Cho High Court Decision 2013 Deputy 4640 ( October 15, 2014)

Where the moving of goods is not required, the time of supply for the goods being made available;

1/2 shares have been registered for the transfer of ownership, and a sales contract provides that no other agreement is made to limit the use and disposition, and there is no other agreement to limit the use and disposition, the disposition imposing tax on the time of supply by deeming the time of supply as the date of registration for

Article 9 of the former Value-Added Tax Act

2014Guhap2646 and revocation of the revocation of the imposition of penalty tax

OO

O Head of tax office

March 26, 2015

April 23, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing value-added tax of KRW 000 (including additional tax of KRW 000) on the Plaintiff on April 4, 2013 shall be revoked.

1. Details of the disposition;

A. The Plaintiff’s transfer of real estate

1) From January 1, 2011, the Plaintiff has run real estate rental business in the name of “AA”.

2) The Plaintiff: (a) purchased each of the said real estate on September 30, 2010; (b) completed the registration of ownership transfer on the said real estate on December 7, 2012, with OOOOOOOOOOOOOOOOOOOOO-0 large scale 2,938 square meters (divided into 00-0 large scale 2,860 square meters on January 11, 2013, and 00-0 large scale 78 square meters on the said 00-0 large scale 2,860 square meters; and (c) completed the registration of ownership transfer on the said real estate on September 30, 2010, with OOOOOOOOOO-0 large scale 00-0 large scale 35 square meters on December 6, 2012 (hereinafter referred to as the “instant building”); and (d) completed the registration of ownership transfer on the said real property on December 7, 2012.

3) On November 14, 2012, the Plaintiff entered into a sales contract with BB with the medical corporation BB (hereinafter “BB”), with the content that the Plaintiff would sell the instant real estate to B (i.e., KRW 000 billion + the land price of the instant building + KRW 00,000, and value added tax) (hereinafter “the instant sales contract”) and the various house fixtures and fixtures of the instant building (hereinafter “the instant house”) and fixtures to sell the instant real estate to BB with the price of KRW 00,000 (including value added tax).

4) However, after the conclusion of the instant sales contract, the Plaintiff and BB agreed to divide the instant real estate into 1/2 shares and transfer ownership over two occasions (hereinafter referred to as “instant agreement before division”). Accordingly, on December 28, 2012, the Plaintiff completed the registration for transfer of ownership on the ground of 1/2 shares of the instant real estate to BB on November 14, 2012 (hereinafter referred to as “the instant primary shares”).

5) Since January 11, 2013, the Plaintiff again completed the registration of ownership transfer based on “sale on January 10, 2013” with respect to the remaining 1/2 shares of the instant real estate to BB on January 11, 2013, and reported the closure of business as to the real estate leasing business on the same day.

B. Plaintiff’s final return of value-added tax and Defendant’s corrective disposition

1) On January 11, 2013, the Plaintiff issued to BB a sales tax invoice in Chapter III, which provides that the time of supply for the instant building portion of KRW 000 (including value-added tax) and the total purchase price of the instant house (including value-added tax) shall be KRW 000,000, out of the instant real estate purchase price of KRW 0 billion and KRW 000,000 (including value-added tax) as indicated in the following table:

No.

Date of Preparation

Items

Value of supply (cost)

Value-Added Tax (won)

Total amount (won)

1

January 11, 2013

Non-public building paints

00,000,000

00,000,000

00,000,000

2

January 11, 2013

Building Balance

00,000,000

00,000,000

00,000,000

3

January 11, 2013

Sale of Equipment

00,000,000

00,000,000

00,000,000

Total

00,000,000

00,000,000

00,000,000

2) On February 25, 2013, the Plaintiff filed a final tax return for the first period of value added tax on the instant real estate, etc. on February 25, 2013, based on the supply value of KRW 000 as the tax base, and reported 00 won as the output tax

3) However, on December 28, 2012, the Defendant: (a) identified the time of supply for the instant portion that the Plaintiff transferred ownership to BB on December 28, 2012 as of December 28, 2012; (b) issued a disposition to correct and notify the Plaintiff of the value-added tax amount of KRW 000 (including additional tax of KRW 000) for the second period of value-added tax in April 4, 2013 (hereinafter “instant disposition”); and (c) issued a decision to refund KRW 000 out of the amount of value-added tax paid for the first period of value-added tax that the Plaintiff reported and paid on April 9, 2013.

C. Plaintiff’s objection

1) On October 21, 2013, the Plaintiff, who was dissatisfied with the instant disposition, filed an objection against the OO of a regional tax office on October 21, 2013, filed an appeal with the Tax Tribunal, but the decision of dismissal was rendered on May 15, 2014.

2) Accordingly, the Plaintiff filed the instant lawsuit on August 12, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 3 (including each number, hereinafter the same shall apply), Eul evidence 1 to 7 and 11, the purport of the whole pleadings

2. The plaintiff's assertion and judgment

A. The plaintiff's assertion

In the event of transfer of real estate, the time of supply for goods under the Value-Added Tax Act refers to the time when the buyer can actually use and benefit from the real estate. However, in order to prevent problems such as provisional seizure by a third party from BB, the Plaintiff first received a request from BB to transfer ownership, and on December 28, 2012, transferred ownership of 1/2 of the instant real estate to BB on December 28, 2012, but in fact BB was unable to use the instant real estate on December 28, 2012, the time of supply for the instant first portion of the instant real estate should be deemed to be the 1st share in 2013. Nevertheless, on the premise that the time of supply for the instant first portion of the instant real estate is deemed to be December 28, 2012, the Plaintiff did not err in the misapprehension of the judgment that the Plaintiff did not issue the sales tax invoice in accordance with the sales invoice in the second period of December 2012.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) Upon entering into the instant sales contract, the Plaintiff and BB entered into the following agreements:

Article 1: 0 billion won of down payment and the intermediate payment 0 billion won on the date of the contract, December 24, 2012, and the remainder 0 billion won on February 14, 2013.

