Where a general taxable person transfers the business to a simplified taxable person, whether the business is comprehensively transferred.

It is determined that the transfer of the above building, which the plaintiff operating a bath business, supplied to his bath business while closing his business, constitutes a supply of goods subject to value-added tax, because he temporarily and pronely supplied goods related to the business.

Article 6 (Supply of Goods)

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

According to the relevant provisions of the Value-Added Tax Act and the Enforcement Decree of the Value-Added Tax Act, the term "the supply of goods subject to value-added tax" means the delivery or transfer of goods under all contractual or legal grounds. The taxpayer is a person who independently supplies goods or services for a business regardless of whether it is for profit, and thus, the entrepreneur is subject to the imposition of value-added tax unless there is a special provision that the goods are delivered or transferred under a contract or legal grounds (see, e.g., Supreme Court Decisions 91Nu6221, Jul. 28, 1992; 91Nu621, Jul. 28, 1992; 200 if the entrepreneur continuously and repeatedly supplies goods or services for the main business, not for the main business, it is subject to the imposition of value-added tax. Furthermore, insofar as the supply of goods or services falls under the supply of goods or services under the Value-Added Tax Act, regardless of whether the purpose of the supply is to maintain or expand the business, or for liquidation, reorganization or discontinuance of the business (see, Supreme Court Decisions 2001Du64.

According to the reasoning of the judgment below, the court below found that the plaintiff's transfer of the building of this case to a bath business on December 11, 200 after the successful bid at the auction procedure had been made to the above building as a general business operator and registered the business as a general business operator. The plaintiff transferred the above building to ○○ school on October 23, 2002 and reported the closure of the business on November 11, 2002. On November 222, 2002, the court below found that ○○ school registered the business as a simplified taxable person while operating the bath in the above building. The court below held that the transfer of the building of this case to which the plaintiff engaged in the bath business was provided for his bath business while running the bath business constitutes a temporary and incidental supply of goods related to the business, and thus, it does not err in the misapprehension of legal principles as to the supply of goods subject to value-added tax, as alleged in the grounds for appeal.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

[Supplementary High Court Decision 2005Nu258 ( October 13, 2006)]

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The disposition of imposition of value-added tax of 52,012,740 won by the defendant against the plaintiff on January 12, 2004 shall be revoked.

1. Details of the disposition;

A. On December 11, 2000, the Plaintiff was awarded a successful bid on the ground of ○○○○○○○-dong, ○○○○○○-dong, ○○○○○○-dong, in the auction procedure, and operated the public bath with the trade name called “○○○○○○”, and registered as a general business operator.

B. On October 23, 2002, the Plaintiff transferred the above building to ○○○○ on November 11, 2002, and reported the closure of business on November 11, 2002. From November 22, 2002, ○○○ operated the above building as its workplace public bath in the same trade name. However, it was registered as a simplified taxable person.

C. As to this, the Defendant: (a) unlike the Plaintiff, who is a general taxable person, was a simplified taxable person and registered as the transferee; (b) on the ground that it does not constitute a comprehensive business transfer under the Value-Added Tax Act (hereinafter referred to as the “Act”); and (c) on January 12, 2004, rendered the instant disposition imposing value-added tax of KRW 52,012,740 on the Plaintiff.

[Reasons for Recognition] Unsatisfy, Eul evidence 1-2

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Since the following illegal grounds exist, the instant disposition should be revoked.

(1) Article 2 of the Act provides for a taxpayer of value-added tax as an entrepreneur, and the business refers to the case where goods or services are supplied with continuous and repeated intent by meeting the business form to create value-added tax, and thus, the Plaintiff, a bath business entity, sells to another person the above building used for the business purpose of the bath business, is irrelevant to the business, and thus, is not subject to value-added tax.

(2) Article 6(6) of the Act and Article 17(2) of the Enforcement Decree of the Act provide that the value-added tax shall be levied on a general taxable person where the general taxable person transfers his business to a simplified taxable person. However, this provision applies only to the intermediate materials, such as raw materials, goods, products, etc. held for business purposes, and cannot be applied to the business capital goods. Since the above building is a business capital goods, value-added tax, which is in essence a consumption

(3) Article 17(2) of the Enforcement Decree of the Act provides that a business shall be transferred only when a business is comprehensively transferred without specific delegation of the Act. Thus, it constitutes a comprehensive delegation and thus null and void.

(4) The imposition of value-added tax is contrary to the principle of self-responsibility, since it does not constitute a comprehensive transfer of business due to business registration as a simplified taxable person who is within the scope of control of the Plaintiff at the free option of the transferee.

B. Relevant statutes

Value-Added Tax Act

Article 6 (Supply of Goods) (6) Any of the following shall not be deemed the supply of goods:

2. Transfer of business as prescribed by the Presidential Decree. The proviso is omitted.

Enforcement Decree

(2) For the purpose of the main sentence of Article 6 (6) 2 of the Act, the term “those as prescribed by the Presidential Decree” means comprehensively succeeding to all rights and duties concerning the relevant business to each place of business (including the cases of division meeting the requirements of Article 46 (1) of the Corporate Tax Act, but excluding the cases where a general taxable person transfers the business to a simplified taxable person).

C. Determination

(1) Determination as to the assertion of the above A. (1)

According to Article 1(2) through (5) of the Act and Article 3 of the Enforcement Decree of the Act, “a person who supplies goods or services independently for business purposes” under Article 2(1) of the Act, which provides for a taxpayer of value-added tax, includes not only a person who supplies goods or services for business purposes but also a person who supplies goods or services for business purposes or for business purposes with a continuous and repeated intent and with a business form to create a point of interest (see, e.g., Supreme Court Decisions 86Nu622, Jan. 20, 1987; 86Nu622, Feb. 10, 1995; 93Nu18396, Feb. 10, 1995).

