Whether input tax deduction is made in the case of comprehensive transfer and takeover of business

Where a business transferor has collected value-added tax from a business operator and filed a return on and paid it by him/her, the above provisions that require the business transferee to deduct the value-added tax collected as the input tax amount shall not be deemed unconstitutional or unlawful.

Article 6 [Supply of Goods] of the Value-Added Tax Act

[Seoul High Court Decision 2007Nu21527, Oct. 23, 2008]

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance is revoked. The defendant's imposition of value-added tax of KRW 2,884,180 on September 1, 2006 against the plaintiff on September 1, 2006 shall be revoked.

1. Quotation of judgment of the first instance;

The reason for the court's implementation of this case is as follows: in the case where the transferor of the business collects value-added tax from the transferee of the business, regardless of whether the transferor of the business has reported or not, the transfer of the business should be regarded as the supply of the goods and be subject to the deduction of the input tax amount, but only the reason why the transferor of the business did not report or pay the input tax amount, the business should be denied the deduction of the input tax amount; in addition, 1-2(excluding the case where the general taxable person transfers the business to the simplified taxable person) is deleted, 6-3(6)(6)(6)(6)(6-2(6)(3)(3)(3)(3)(3)(3)(3)(3)(3)(3)(3)(2)(2)(3)(3)(2)(3)(3)(42)

2. Conclusion

Therefore, the judgment of the court of first instance is legitimate, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

[Seoul Administrative Court 2007Guu12149, 2007.25]

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

Cheong-gu Office

The disposition of imposition of value-added tax of KRW 2,884,180 on September 1, 2006 by the Defendant against the Plaintiff on September 1, 2006 is revoked.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be acknowledged by taking into account the whole purport of the pleadings in each entry of Gap evidence 1, Gap evidence 2-1, Eul evidence 1-2, Eul evidence 2-1, Eul evidence 2-1, Eul evidence 3-7:

A. On June 7, 2006, the Plaintiff acquired the right to operate the parking lot (hereinafter “instant parking lot operation right”) on the 1,000,000, value of supply, value-added tax of KRW 1,000,000, value-added tax, KRW 100,000,000, and KRW 1,00,000,000 on the tax invoice of this case (hereinafter “instant tax invoice”) by deducting the input tax amount of KRW 1,00,00,000 from the output tax amount by deducting the input tax amount of KRW 1,00,00,000,000 on the tax invoice of this case from the output tax amount.

B. On September 1, 2006, the Defendant, on the ground that the non-party company comprehensively transferred the right to operate the instant parking lot to the Plaintiff, but did not pay the value-added tax on the instant tax invoice, the Defendant denied the input tax deduction for the reason that the value-added tax amount of KRW 100,000,000 on the instant tax invoice cannot be deducted from the output tax amount, and notified the correction and notification of KRW 2,884,180 on September 1, 2006 (including additional tax) (hereinafter “instant disposition”).

C. On November 7, 2006, the Plaintiff filed an appeal with the National Tax Tribunal on the instant disposition, which was dismissed on December 28, 2006.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

It is based on Article 17(3) of the Enforcement Decree of the Value-Added Tax Act that the person who has transferred the business (the transferor) did not allow the deduction of the value-added tax if he did not pay and pay the value-added tax even if he collected the value-added tax from the transferee of the business (the transferor). The above provision is inconsistent with the principle of equality under the Constitution, which is unreasonable discrimination compared with the fact that the supplier of the goods paid the value-added tax without examining whether or not the supplier has paid and paid the value-added tax collected in the case of the supplier of the goods that do not fall under the transfer of the business, and is contrary to the principle of equality under the Constitution.

(b) Related statutes;

[The Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006; hereinafter the same)]

Article 6 (Supply of Goods)

(1) The supply of goods shall be a delivery or transfer of goods pursuant to all contractual and legal grounds.

(6) The goods that fall under any of the following subparagraphs shall not be deemed the supply of goods:

1. Offering any goods as security, which are prescribed by the Presidential Decree; and

2. Transfer of business as prescribed by the Presidential Decree: Provided, That in case where an entrepreneur delivers a tax invoice under Article 16, and such transfer is excluded.

3. Paying taxes in kind under Acts, as prescribed by the Presidential Decree.

(7) Matters necessary for the supply of goods under paragraph (1) shall be prescribed by Presidential Decree.

Where an entrepreneur supplies goods and services, the value-added tax, computed by applying the tax rate under Article 14 to the tax base under Article 13, shall be collected from the person who receives the relevant supply.

