Cho Jae-2014- Daejeon-0710 ( October 11, 2014)

In cases of transferring only one business division among the business sections concurrently operated, the transfer of the comprehensive business shall apply.

Since maintaining the identity of a business division, it shall be deemed that only the business owner is replaced while maintaining the identity of the business division, the transfer of business constitutes the transfer of business and the transferr's non-deduction of input tax amount due to the failure

Special cases of supply of goods under Article 10 of the Value-Added Tax Act and transfer of business not deemed supply of goods under Article 23 of the Enforcement Decree of the Value-Adde

2013Guhap101783 Claim for Payment of Value-Added Tax Refund

AA file Co., Ltd.

ㅇㅇ세무서장, ㅇㅇ세무서장, ㅇㅇ세무서장

November 19, 2014

January 14, 2015

1. The plaintiff's claims against the defendants are all dismissed.

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

Cheong-gu Office

As to Plaintiff AA file corporation, Defendant BB’s disposition of refusal of value-added tax for the second period of December 12, 2013 and disposition of imposition of KRW 296,381,790 for the second period of the year 2013, and Defendant CB’s disposition of refusal of payment of value-added tax for the second period of the year 2013 and disposition of imposition of KRW 150,093,410 for the second period of the business year 2013, which was made by Defendant CB head of the tax office (the “DD head of the tax office’s disposition of refusal of payment of value-added tax for the second period of the year 2013 and the disposition of imposition of KRW 126,823,20 for the second period of the year 2013 are deemed to be a clerical error) are revoked.

1. Details of the disposition;

A. The Plaintiff was established on June 12, 2013 by investing 100% of AAC Cement, an affiliate company of AAA Group, for the purpose of manufacturing, processing, and selling ready-mixed, slate, aggregate, office concrete, and other cement.

B. On July 15, 2013, the Plaintiff entered into a business takeover agreement with AA (hereinafter referred to as “A”) that takes over only 120,000,000 won (the acquisition price of August 5, 2013 was changed to 117,00,000,000 won) from a company holding the same group (hereinafter referred to as “A”) to a business takeover agreement, which takes over from the business place where AA concurrently operated at the EE factory, D D factory, F factory, and three places of business located in the F factory, and mixed fire business and file business (hereinafter referred to as “the acquisition price of this case”).

C. On the premise that the acquisition level of this case constitutes “the supply of goods subject to value-added tax (the input tax deduction)”, the Plaintiff additionally paid A amount of KRW 6,468,472,879 (the supply price of KRW 64,684,728,79) (the total purchase price of KRW 66,365,883,782 + the general purchase price of KRW 1,681,681,54,984) for the total amount of KRW 66,365,883,782) for August 7, 8. The Plaintiff deducted the relevant input tax amount from the output tax amount on September 25, 2013 to the Defendants on September 25, 2013, and applied for early refund of KRW 5,942,239,439 [the sales price] as follows: the sales amount of KRW 64,693,489,389,386,38686].

D. As a result of the investigation, the Defendants determined that the transfer rate of the instant case constitutes “transfer of business” under Article 10(8)2 of the Value-Added Tax Act, and that the pertinent input tax amount was deducted from the output tax amount, and thus, rejected the Plaintiff’s application for refund of the value-added tax. On December 12, 2013, Defendant BB director of the tax office, such as “tax amount B”, issued a revised notice of KRW 296,381,790 (including additional tax; hereinafter the same shall apply) for the Plaintiff’s EE factory on December 12, 2013; Defendant DD director of the tax office on January 3, 2014 for the Plaintiff’s D factory, KRW 126,823,228; and Defendant CCC director of the tax office on December 13, 2013 for the Plaintiff’s FF factory, respectively, (hereinafter referred to as “instant disposition”).

E. On October 25, 2013, AA made a preliminary return of value-added tax for the second term of 2013 on the acquisition limit of this case. Meanwhile, A applied for the commencement of corporate rehabilitation procedures to the competent court on September 30, 2013, and received a decision of commencement on October 17, 2013.

