A person supplied with a tax invoice for the transfer of business without consent of a lessor is an existing contractor.

Tax invoices issued by a lessee who operates a real estate rental business without the consent of the lessor to receive the transferor who is an existing contractor, who is not the general transferee of the business, pursuant to the comprehensive acquisition by transfer of the business.

Article 75 of the Enforcement Decree of the Value-Added Tax Act

Daejeon District Court-2017-Gu Partnership-107512

○

○ Head of tax office

May 31, 2018

July 12, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s refusal to refund or correct value-added tax amounting to KRW 5,400,00 for the second period of December 8, 2016, KRW 16,200 for the first period of December 2013, KRW 13,500 for the second period of December 2013, and KRW 13,500 for the second period of December 2013 is revoked.

1. Details of the disposition;

A. The Plaintiff is a corporation established for the purpose of real estate development, lease of real estate, etc., and AA is the representative director of the Plaintiff.

B. On July 15, 200, AA registered as a business operator with the trade name "○ building", and on August 26, 201, between BB Co., Ltd. (hereinafter "B") and BB house located in ○○○○○○dong (hereinafter "the instant building") the lease term was extended from January 1, 201 to December 9, 2012; the lease deposit was KRW 30 million from January 1, 201 to December 1, 201; the monthly rent was KRW 26 million from January 1, 201; and from December 10, 201 to December 10, 201, the lease contract was concluded to lease part of the said building to other business operators (hereinafter "the instant lease agreement").

C. On September 24, 2012, AA established the Plaintiff and assumed office as the representative director. On the same day, AA concluded a comprehensive business transfer and takeover agreement between the Plaintiff and the Plaintiff to transfer “all assets, liabilities, etc. of ○○ building” (hereinafter “instant business transfer agreement”) and closed the ○ building on October 31, 2012.

D. The Plaintiff remitted KRW 27 million to BB through the Plaintiff’s account from November 2012 to February 2013. From March 2013 to November 201, 2013, the Plaintiff paid KRW 300 million by deducting the lease deposit from KRW 300 million. BB issued an electronic tax invoice 13 (total value of supply, KRW 351 million,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,0000,000,000,000,000,000,000,000,000).

E. On November 30, 2015 and March 2, 2016, the Plaintiff requested the re-issuance of a tax invoice changed from “○○ Building AA” to “Plaintiff.” On February 4, 2016, BB issued 13 copies of the revised electronic tax invoice from November 201 to November 2013 (the total supply price of 350 million won, total tax amount of 351 million won, 5.1 million won, total tax amount of 35.1 million won) (hereinafter “instant revised tax invoice”).

F. Accordingly, on October 13, 2016, the Plaintiff filed a request for correction with the Defendant for refund of KRW 35,100,000,000 (= KRW 5,400,000 + KRW 1,62 million in January 1, 2013 + KRW 13,50,000 in 2012), along with the instant revised tax invoices, for the second period, 2012, 2013, and 2013.

G. However, on December 8, 2016, the Defendant notified the Plaintiff of the refusal of the request for correction on the ground that, if some of the necessary entries of the tax invoice were to be mistakenly entered due to reasons other than mistake, the revised tax invoice should be prepared by the deadline for final return for the taxable period to which the date of supply belongs pursuant to Article 70(1)6 of the Enforcement Decree of the Value-Added Tax Act. However, when the Plaintiff submitted the revised tax invoice in 2012 and 2013 transaction amount in around 2016, it does not constitute a reason for the input tax deduction. (hereinafter “instant disposition”).

H. The Plaintiff filed an objection to the instant disposition with the ○○ Regional Tax Office on January 9, 2017, but received a decision of dismissal on February 23, 2017, and again filed a request for a tax trial with the Tax Tribunal on May 17, 2017, but received a decision of dismissal on September 19, 2017.

2. Summary of the plaintiff's assertion

After entering into the instant business transfer agreement with AA, the Plaintiff was known to BB, and the lessee was provided with the leased service from BB, and the lessee was provided with the sub-lease service, so the lessee of the instant building is clear by the Plaintiff. Nevertheless, BB filed a lawsuit against AA to deliver the building as soon as possible from AA to the lessee, despite the Plaintiff’s continuous demand, and entered the person who is provided under the tax invoice as the lessee under the lease agreement, as the lessee under the lease agreement. Accordingly, the purchase tax amount pursuant to the revised tax invoice should be deducted by mistake. However, the disposition of this case should be revoked by deeming that the necessary entry of the tax invoice is erroneous for reasons other than mistake.

3. Relevant statutes;

The entries in the attached Table-related statutes shall be as follows.

4. Whether the disposition of this case is unlawful

(a) Facts of recognition;

(1) On October 11, 2012, after the conclusion of the instant business transfer agreement with AA, the Plaintiff sent to BB a written notification that “○○ building was registered as a stock company ○ (Plaintiff) on September 24, 2012.” The Plaintiff sent a business registration certificate and a written statement accompanied by the certified copy of the corporate register.”

St. St. L. L.S.

