Cho High Court Decision 201No3308 ( November 30, 2011)

The plaintiff newly constructed the warehouse of this case for the purpose of expanding existing real estate rental business and it is not enough to recognize it.

Since the Plaintiff’s construction and recognition of the warehouse of this case are insufficient for the purpose of expanding existing real estate rental business, the disposition that did not deduct input tax on the grounds that it is not related to the business operated at the existing establishment is legitimate.

Article 17 of the Value-Added Tax Act, Article 4 of the Value-Added Tax Act, and Article 5 of the Value

Article 4 of the Enforcement Decree of the Value-Added Tax Act

2012 disposition of revocation of imposition of value-added tax, 6810

XX Kim

Gangwon-gu Director of the District Office

September 18, 2012

October 18, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of KRW 000, which was imposed on the Plaintiff on March 1, 2011, shall be revoked.

1. Details of the disposition;

A. The Plaintiff, a business operator running a real estate rental business at the location of his/her place of business, newly built a warehouse of 333.5 square meters in total size (hereinafter “instant warehouse”) on the 2nd half of the 2010 taxable period of Gyeonggi-do, Gyeonggi-do, Seoul. The Plaintiff received a tax invoice for purchase of KRW 397-8 and the supply price of KRW 00 (hereinafter “the instant tax invoice”) on December 31, 2010 from both AA (the contractor of the new warehouse construction in Seoul, Gangdong-gu, Seoul, and the business operator registration number 212-06-4,000) from the date of supply from the date of the new warehouse construction in the name of his/her place of business (hereinafter “the instant tax invoice”). On January 18, 2011, the Plaintiff deducted the input tax amount from the output tax amount of KRW 00 (00) and deducted the amount exceeding the input tax amount of KRW 00 (00) from the output tax amount of KRW 00 (00).0).

B. On February 24, 2011, the Defendant notified the Plaintiff of the refusal of the application for refund of value-added tax on the ground that the input tax amount of the instant tax invoice was an unrelated expenditure for the business operated at the existing place of business, and thus, the Plaintiff could not be subjected to the deduction of the said input tax amount. On March 4, 2011, the Defendant corrected and notified the Plaintiff of KRW 000 of value-added tax for 2010 (hereinafter “instant disposition”).

C. On September 8, 201, the Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on September 8, 201, but was dismissed on November 30, 201, and filed the instant lawsuit on February 27, 2012.

[Reasons for Recognition] Facts without dispute, Gap 4, 5, 11 evidence, Eul 1, 2, and 4 evidence, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff newly constructed the instant warehouse for the purpose of expanding the existing real estate rental business from the beginning. Since the instant tax invoice is a purchase tax invoice for the said new construction business, the input tax amount of the instant tax invoice falls under the “tax amount for the supply of goods or services used or to be used for one’s own business” under Article 17(1)1 of the Value-Added Tax Act, and thus, should be deducted from the output tax amount. The Plaintiff initially stated that the Plaintiff newly constructed the instant warehouse for the purpose of lease even though the Defendant was asked about the refund of value-added tax from February 1, 201 to October 10 of the same month. However, on February 24, 2011, the instant tax invoice was received from the Defendant for the reason that “the said input tax invoice cannot be deducted because it was received without relation to the business operated in the existing business place,” the Plaintiff should report the use of the storage to the Defendant, and thus, the instant tax invoice was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The Plaintiff completed his business registration for the location of October 5, 1993 as the Seoul Gangdong-gu Seoul Metropolitan Government 397-8, the business type real estate business, and the category non-residential building rental business, and leased the Y 397-8 ground commercial building in Gangdong-gu Seoul Metropolitan Government.

2) On December 29, 2008, the Plaintiff newly built the instant warehouse on the ground of Gyeonggi-do Y 537-21 by obtaining a construction permit from the head of the relevant Si/Gun, and obtained approval for use from the head of the relevant Si/Gun on December 22, 2010.