F. Upon each of the instant dispositions, the Plaintiff filed each of the instant appeals on December 24, 2013, January 27, 2017, and January 10, 2014, but was dismissed on August 11, 2014 (the first instance court’s dismissal on August 11, 2014, respectively).

Facts that there is no dispute over recognition, Gap's evidence 1 through 9, 20 through 22, Eul's evidence 1, 3, 4, 5, 8 (including each number), the purport of the whole pleadings.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) The instant acquisition limit is limited to the Plaintiff’s prior acquisition of tangible assets related to file business, part of which AA had been engaged in three places of business within the scope of KRW 120 billion available to the Plaintiff, as well as to the supply of goods, which is subject to value-added tax exemption, since most of the debts, part of the human organizations, goodwill, etc. are not included in those subject to acquisition, and pursuant to Article 23 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 25196, Feb. 21, 2014; hereinafter the same) that does not regard as the supply of goods, the transfer of the business that is not considered as the supply of goods is comprehensively succeeded to all the rights and obligations for each place of business. Therefore, the instant acquisition of goods transferred at each place of business constitutes not the transfer of business subject to value-added tax exemption but the supply of goods

2) Even if the acquisition value-added tax is applicable to the transfer of a business that is exempt from value-added tax, the pertinent input tax amount should be deducted from the output tax amount pursuant to Article 39(1)3 proviso of the Value-Added Tax Act (amended by Act No. 12113, Dec. 24, 2013; hereinafter the same) and Article 76 of the Enforcement Decree of the same Act, insofar as the Plaintiff paid the value-added tax to A, and even if A was declared and paid on January 24, 2014 by A.

3) Since the National Tax Service has expressed its view that transactions similar to the instant acquisition by transfer do not constitute business transfer in the relevant case, each of the instant dispositions is unlawful against the principle of trust protection.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

1) Whether the acquisition level of the instant case constitutes “transfer of business”

A) Even if an act of supplying goods or services subject to value-added tax is a case where the goods or services subject to supply cannot be seen as goods or services due to the nature of value-added tax, or where the contents of supply are inappropriate, it is exempt from taxation. The purport of this Act is not to deem the transfer of business as the supply of goods, but to consider the transfer of business as non-taxation. The transfer of business does not correspond to the intrinsic nature of the supply in the value-added tax, which serves as a taxation requirement for the individual supply of specific goods, but generally, it is anticipated that the transferee would be entitled to deduct the input tax amount without any exception. As such, allowing the business transferee to collect the output tax amount even for such a transaction is connected to the tax or economic policy consideration that the business transferee should avoid unnecessary pressure.

In addition, the term "transfer of business" that is not considered as the supply of goods refers to the comprehensive transfer of business property for each place of business, physical, human facilities, rights, and obligations, etc. to replace only the main body of business while maintaining the identity of the business, and the business must be separated from the main body of business and be recognized as a socially independent entity (see, e.g., Supreme Court Decisions 2004Du10593, Dec. 10, 2004; 97Nu12778, Jul. 10, 1998; 2006Du17895, Dec. 24, 2008). In cases falling under this, even if the former employee was not transferred as it is, the transfer of business cannot be an obstacle to recognizing the transfer of business (see, e.g., Supreme Court Decisions 2006Du17895, Dec. 24,

However, a business place in the transfer of such a business should not simply refer to the division of a place, but be viewed as a business unit. Therefore, even if a business is operated within the same place, if one of the two types of business is divided into two or more, and a business is transferred comprehensively by combining one of the two types of business, it can be deemed that it constitutes a transfer of business that can be recognized as a social independence (see Supreme Court Decision 83Nu104, Oct. 25, 1983). Meanwhile, even if the transferor is a business operated as a single business, it can be objectively classified as a business subject to the business, and if it can be deemed as a business unit in substance identical to several categories of businesses, it can be said that the above law comprehensively takes place, even if it is transferred by each sector, it constitutes a transfer of business that maintains identity.

B) In addition to the statements in Gap evidence Nos. 10 through 19 and Eul evidence Nos. 6 (including the number of pages), the following facts are recognized.