1. AA shall deliver the instant building to BB by November 30, 2015, and if AA does not deliver the building by the above date, the amount calculated by applying the ratio of KRW 58,300,000 per month from the day following the above date to the delivery date shall be paid to BB.

2. BB waives all claims (e.g., unjust enrichment, damages, removal costs) against AA and sub-lessees with respect to the instant lease agreement, except as provided in paragraph 1 above.

3. AA waives all claims for reimbursement of beneficial costs and claims for reimbursement of deposit to BB related to the instant lease agreement.

4. AA and CCC (her husband of AA) withdraw the lawsuit of the ○○ District Court, and there is no action against BB in respect of the instant lease agreement, such as reimbursement of beneficial cost, claim for reimbursement of deposit, etc.

5. The CC shall accept the claim of BB in the Daejeon District Action, and the AA shall cooperate with the corporation ○○, Inc., to accept the claim of BB in the said Action.

6. AA shall exercise the right to claim rents and management expenses under a sub-lease agreement between AA and sub-lessees from January 2013 to November 30, 2015, and shall settle accounts between the aforementioned parties.

7. BB and sub-lessees have concluded a lease agreement on part of the instant building after November 30, 2015.

8.BB waives each other claims against AA and sub-lessees.

(2) On December 27, 2012, BB filed a civil lawsuit (hereinafter referred to as "related civil lawsuit") seeking the delivery, etc. of the building of this case against DD Co., Ltd. and EE Co., Ltd. (hereinafter referred to as "Lessee"), which is a former lessee, on December 27, 2012. The ○○ District Court rendered a judgment in favor of BB, which is the legal cause of the case, rendered a final judgment against BB. AA and the former lessee appealed against it. On October 16, 2015, the ○ High Court, which is the legal cause of the appeal of the case, rendered a decision to recommend a compromise with the following content, and the said decision became final and conclusive as it is because the parties did not raise any objection (hereinafter referred to as "the recommendation of reconciliation of this case").

(3) Meanwhile, on December 4, 2014, AA filed a lawsuit against BB against ○○ District Court claiming reimbursement of beneficial costs for the instant building, and voluntarily withdrawn the lawsuit on November 4, 2015, pursuant to paragraph (4) of the decision on recommending reconciliation made in the relevant civil procedure.

(4) On December 29, 2014, BB commenced the enforcement of the instant building, which was the part of the first instance judgment on relevant civil litigation, but the possessor was not AA, and accordingly, BB filed a lawsuit against the Plaintiff et al. on March 13, 2015 against the Plaintiff et al. for requesting the delivery of the building, and was sentenced to a favorable judgment on December 2, 2015.

B. Determination

(1) Relevant provisions

Article 32(7) of the Value-Added Tax Act provides that an electronic tax invoice corrected, as prescribed by Presidential Decree, may be issued if any cause or event prescribed by Presidential Decree arises after erroneous entry of an electronic tax invoice or issuance of an electronic tax invoice. Article 70(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 26983, Feb. 17, 2016; hereinafter the same shall apply) provides that "where a requisite entry, etc. is mistakenly entered in the grounds and procedure for issuance of an amended electronic tax invoice is erroneous," the time limit for preparation of the tax invoice is not provided (Article 32(7) of the Value-Added Tax Act (Article 6). However, Article 39(1)2 and Article 32(1)2 of the Value-Added Tax Act provides that a taxpayer who receives one of the requisite entry items in the tax invoice issued may deduct the remainder of the input tax invoice from the output tax amount confirmed to be different from the fact."

(2) In light of the following circumstances: (a) the transfer of right to lease between the Plaintiff and the Plaintiff cannot be asserted against the lessor unless the lessor gave consent to the transfer of the instant building; (b) even if the Plaintiff entered the instant contract into a sub-lease agreement with the lessee, if the lessor did not consent to the transfer of the instant building, then the lessee would still be deemed as a non-resident of the instant building; (c) the lessee would not have explicitly consented to the transfer of the right to lease to the Plaintiff and the Plaintiff; and (d) the lessee would not be deemed to have agreed to the transfer of the instant building upon the premise that the lessee would have received rent payments from the Plaintiff’s account, and thus, the judgment of the court below that the transfer of the instant building was inevitable after the conclusion of the judgment of the judgment of the court below regarding the transfer of the instant building, and that the lessee would not be deemed to have explicitly consented to the transfer of the right to lease on the premise that the lessee would have received rent payments from the Plaintiff’s account (see Supreme Court Decision 200Da570, Jan. 17, 198).

Therefore, pursuant to Article 70(1)6 of the former Enforcement Decree of the Value-Added Tax Act, a revised tax invoice shall be prepared by the deadline for filing the final return for the taxable period in which the service date falls, and BB prepared the instant revised tax invoice on February 4, 2016 after two years or more from January 25, 2014, which was the final return for the second period of 2013, the date of filing the final return for the second period of 2013. Thus, the said revised tax invoice may not be deducted, and the input tax amount shall not be deducted pursuant to Article 75(2) of the former Enforcement Decree of the Value-Added Tax Act. Accordingly, the Plaintiff’s aforementioned assertion is groundless

5. Conclusion

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