2014 High Court Decision 158 (Law No. 15, 2014)

The disposition imposing value-added tax on the real estate sales businessman is legitimate.

Article 1(2) of the Enforcement Rule of the Value-Added Tax Act is merely an exemplary provision that can be seen as real estate sales, and so long as the real estate transaction comprehensively and repeatedly takes place with continuity and repetition of the business purpose, it does not deny the feasibility of the transaction during the relevant taxable period, even if the transaction falls short of the

Article 1 of the Enforcement Rule of the Value-Added Tax Act

2014Guhap4670 Revocation of Disposition of Imposition of Value-Added Tax

LAA

○ Head of tax office

oly 23, 2015

November 20, 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 imposition of value-added tax of KRW 00,00,000 for the second period of March 4, 2013 and value-added tax of KRW 0,00,00 for the first period of October 31, 2013 and the imposition of KRW 00,00,00 for the second period of value-added tax for the second period of October 31, 2013 shall be revoked, respectively.

1. Details of the disposition;

A. On December 9, 2006, the Plaintiff transferred the real estate listed in the separate sheet No. 1, the real estate listed in the separate sheet No. 2 on September 4, 2007, and the real estate listed in the separate sheet No. 3 on June 17, 2009 to a third party, and reported and paid the capital gains tax accordingly.

B. On December 20, 2012, the Defendant confirmed the fact that the Plaintiff acquired and transferred several land and buildings as shown in attached Form 4, and deemed that the Plaintiff constitutes a person who sells real estate or sells real estate at least once during one taxable period, and sells real estate at least twice for business purposes (hereinafter referred to as “real estate sales businessman”) under Article 1(2) of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 342, Mar. 23, 2013; hereinafter referred to as the “former Enforcement Rule of the Value-Added Tax Act”) and completed the registration of business ex officio against the Plaintiff (hereinafter referred to as “real estate sales businessman”).

C. After that, the Defendant: (a) considered real estate listed in [Attachment 1 through 3 as the supply of goods; and (b) calculated the transfer value of real estate subject to value-added tax in total transfer value; (c) imposed value-added tax of KRW 00,000,00 for the second period of March 4, 2013; (b) value-added tax of KRW 00,000 for the second period of 2007; and (c) value-added tax of KRW 00,000 for the first period of 209 for the first period of 200,000 for the first period of 00,000 for the first period of 00,000 for the first period of 00,000 for the first period of 200,000 for the second period of 00,000 for the amount of value-added tax for 200,000 for the second period of 200,000 for the second period of 3.

D. The Plaintiff appealed and filed a request for review with the Chairman of the Board of Audit and Inspection, but was dismissed on May 21, 2014.

[Reasons for Recognition] Facts without dispute, Gap evidence 1 to 3, Eul evidence 1 to 4, 7, and 8 (including various numbers) and the purport of the whole pleadings

2. The plaintiff's assertion and judgment

A. The plaintiff's assertion

1) Ex officio registration of real estate sales businessman

The Defendant, on the ground that the Plaintiff sold a number of real estate, issued a business registration ex officio with respect to the Plaintiff, and subsequently disposed of each of the instant dispositions. Since the Plaintiff failed to obtain a business registration certificate under Article 5(4) of the former Value-Added Tax Act (Amended by Act No. 11873, Jun. 7, 2013) and Article 7(3) of the former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 24441, Mar. 23, 2013), the above business registration was unlawful and each of the instant dispositions based on the premise

2) Illegality of a tax investigation conducted in relation to each disposition of the instant case

Although the Plaintiff does not fall under the tax investigation stipulated in Article 81-6 (2) of the former Framework Act on National Taxes (amended by Act No. 12162, Jan. 1, 2014), it is unlawful for a tax official to abuse his/her authority to conduct a tax investigation to include the Plaintiff in the investigation, and each of the dispositions of this case based on such premise is unlawful. This is also unlawful. Even if it is a simple taxation data processing, which is not a tax investigation, the Plaintiff’s prior notice and statement of opinion, are

3) The assertion that the real estate sales businessman cannot be viewed as a real estate sales businessman

The plaintiff cannot be deemed as a real estate sales businessman under Article 1 (2) of the former Enforcement Rule of the Value-Added Tax Act for the following reasons.

A) There are no more than three taxable periods for which the Plaintiff acquired real estate at least once and sold two times. Of those, one of the 1st, 2006 and 2nd and 2nd and 2nd and 2nd and 2009, one of the two sales appearing in 2006 and 2nd and 2nd and 2nd and 2009, is deemed to have been expropriated at ○○, etc., and it cannot be deemed to have been actually sold.

B) The Plaintiff purchased real estate to set up a farming house mainly between 2004 and 2006 and sold each real estate continuously and repeatedly for the purpose of raising living expenses by failure to meet the requirements for raising the agreed money due to divorce at the beginning of 201, and thus, did not sell real estate continuously and repeatedly. It is unreasonable to determine whether the Defendant included the Plaintiff’s acquisition and transfer of real estate before July 1, 2006, which was registered ex officio with respect to real estate sales business.

4) The assertion of deviation and abuse of discretion

Each of the dispositions of this case is illegal disposal that deviates from or abused discretion, considering the fact that the Plaintiff did not sell real estate and make profits, but has continued to engage in social contribution activities, such as paying donations through the sale price, and that there is no special deduction for donations.

B. Relevant statutes

Attached Form 5 shall be as listed in attached Table 5.