① As a part of a restructuring plan, AA proceeds from the sale (business transfer) of file business sector (business transfer) but the public sale was not conducted on April 2013. As a result, AA cement established the Plaintiff, a subsidiary company, at 12.10% on June 12, 2013, and promoted the instant acquisition.

② The file business that became the subject of the instant transfer is the manufacturing industry that produces high-Robbery clock file (PHC file). PHC file is a high-Robbery concrete piling, which is located in order to prevent ground subsidence of large structures and secure solid support power, and its raw materials and manufacturing process are different from ready-mixed and mixed materials.

③ AA concurrently operates three businesses (electronic files, ready-mixeds, and mixed fire) at three businesses (E,D, and F factories). However, each of the above factories was placed in a way that factory facilities can be classified by business sector, and each of the raw materials was loaded and managed separately, and AA has prepared and managed the details of monthly production, sales, manufacturing cost, etc. by each business before the acquisition of the instant plant.

④ On July 15, 2013, among three business places operated by A and AA, the Plaintiff entered into an asset acquisition agreement with the content that the Plaintiff will succeed to certain assets, such as real estate, equipment, etc., of the file business sector. On August 2, 2013, the Plaintiff entered into an amended agreement with the content that partially add assets, etc. to the subject of the said acquisition agreement, and on August 5, 2013, changed the acquisition price of KRW 117,00,000 from KRW 120,000 to KRW 117,00,000 to KRW 120,000,000, respectively. The instant acquisition agreement was concluded on August 31, 2013, and on September 10, 2013, respectively. The main content of the instant agreement is as follows.

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◆ 양수도계약서(2013. 7. 15. 자)

Article 2. Transfer of Business

2.1.In accordance with the terms and conditions set out in this Agreement, the transferor shall transfer to the transferee as of the date of the completion of the present business, and the transferee shall take over it. Specific subject matter of the transfer (hereinafter referred to as "subject matter of transfer") shall be as follows:

(1) Tangible assets listed in Appendix 2.1-(1) (hereinafter referred to as “Tangible Assets”)

(2) An intangible asset listed in Appendix 2.1-(2) (hereinafter referred to as “acquisition-free intangible asset”)

(3) An intellectual property right listed in Schedule 2.1-(3) (hereinafter referred to as "acquisition-do intellectual property right" and, in addition to tangible assets, "acquisition-do assets";

(4) Officers and employees listed in Appendix 2.1-(4), who are employed by the transferor as of the date of this contract (hereinafter referred to as the “Successor officer and employee”) in order to carry on the business of this case.

(5) Contracts listed in Appendix 2.1-(5) which had been agreed by the transferor on the transfer of contracts by the other party (hereinafter referred to as "contract subject to transfer") not later than the end date.

(6) Authorizations, permits, etc. (hereinafter referred to as "authorizations, permits, etc.") listed in Appendix 2.1-(6)

(7) the books, documents, drawings, office records, films, diskettes, diskss and other media in which the information is recorded, as shown in Schedule 2.1-(7).

(8) Borrowing liabilities listed in Schedule 2.1-(8) (hereinafter referred to as "loan liabilities subject to acquisition") and unpaid wages and retirement benefits reserve funds as of the closing date.

(9) Other matters not included in the above subparagraphs and the separate schedules, provided that the transferor and transferee have agreed to fall under the matters necessary for the smooth transfer of this business by the time this contract was concluded and entered in Schedule 2.1-(9).

(10) In addition to paragraphs (1) through (9) above, cash and cash assets, sales bonds, inventory assets and other current assets and other current assets and liabilities agreed to be necessary for a smooth transfer of the business at the time of termination pursuant to section 2.2.

2.2The transferor and the transferee shall decide to adjust cash and cash assets, sales bonds, inventory assets and other current assets and purchased liabilities, and other current liabilities, among those subject to acquisition by transfer, so that the amount by the following formula may also become the proceeds of the transfer under Article 3.1, and the detailed details of cash and cash assets, sales bonds, inventory assets and other current assets and purchased liabilities which should also be taken over, shall be determined by mutual agreement at the time of completion:

(X) + (Y) + (Z) ＋ (A) - - (B) - (C) = The acquisition price of the article 3.1

(X) the market price of tangible assets acquired;

(Y) Book value of an intangible asset acquired;

(Z) Book value of cash and cash assets, sales bonds, inventory assets and other current assets;

(A) the book value of purchase liabilities and other current liabilities;

(B) the book value of the allowance for severance and retirement benefits as of the closing date.