3) The warehouse of this case was built by both the Plaintiff and the Plaintiff’s establishment, and the rest part of the 2nd floor of the 397-8 ground building in Gangdong-gu Seoul Metropolitan Government, the Plaintiff’s workplace, is registered as the business address (manufacturing: signboards).

4) On January 18, 2011, the Plaintiff filed a return on the refund of value-added tax on KRW 000 as the refundable tax during the second taxable period of 2010, and thereafter, on January 25, 201, the Plaintiff filed a return on the refund of value-added tax with the Defendant as the storage for storing advertising materials.

5) After being notified by the Defendant of the refusal to refund value-added tax on February 24, 201, the Plaintiff changed its business registration on March 11 of the same year to add the category of business (type of wholesale and type of advertisement) to the previous business registration, and reported the establishment of the storage on the same day to the Defendant.

6) Meanwhile, on April 20, 201, the Plaintiff filed an objection against the instant disposition with the Defendant at the time of the Plaintiff’s filing of the objection, stating that “The Plaintiff, while running real estate leasing business under Article XX 397-8 of Gangdong-gu Seoul Metropolitan Government, the Plaintiff intended to engage in the advertising materials wholesale business on the grounds that the advertising materials sales business is good because it is difficult to live as rent, but there was no material storage, but the Plaintiff newly constructed a warehouse to be used as a storage at the time of the Plaintiff’s fluor-gun document document 537-21, located in the Republic of Korea, in the absence of a material storage.”

7) As of the closing date of the instant argument, the Plaintiff was in a state that it was not registered as a business operator on the location of female-gun’s active documents 369-10 as of the date of the instant argument, and there was no fact that the instant warehouse was leased to a third party.

[Reasons for Recognition] Facts without dispute, Gap 1, 2, 3, 9 evidence, Eul 3 and 4 evidence, the purport of the whole pleadings

D. Determination

1) Article 4(1) and Article 5(1) of the Value-Added Tax Act provides for a business owner as a taxpayer and requires a business owner to report and pay the value-added tax at each business establishment by making the business owner registered separately at each business establishment (see Articles 4(1) and 5(1) of the Value-Added Tax Act). Thus, in the case of a real estate rental business, the location on the registry of the real estate shall be deemed a business place (Article 4(1)4 of the Enforcement Decree of the Value-Added Tax Act). Therefore, “the tax amount on the supply of goods or services used or to be used for one’s own business” under Article 17(1)1 of the Value-Added Tax Act refers to the tax amount on the supply of goods, etc. used or to be used for the business purpose of the business (see Supreme Court Decision 2005Du14608, Jan. 26, 206).

2) Ultimately, the issue of this case is whether the Plaintiff operating a real estate rental business can be deemed to have newly constructed the warehouse of this case outside the existing place of business for the purpose of expanding the business size.

In light of the following circumstances, i.e., the Plaintiff did not lease the instant warehouse after the construction of the new warehouse, but did not make a separate business registration for the location of the Y 369-10 location. ② The Plaintiff’s objection to the instant disposition and filed an objection to the construction of the instant warehouse for the purpose of using advertising materials as the storage for the purpose of using advertising materials even before the Plaintiff was notified of the refusal of value-added tax refund. ③ On January 25, 201, the Plaintiff reported the instant warehouse to the Defendant on January 25, 201, to the storage for the purpose of storing advertising materials for the purpose of expanding the original real estate rental business, in light of the following circumstances: (a) the Plaintiff did not lease the instant warehouse after the construction of the new warehouse; and (b) the Plaintiff did not have any other evidence to acknowledge the Plaintiff’s new construction of the new warehouse for the purpose of expanding the real estate rental business; and (c) the Plaintiff’s construction of the new warehouse for the purpose of using the new warehouse for the purpose of using the new warehouse or its rental.

Therefore, the plaintiff's above assertion is groundless.

3. Conclusion

The plaintiff's claim is dismissed on the ground that it is without merit.