Cho Jae-2013- Daejeon-3573 ( October 17, 2013)

Whether the value of supply of real estate for business use may be deemed a transfer of business other than the supply of goods.

The key issue is that the place of business has been transferred to the transferee to operate a real estate rental business, and thus, it cannot be deemed that the business has maintained the identity of the business.

Article 6 of the former Value-Added Tax Act

Cheongju District Court-2013-Gu Partnership-1763 Disposition of revocation of Disposition of Imposition of Value-Added Tax

○ ○

○ Head of tax office

February 27, 2014

March 20, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of value-added tax of KRW 390,162,610 on May 1, 2013 against the Plaintiff on May 1, 2013 is revoked.

1. Details of the disposition;

A. On December 21, 2005, the Plaintiff opened and operated ○○○○○○-dong, ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ established a real estate sales contract with the Plaintiff, on April 30, 2012, to sell the site and building of the instant age club to the said transferee for KRW 7.5 billion. On May 23, 2012, the Plaintiff drafted a contract for the transfer and acquisition of real estate with a content that comprehensively transfers all rights, obligations, and human and physical facilities related to the instant age club’s business to the transferee.

B. The Plaintiff deemed that the sale of the site and the building of the instant age club was based on the comprehensive transfer of business rather than the supply of goods, and subsequently filed a final return on value-added tax by excluding the sales amount from the sale.

C. However, since the Defendant cannot be deemed to have comprehensively transferred the site and building of the instant age club at the time of the transfer, it deemed that the said transfer constitutes the supply of goods subject to value-added tax, and thus, on May 1, 2013, the Defendant corrected and notified the Plaintiff of value-added tax 390,162,610 for the first term portion of value-added tax in 2012 (hereinafter “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Director of the Tax Tribunal on August 8, 2013, but the said claim was dismissed on October 17, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 3, 5, 12, Eul evidence No. 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

On April 30, 2012, the Plaintiff comprehensively transferred all rights and obligations regarding the instant age club’s business by selling the site and the building of the instant age club to the transferee. The transferee, after comprehensively taking over the instant age club’s business from the Plaintiff, had cccc issued a business license under its name, and had cc leased the said age club to dddd on May 25, 2012 while operating a real estate rental business. As such, insofar as the Plaintiff sold the site and the building of the instant age club as part of the comprehensive transfer to the transferee, regardless of whether the transferee continued to operate the instant age club’s business, the transferee constitutes an unlawful transfer of the goods under Article 6(6)2 of the Value-Added Tax Act and Article 26(1)2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 2438, Jul. 13, 2013).

B. Relevant statutes

Attached Form is as shown in the attached Form.

(c) Fact of recognition;

1) The sales contract made between the Plaintiff and the assignee as of April 30, 2012 includes the following special terms and conditions:

Table Omission of the Table

2) On April 30, 2012, the Plaintiff received KRW 358,384,420 from the transferee (aa to KRW 158,384,420, and KRW 200,000 from bb to 200,000) as local tax in arrears, and received KRW 11,615,580 from Aa on May 2, 2012.

3) On May 23, 2012, the assignee completed the registration of ownership transfer on the site and building of the instant age club, and leased the instant age club to ddd on May 25, 2012.

4) On July 19, 2012, the transferee registered his/her business as a real estate business on May 24, 2012 with the starting date of July 19, 2012, and the location of the instant age club as its place of business as its place of business, and ddd on May 25, 2012, with the starting date of May 26, 2012 as dd on May 26, 2012, as d on the location of the instant age club as its place of business, as d on the location of the instant place of business, and as hart club

5) Meanwhile, on the business license certificate for the instant age club business, the business name of the Plaintiff was changed from the Plaintiff to c on April 30, 2012, and was changed to dd on May 24, 2012. However, as the loan was borrowed but the principal and interest on the loan was not repaid by the due date, the purchase price for the instant real estate owned by the seller is changed to 7.5 billion won.

6) On May 30, 2012, the instant age club business was reported to be closed down.

[Recognition] Facts without dispute, Gap's statements, Gap's statements, Gap's evidence Nos. 1, 4, 8, 10, 13, 14, 15, Eul's evidence Nos. 2, 3 and 4 (including paper numbers), and the purport of the whole pleadings

D. Determination

(1) Article 6 (6) of the Value-Added Tax Act provides that the transfer of business is not deemed the supply of goods subject to value-added tax. Article 17 (2) of the Enforcement Decree provides that the transfer of business under Article 6 (6) of the Act shall comprehensively succeed to all rights (excluding rights related to outstanding amounts) and obligations (excluding rights related to unpaid amounts) to each business establishment. The term "transfer of business" refers to the comprehensive transfer of physical, human and rights and obligations including business property to replace only the owner of the business while maintaining the identity of the business. Thus, the fact that the business is a systematic combination of human and material facilities and its social independence should be recognized by being separated from the owner of the business, and it is difficult to view that the transferee of the above business as the ground of the tax disability in the transfer of the value-added tax and the burden of proof regarding the transfer of the above business is difficult to view that the transferee of the above business was the owner of the above c clubs as the owner of the above 3rd building site.

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.