(C) the principal of the borrowed debt to be acquired by the assignee, provided that the transferee

Article 6 Succession to Employment

6.1 The transferee shall succeed to all the labor relations of the officers and employees succeeded on the date of termination. To this end, the transferee will enter into an employment or delegation contract with the successor officers and employees.

6.2 The transferee shall succeed to the unpaid wages of the succeeded officers and employees by the date of termination (including the date of termination), and even if the transferee pays the unpaid wages to the successor officers and employees after the date of termination, the transferor may not claim for reimbursement of that amount.

6.3 Retirement allowances to succeeded officers and employees shall be succeeded to by the transferee, regardless of whether before or after the completion of the contract (or, if any, prior to the completion of the succession, the transferee shall succeed in the manner by which the transferee acquires the transferor's retirement allowances and retirement allowances as of the date of the termination of the contract), and even if the transferee bears the transferor's obligation to pay retirement allowances due to employment relations

◆ 양수도계약의 변경계약서(2013. 8. 2. 자)

Article 2 (Addition of Tangible Assets)

Attached 1. An asset listed in attached Form 1 shall be added to the acquisition-type asset specified in Article 2.1(1) of the acquisition-type contract.

Article 3 (Addition of Successor Officers and Employees)

The number of successors and the number of persons listed in attached Form 2 shall be added to those listed in Section 2.1(4) of the transfer agreement.

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⑤ Accordingly, the Plaintiff’s entire real estate and strike of EE, D, and FF factories as follows:

AA took over devices such as facilities related to the daily business, and among them, the real estate and facilities related to ready-mixed and mixed fire business were arranged to be leased and used again by the Plaintiff.

6) In addition, the Plaintiff acquired cash assets (deposit bonds), sales bonds, inventory assets, and other current assets from AA as follows, and excluded the claim amounting to KRW 13.1 billion from the subject of the transfer of this case.

7) The Plaintiff acquired 2,861,083,566 won out of the total debt amount of KRW 21,325,997,714 related to the file business from AA, and excluded both the credit purchase amount and the payment obligation related to the business from the target.

8) The Plaintiff acquired the KS certification related to the file business sector from AA as follows:

9. The Plaintiff acquired the patent right related to the file business from A as follows:

① The Plaintiff succeeded to 8 cases related to file business-related purchase contracts, 2 cases related to file business-related patent technology use contracts, 3 cases for file factory production contracts, 1 case for transport cost contracts, 1 case for comprehensive property insurance contracts, 14 cases for vehicle leasing and rental contracts, and 14 cases for unmanned security contracts from AA. Meanwhile, the Plaintiff succeeded to the legal status of authorization and permission related to file business-related file business, including EE market, DD market, and certification of report on installation of air discharge facilities, which are issued by the head of FF headquarters with respect to each factory.

1) After the acquisition of the instant case, AA, AA cement, and the Plaintiff made a corporate disclosure to the effect that the files of AA were transferred to the Plaintiff for the purpose of improving the financial structure of the AA.

(12) After the acquisition of the instant case, AA entirely performed the file business and continued to operate the file business at the place of business leased from the Plaintiff.

(13) Even after the acquisition of the instant case, management and employees of the existing representative director, etc. related to the file business are almost maintained, and sales of at least 50 million won in the existing sales office.

The wife's 75% is the same.