The plaintiff acquired the above building to run a bath business and offered it to the above purpose business, and the above building constitutes goods used or to be used for the plaintiff's business, and thus, the tax authorities deducted or refunded the value-added tax amount that the plaintiff shared by the plaintiff in the process of acquiring the above building as an input tax amount (Article 17 (1) 1 of the Act). Therefore, the above building is a goods related to the plaintiff's bath business. Therefore, the above building transferred to another person when the plaintiff discontinued the bath business is a goods supplied contingent or temporarily in relation to the main business under Article 3 (3) of the Enforcement Decree of the Act. Thus, the plaintiff's assertion is without merit.

(2) Determination as to the assertion of the above A. (2)

(A) In addition, according to Article 1(2) of the Act and Article 1(1) of the Enforcement Decree of the Act, “transfer of goods” subject to value-added tax, goods refer to all tangible goods and intangible goods, and among them, tangible goods, such as goods, raw materials, machinery, and buildings, do not distinguish between whether they are consumed or intermediate goods in terms of their use.

In accordance with the law, the value-added tax is a tax based on the ability to pay for consumption, which ultimately imposes upon the final consumer, but the law does not impose value-added tax on intermediate materials and capital goods transactions, but is based on the method of deducting all input tax amounts on the goods (see Article 17(1) of the Act).

In other words, if all goods in business feasibility are supplied regardless of intermediate or capital goods, the tax base is to calculate the output tax amount by multiplying the supply value by the tax rate, and ‘the tax amount for the supply of goods or services used or to be used for one's own business', namely, ‘the tax amount payable by the entrepreneur after deducting the input tax amount, the amount equivalent to the value-added tax paid to the supplier during the process of purchasing the capital goods such as raw materials or machinery is deducted from the input tax amount or refunded by the entrepreneur.

Therefore, even if the above building is capital goods of the Plaintiff’s business, and is capital goods of the person transferred from the Plaintiff, the Plaintiff is obligated to pay value-added tax (sales tax) according to the supply of the above building.

(B) In addition, Article 6(1) of the Act provides that the delivery or transfer of goods shall be deemed as the supply of goods and shall be subject to value-added tax, while Article 6(6)2 of the Act and Article 17 of the Enforcement Decree thereof provide that the transfer of goods or services subject to value-added tax shall not be deemed as the supply of goods and services, even if the supply of goods or services subject to value-added tax cannot be deemed as the supply of goods or services due to the nature of value-added tax, or the supply of goods is inappropriate, it shall be exempt from tax. The transfer of the business does not correspond to the intrinsic nature of the supply of value-added tax, which is the requirement of taxation for the individual supply of specific goods. In addition, the transfer of the transaction amount and the value-added tax amount are so high that it is anticipated that the transferee would be entitled to the deduction of the input tax amount without any exception, and thus, it is limited to the tax or economic policy consideration that should be avoided by the business transferee.

Therefore, in a case where a general taxable person intends to transfer his/her business to a general taxable person, the transferee does not have the benefits of taxation by having the general taxable person deducted the input tax amount, and the transferee is in accordance with the purport of the system to prevent the increased burden of financial pressure, etc. from being refunded after having paid the value-added tax. However, in a case where the trading partner is a simplified taxable person, the transaction partner does not have the amount of output tax (X10%) generated by the general taxable person in the amount of tax credit (the supply price X10%). Therefore, in a case where the transaction partner is a simplified taxable person, the tax authority cannot be said to have no benefits of taxation, in light of the legislative intent of making the comprehensive transfer of business non-taxation, the transfer of the business subject to non-taxation pursuant to Article 6(6)2 of the Act and Article 17(2) of the Enforcement Decree of the same Act refers to a comprehensive transfer of property for business, including property for business, and replacement of the business owner while maintaining the identity of the business (see, e.g., Supreme Court Decision 2000Du1420).

(C) Examining the above facts in light of the aforementioned legal principles, the Plaintiff’s transfer of the above building to ○○, a simplified taxable person, does not constitute a comprehensive transfer of business, and thus constitutes subject to the Value-Added Tax Act, and the Plaintiff’s assertion that no value-added tax may be imposed on the supply of capital goods, which is not a supply of goods

(D) Therefore, the above argument is without merit.

(3) Determination as to the assertion of the above A. (3)

Article 6 (6) 2 of the Act provides that a person shall be exempted from the transfer of a business that can determine the concept of the business and delegates the specific scope and limits thereof to the Presidential Decree. Any person may sufficiently predict the major contents to be prescribed by the Presidential Decree from the above provision. Article 17 (2) of the Enforcement Decree of the Act delegated by him shall not be deemed as a comprehensive delegation because he/she implements the content of the transfer of the business corresponding thereto (see Constitutional Court Order 2005Hun-Ba69, Apr. 27, 2006). Therefore, there is no reason to assert this.

(4) Determination as to the assertion of the above A. (4)

As seen earlier, the transfer of the above building does not fall under the transfer of the business falling under the non-taxable object, and the transferee, ○○○○, does not fall under the scope of the Plaintiff’s control. However, the Plaintiff, at the time of the transfer of the business, did not have the Plaintiff choose the type of taxation, but has the Plaintiff first registered the business as a general taxable person and then transferred the business, or had the Plaintiff registered the business as a general taxable person after the transfer of the business if he did not have registered the business. However, in the case of this, the Plaintiff may in fact avoid the economic burden due to the above taxation by adding the matters requiring the burden of value-added tax to the Plaintiff by a separate contract. Accordingly, the above assertion is groundless.

3. Conclusion

Therefore, the judgment of the first instance is just, and the plaintiff's appeal is without merit, and it is so decided as per Disposition.