Article 17 (Payable Tax Amount)

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as the “paid tax amount”) shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as the “purchase tax amount”) from the tax amount on the goods and services supplied by him (hereinafter referred to as the “sales tax amount”): Provided, That where an input tax amount exceeds the output tax amount, it shall be a refundable

1. The tax amount for the supply of goods or services used or to be used for a person's own business;

2. The tax amount for the import of goods used or to be used for his own business; and

[Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 19892, Feb. 28, 2007; hereinafter the same)]

Article 17 (Provision of Security, Transfer of Business and Payment of Taxes in Kind)

(2) The term "those prescribed by Presidential Decree" in the main sentence of Article 6 (6) 2 of the Act means comprehensively succeeding to all rights and obligations with respect to the relevant business at each place of business (including cases of a division meeting the requirements under Article 46 (1) of the Corporate Tax Act and cases where the transferee adds the new type of business or changes the type of business other than the business succeeded to). In such cases, even if the transferee succeeds to the relevant business without including those falling under any of the following subparagraphs from among the rights and obligations with respect to the relevant business, it shall be deemed that the relevant business is comprehensively succeeded:

1. The amount receivable;

2. A document concerning accounts payable;

3. Land, buildings, etc. not directly related to the relevant business as prescribed by the Ordinance of the Ministry of Finance and Economy.

(3) For the purpose of the proviso of Article 6 (6) 2 of the Act, the term “cases as prescribed by the Presidential Decree” means the case where the tax amount collected by the transferor of business under Article 15 of the Act is returned and paid under Article 18 or 19 of the Act.

C. Determination

(1) Reasons why the Value-Added Tax Act does not regard the transfer of business as the supply of goods

Article 6(1) of the Value-Added Tax Act provides that the supply of goods shall be a delivery or transfer of goods by all contractual and legal reasons. Article 6(6)2 of the Enforcement Decree provides that "the transfer of business as prescribed by the Presidential Decree" shall not be deemed a transfer of goods, and Article 17(2) of the Enforcement Decree of the Value-Added Tax Act provides that "the transfer of all rights and obligations concerning the business shall be comprehensively succeeded to by business place (excluding the transfer of business to a general taxable person)." The purport of the above provision is that the transfer of the Value-Added Tax Act does not include the transfer of the goods or services subject to value-added tax as the supply of the goods or services, even if the supply of the goods or services subject to value-added tax cannot be deemed a supply of the goods or services due to the nature of the value-added tax, or if the supply of the goods is inappropriate, the transfer of the business is not in accordance with the essential nature of the supply of the value-added tax, the transaction amount and value-added tax amount of which are so high that the purchaser would not be entitled to receive the input tax amount without exception.

(2) The purport of the proviso of Article 6(6)2 of the Value-Added Tax Act, Article 17(3) of the Enforcement Decree of the Value-Added Tax Act, and whether the same applies

In the case of "transfer of business which is not considered as the supply of goods under the Value-Added Tax Act", the tax authority does not have the authority to collect the output tax from the transferor of the business, and the tax authority does not have the right to collect the value-added tax from the transferor of the business, and there is no obligation to collect the value-added tax from the transferee of the business to collect the value-added tax. Thus, in the case of transfer of the business, if the transferor of the business collects the value-added tax from the transferee of the business and pays it by return, it cannot be a problem of the input tax deduction under the Value-Added Tax Act. However, in the case of transfer of the business, the tax authority without the authority to deduct the value-added tax from the input tax amount. It would induce the transferee of the business to return the value-added tax to the transferee of the business who bears the value-added tax without any obligation.

On the other hand, in case where the business transferor did not pay the value-added tax even though he did not collect the value-added tax from the business transferor, the tax authority does not have the right to collect the value-added tax against the business transferor, and there is no room for allowing the business transferee to deduct the input tax amount. In this case, the business transferor may recover the value-added tax by claiming the return of the value-added tax collected without any obligation against the business transferor

In full view of the above circumstances, in a case where a business transferor in relation to the transfer of business collects the value-added tax from a business owner who traded and returns it, the above provisions allowing the business transferee to deduct the value-added tax collected as the input tax amount. As asserted by the Plaintiff, the above provisions do not violate the national equality principle, the property right guarantee principle, the substantial principle of no taxation without law, the Value-Added Tax Act and the basic principles of the Value-Added Tax Act, or do not constitute an unfair double taxation

(3) Therefore, we cannot accept the Plaintiff’s assertion premised on the unconstitutionality and illegality of Article 17(3) of the Enforcement Decree of the Value-Added Tax Act.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

[Supreme Court Decision 2008Du2378 (No. 27, 2008)]

1. The appeal is dismissed.

2. The costs of appeal are assessed against the Plaintiff.

All of the records of this case and the judgment of the court below and the grounds of appeal were examined, but it is clear that the appellant's grounds of appeal fall under Article 4 of the Act on Special Cases Concerning the Procedure of Appeal and therefore, the appeal is dismissed pursuant to Article 5 of the above Act. It is so decided as per Disposition by