Article 2 The name limit of the instant real estate is from November 14, 2012 to start the preparation of BB's openings (internal remodeling, authorization and permission preparation, etc.).

Article 3 The Plaintiff shall be liable for and reimburse all the taxes and public charges related to the subject matter of sale under the above Article 1 and all the accounts payable (such as the price for construction, internal collection, etc.) related to the subject matter of sale under the above Article 1 on the basis of the payment date of the balance: Provided, That the electricity and the water tax shall be borne by BB for the construction of the facilities within the remainder due

* Special Terms and Conditions

3. In relation to the down payment and intermediate payment among the terms of the contract, the Plaintiff uses the full amount of the down payment and intermediate payment (0 billion won) received from BB prior to the remainder payment in the name of OO, which is the first collateral security (the first collateral security) of the subject matter of the contract. If BB wishes, the Plaintiff shall implement the procedure for creation of a collateral security or provisional registration in the name of BB as the secured obligation.

2) Pursuant to Article 1 of the instant sales contract, BB paid to the Plaintiff the intermediate payment of KRW 0 billion on November 24, 2012, the date of the said contract, and KRW 0 billion on December 24, 2012, respectively.

3) On December 24, 2012, the Plaintiff, after receiving the down payment and the intermediate payment as above, deleted all the registration of establishment of a mortgage established on the instant real estate on December 24, 2012 pursuant to paragraph (3) of the instant special agreement.

4) On February 28, 2013, the Plaintiff: (a) filed a preliminary return of capital gains tax following the instant first sale of equity shares; (b) decided on December 28, 2012 as the date of transfer of assets; and (c) separately decided on April 1, 2013 as the date of transfer of assets when filing a preliminary return of capital gains tax on the remainder 1/2 of equity shares; and (d) decided on January 11, 2013.

D. Determination

1) Comprehensively taking account of the purport of Articles 6(1) and 9 of the former Value-Added Tax Act and Article 14 of the former Enforcement Decree of the Value-Added Tax Act, the supply of goods refers to the delivery or transfer of goods based on all contractual or legal causes, and in light of the nature of value-added tax, such delivery or transfer is premised on the act of transferring the ownership so that the goods can be used and consumed. Thus, even before a business operator concludes a sales contract to sell a building or completes registration of transfer under the name of the other party, if the other party transfers the ownership so that the owner can use and dispose of the building exclusively, it constitutes the supply of goods under the Value-Added Tax Act (see Supreme Court Decision 2005Du2926, Oct. 13, 2006). Meanwhile, Article 9(1)2 of the former Value-Added Tax Act provides that "if the transfer of goods is not necessary, the time when the goods are made available," and it is reasonable to deem that the real property becomes available as 90.

2) In light of the foregoing legal doctrine, taking into account the following circumstances, comprehensively taking into account the following circumstances, it is reasonable to view the time of supply of the instant first share pursuant to the instant sales contract to be December 28, 2012.

A) On December 24, 2012, after receiving the down payment and the intermediate payment from BB pursuant to paragraph (3) of the terms and conditions of the instant sales contract, the Plaintiff cancelled all registration of the establishment of a neighboring mortgage established on the instant real estate on December 24, 2012, and there is no evidence to acknowledge that the instant sales contract and the instant agreement for the division transfer (it is unclear that the agreement was made, but the Plaintiff asserted that it would aim at saving capital gains tax at the time of filing an appeal with the Tax Tribunal, but at the time of filing an appeal with the Tax Tribunal, the Plaintiff filed a registration of the transfer of the ownership of the instant first share with BB on December 28, 2012. Accordingly, BB acquired ownership of the instant first share out of the instant real estate without any restriction, such as a collateral security, with respect to one-half share, and there is no agreement restricting the ownership or other right to dispose of the instant first share under the instant sales contract or the instant agreement for the division transfer.

B) On or after November 14, 2012, the Plaintiff and BB agreed that “The name limit of the instant real estate” in Article 2 of the instant sales contract shall be from the commencement of BB’s preparation for opening (internal remodeling, authorization, and permission preparation, etc.). The proviso of Article 3 provides that “B shall bear electricity and water tax when the interior facilities are installed within the remainder due to the necessity of BB.” Accordingly, it is reasonable to deem that BB could have actually used the instant real estate, such as the transfer of the instant real estate and construction for the opening of the hospital at any time even before the remainder payment is made after November 14, 2012. There is no evidence to acknowledge that there was an agreement restricting BBB’s right to use the instant real estate under the instant sales contract or the instant agreement for the division transfer.

C) In relation to the instant sales contract, in light of the fact that the Plaintiff issued two tax invoices using the sales price for the instant portion and the sales price for the remainder of 1/2 as a separate supply price, and the preliminary return for the transfer income tax following the instant first transaction and the preliminary return for the transfer income tax on the remainder of 1/2 shares, the Plaintiff appears to have recognized the transfer of ownership due to the instant first transaction and the transfer of ownership due to the remaining 1/2 shares as a separate transaction unit.

3) Therefore, it is reasonable to deem that the time of supply of the instant first share belongs to the second time of 2012, and thus, the instant disposition cannot be deemed unlawful as otherwise alleged by the Plaintiff.

3. Conclusion

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