C. Determination

1) Determination as to the assertion that the registration ex officio is unlawful

The legislative intent of business registration under the Value-Added Tax Act is to enable the tax authority to identify the taxpayer of the value-added tax and to secure the taxation data. This is merely a report of business fact, which is established by filing an application for registration of a business operator with the head of the competent tax office or ex officio. The issuance of a business registration certificate is merely an act of issuing a certificate verifying such registration and the ex officio cancellation of business registration is also an entry of the fact of business closure, not a change in the status of a business operator (see Supreme Court Decision 93Nu17355, Dec. 10, 1993). The same applies to cases where the tax authority ex officio made business registration of an individual pursuant to Article 7(4) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 2441, Mar. 23, 2013).

Although the Defendant completed the business registration ex officio by deeming the Plaintiff as a real estate sales broker under the former Enforcement Rule of the Value-Added Tax Act, the fact that the Defendant did not deliver the business registration certificate does not conflict between the parties. In light of the above legal principles, even if the Defendant did not deliver the registration certificate to the Plaintiff, the Defendant’s act of completing the business registration ex officio is not illegal. Therefore,

2) Determination as to the Defendant’s assertion that the tax investigation was illegal

Article 21(1)1 and 2 of the former Value-Added Tax Act (amended by Act No. 11873, Jun. 7, 2013; hereinafter referred to as the "former Value-Added Tax Act") provides that where a business operator fails to file a final return, the head of a tax office having jurisdiction over the place of business shall investigate the tax base of value-added tax or the amount of tax to be paid for the taxable period and determine or correct the amount of tax to be paid for the taxable period if any error or omission exists in the details of the final return, and Article 7(4) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 2441, Mar. 23, 2013) provides that where a person commencing a business fails to file a registration of business, he/she may investigate and register the relevant business. Meanwhile, Article 81-6(2)1 of the former Framework Act on National Taxes (amended by Act No. 12162, Jan. 1, 2014>

According to the above facts, the defendant did not make a final tax return on the plaintiff's final tax return or did not make a error in the final tax return, and it did not order the plaintiff to investigate and submit relevant data or documents in the process of taking each disposition as a real estate broker, and it is difficult to view that the defendant selected the plaintiff as a person subject to tax investigation under the former Framework Act on National Taxes and conducted a tax investigation, and there is no other evidence to acknowledge otherwise.

Even if the Defendant conducted a tax investigation against the Plaintiff, the Plaintiff did not report or register real estate sales business pursuant to the former Enforcement Rule of the Value-Added Tax Act, even if there is a big difference in the tax base or amount of value-added tax depending on whether a return or registration for real estate sales business was made or made. Therefore, it constitutes a case where a taxpayer fails to fulfill his/her duty to cooperate in tax, such as filing a return based on facts prescribed by tax laws, submitting a certificate of faithful return, and preparing, delivering, and submitting a tax invoice or invoice. Therefore, the Defendant’s on-site investigation and data investigation against the Plaintiff is a lawful tax investigation under Article 81-6(2)1 of the former Framework Act on National Taxes

Meanwhile, according to the aforementioned evidence and the purport of the whole pleadings, the defendant given the plaintiff an opportunity to state his opinion by giving a prior notice of taxation regarding each disposition of this case on or around December 2012. Thus, the plaintiff's assertion that the taxation procedure of this case is incomplete is without merit.

3) Determination as to the assertion that the real estate sales businessman cannot be viewed as a real estate sales businessman

Whether the act of transferring real estate consists of "real estate sale business" or "income therefrom shall be determined according to the ordinary social norms, taking into account the transferor's acquisition and holding status of real estate, creation, size and frequency of transfer, mode, counterpart, etc., and whether the transfer has continuity and repetition to the extent that the transfer can be seen as business activities. The determination must take into account not only the transfer real estate but also all the circumstances before and after the transfer of the real estate held by the transferor throughout the entire real estate owned by the transferor. Furthermore, Article 1(2) of the former Enforcement Rule of the Value-Added Tax Act is merely an exceptional provision that can be seen as real estate sale business, and so long as the real estate transaction was conducted in whole with continuity and repetition under the business purpose, the business feasibility of the transaction during the taxable period is not denied (see Supreme Court Decision 2010Du29192, Feb. 28, 2013).

The following facts are acknowledged as follows: ① the Plaintiff acquired 61 piece of land, including real estate, at ○○○○○○ through 25 times from 2004 to 2012, as indicated in attached Table 4, and real estate transactions frequently occurred by transferring 24 times. The act of transfer of most land takes place 1 to 5 years from the date of acquisition; ② the purchase price of each piece of real estate acquired by the Plaintiff exceeds 10 billion won, as well as KRW 3 billion from the date of transfer of the above real estate; ③ it is reasonable to view that the Plaintiff purchased the above real estate to establish a farming house, but it is difficult to understand that the Plaintiff actually acquired the above real estate at a distance of 1 to 200,000 won from the date of acquisition to the date of transfer of each piece of real estate, ④ The time of acquisition and transfer of each piece of real estate from 200 to the date of transfer to 200,500 to the date of transfer of each piece of real estate, and the Plaintiff actually acquired each piece of real estate from 2000.

Therefore, the plaintiff's above assertion is without merit.

4) Whether there is deviation or abuse of discretion

Even if a certain administrative act is a binding act or a discretionary act, whether it is a discretionary act or a discretionary act can not be uniformly defined, and it should be determined individually in accordance with the form, system, or language of the provision that served as the basis for the pertinent disposition (see Supreme Court Decision 94Nu12302, Dec. 12, 1995). Article 31 of the Value-Added Tax Act provides that the tax authority is obliged to impose value-added tax on a person who receives the supply of goods or services at a certain rate, unless it falls under the requirements for reduction or exemption, unless it satisfies the requirements for reduction or exemption, it is difficult to view that there is room for discretion that the tax authority may decide on whether to impose tax or adjust the amount of tax in light of the form, etc. of the relevant provision.

Therefore, the plaintiff's above assertion based on the premise that the defendant has discretion on the disposition of this case is without merit.

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.