C) Comprehensively taking into account the following circumstances, namely, ① each place of business of AA includes files, ready-mixeds, and mixed fire independently, so it is possible to transfer only the file business, and the transfer of this case took place only for file business. ② In fact, this case’s acquisition agreement covers most of tangible and intangible assets necessary to operate file business, such as real estate, machinery and equipment, contracts, goodwill, human resources and employment relationship, authorization and permission, intellectual property, etc. ③ After the acquisition of this case, only the Plaintiff is running file business, and ④ The Plaintiff and AA excludes partial bills or significant debts from those subject to transfer. However, in light of Article 23 of the Enforcement Decree of the Value-Added Tax Act, the Plaintiff’s acquisition of this case’s acquisition of this case’s bonds and liabilities can be deemed as transfer even if they are excluded from those subject to transfer, and the size of assets included in the subject of transfer of this case’s assets cannot be seen as being identical in light of the legal principles as seen earlier.

Therefore, this part of the plaintiff's assertion that the transfer of this case is "supply of goods subject to value-added tax" is without merit.

2) According to Article 39(1)3 of the Value-Added Tax Act, where an entrepreneur who supplied goods or services exempt from value-added tax pays all the amount of tax, whether the supplier is eligible to deduct the relevant input tax from the output tax amount, and where a tax invoice is issued upon receipt of the goods or services exempt from value-added tax, the input tax amount is not deducted from the output tax amount, but the entrepreneur who supplied the relevant goods or services is entitled to exclude the input tax amount in cases prescribed by Presidential Decree from the input tax amount. Article 76 of the Enforcement Decree of the same Act provides that ① (i) the entrepreneur has reported and paid the tax amount payable for the relevant taxable period calculated pursuant to Article 37 of the Act, including the output tax amount of the tax invoice issued while supplying the goods or services exempt from value-added tax, to the head of the district tax office having jurisdiction over the place of tax payment under Articles 48 and 49 of the Act; and (ii) the entrepreneur shall file a revised tax invoice or revised electronic tax invoice under Article 32(7) of the Act with the head of the competent tax office within 25 days after filing the tax base or tax amount for each taxable period.

B) In light of the foregoing, even if the Plaintiff paid the value-added tax based on the acquisition tax of this case to AA, according to the evidence and the purport of the entire pleadings adopted earlier, it can be acknowledged that AA only filed a return on October 25, 2013, which was the preliminary return period of value-added tax for the second period of value-added tax in 2013, and the acquisition tax of this case also paid the tax amount on January 24, 2014. Thus, since AA does not fall under the case where a return and payment of value-added tax was made within the period stipulated under Articles 48 and 49 of the Value-Added Tax Act, the Plaintiff cannot be allowed to deduct the relevant input tax amount from the output tax amount. This part of the Plaintiff’s assertion is without merit.

C) As to this, the Plaintiff asserts that AA had entered the rehabilitation procedure and failed to pay the value-added tax. The fact that AA received a decision on commencing the rehabilitation procedure on September 30, 2013 by the competent court is as seen earlier. However, even if so, AA had to pay the value-added tax after the payment period expires and the instant disposition was taken, and each of the instant value-added taxes can be paid without restriction pursuant to the rehabilitation procedure as a priority claim. Thus, it cannot be deemed that A A paid the value-added tax in accordance with the requirements under Article 76 of the Enforcement Decree of the Value-Added Tax Act. The Plaintiff’s assertion is difficult to accept.

3) Whether the principle of protection of trust has been violated

In general, in order to apply the principle of trust protection to the acts of tax authorities in tax legal relations, the tax authorities should express the public opinion that is the subject of trust to taxpayers, and the second, the taxpayer should not be responsible for the taxpayer's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance on the tax authority's reliance, and fourth, the tax

On the other hand, there is no evidence to deem that the Plaintiff formally asked the tax authority about the acquisition limit of this case in advance, or that other tax authorities expressed public opinion on this case. Accordingly, this part of the assertion is without merit without further review.

3. Conclusion

Therefore, the plaintiff's respective claims against the defendants are dismissed in its entirety as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

/ Value-Added Tax Act (Amended by Act No. 12113, Dec. 24, 2013)

Article 4 (Taxable Objects) Value-added Tax shall be levied on the following transactions:

1. Supply of goods or services by an entrepreneur;

2. Import of goods.

Article 10 (Special Cases of Supply of Goods)

(8) None of the following shall be deemed the supply of goods:

2. Transfer of business, as prescribed by Presidential Decree.

Article 39 (Non-Deduction of Purchase Tax Amount)

(1) Notwithstanding Article 38, the following input tax amounts shall not be deducted from the output tax amount:

3. An input tax amount in cases where a tax invoice is issued on any goods or services exempt from value-added tax (including any goods or services exempt from value-added tax): Provided, That the input tax amount in cases prescribed by Presidential Decree in which the relevant goods or services are fully paid by the supplier, shall be excluded;

Article 48 (Preliminary Return and Payment)

(1) An entrepreneur shall report to the head of a tax office having jurisdiction over the place of tax payment and the amount of tax payable or refundable for each preliminary return period, as prescribed by Presidential Decree, within 25 days after the period under the following table (hereinafter referred to as "preliminary return period") ends during each taxable period: Provided, That the first preliminary return period for a person who intends to commence or commence a business shall be the period from the commencement date of the business (referring to the date of application where an application for business registration is filed prior to the commencement date of the

(2) When an entrepreneur files a preliminary return under paragraph (1) (hereinafter referred to as "preliminary return"), he/she shall pay the amount of tax payable for the preliminary return period to the head of a tax office having jurisdiction over each place of tax payment (referring to the head of a tax office having jurisdiction over the main place of business in cases under Article 51) along with the preliminary return of value-added tax, or pay it to the Bank of Korea (including its agencies

Article 49 (Final Tax Return and Payment)

(1) A business operator shall report to the head of the competent tax office having jurisdiction over the place of tax payment, as prescribed by Presidential Decree, within 25 days (in cases of closure of business, the 25th day of the month following the month in which the date of closure under Article 5 (3) falls) after the tax base and amount payable or refundable amount for each taxable period expires: Provided, That no business operator who has made a preliminary return pursuant to Article 48 (1) and (4) or who has filed a return to receive early refund pursuant to Article 59 (2) shall file

(2) In filing a final return under paragraph (1) (hereinafter referred to as "final return"), a business operator shall pay the following amounts to the head of each tax office having jurisdiction over each place of tax payment (referring to the head of each tax office having jurisdiction over the location of the main place of business in cases under Article 51) along with the final return of value-added tax after deducting the following amounts from the

1. The amount of tax refundable for early refund under Article 59 (2) but not yet refunded;

2. The amount collected in accordance with the main sentence of Article 48 (3);

(1) Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 25196, Feb. 21, 2014)

Article 4 (Classification of Services)

(1) The classification of business supplying goods or services shall be in accordance with the Korean Standard Industrial Classification as of the starting date of the relevant taxable period publicly announced by the Commissioner of the Statistics Korea

"Those prescribed by Presidential Decree" in Article 23 (8) 2 of the Act means that each place of business (including the cases of division or merger by division within the same place of business, in cases of division or merger by division under the Commercial Act) comprehensively succeeds to all rights and obligations concerning the relevant business (including cases of division meeting the requirements under Article 46 (2) or 47 (1) of the Corporate Tax Act, cases of comprehensive transfer of assets meeting the requirements under each subparagraph of Article 37 (1) of the Restriction of Special Taxation Act, and cases where the transferee adds new type of business or changes the type of business other than the succeeded business). In such cases, even if the transferee succeeds to the business without including the following matters among rights and obligations concerning the relevant business, it shall be deemed that the comprehensive succession to the business has been made:

1. The amount receivable;

2. A document concerning accounts payable;

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

"Cases prescribed by Presidential Decree" in the proviso to Article 39 (1) 3 of the Act (referring to cases where a tax invoice is issued to supply tax-free) means cases meeting all of the following requirements:

1. The payable tax amount for the relevant taxable period computed under Article 37 of the Act, including the output tax amount of the tax invoice issued, shall be returned and paid to the head of the tax office having jurisdiction over the place for tax payment under Articles 48 and 49 of the Act, while an entrepreneur supplies goods or services exempt from value-added tax (including such goods

2. The entrepreneur who has supplied the relevant goods or services shall not issue any amended electronic tax invoice or amended electronic tax invoice pursuant to Article 32 (7) of the Act regarding the supply of such goods or services;