Value-added tax shall not be exempted on individual packaging and sale for each independent transaction unit.

In the case of supplying manufacturing facilities by packing them in an independent transaction unit, such as entry, disease, and other similar forms, it can be seen that the leakage of contents is prevented, and that the value of goods increases considerably due to the increase of convenience in use such as distribution and possession, so the value-added tax shall not be deemed exempted.

Article 24 of the Enforcement Rule of the former Value-Added Tax Act: Scope of Unprocessed foodstuffs

2019Guhap21278 Disposition of revocation of refusal to correct value-added tax

○○○ 1

○ Head of tax office

September 19, 2019

October 17, 2019

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

Cheong-gu Office

The Defendant’s refusal to rectify the total value-added tax of KRW 542,264,633 in addition to each of the value-added tax listed in the Schedule of Attached Table 1(1) against Plaintiff AA on March 26, 2018, and each of the value-added tax of KRW 95,556,692 in addition to attached Table 1(2) against Plaintiff BB, shall be revoked.

1. Details of the disposition;

A. Plaintiff AA, from April 30, 200 to June 2, 2016, and Plaintiff BB, from June 3, 2016 to June 2, 2016, engaged in the manufacturing business of cut food products under the trade name called “CC food at Ansan-si from June 3, 2016 to June 3, 201.”

B. With respect to part of the part of the part of the part that the plaintiffs manufactured and sold, the plaintiff AA reported and paid the value-added tax of KRW 542,264,63 in total from the second to the first period of 2016 in 2012, and the plaintiff BB filed and paid the value-added tax of KRW 95,556,692 in total from the first to the first period of 2017 in 2016. The specific details of the value-added tax reported and paid by the plaintiffs are as shown in attached Tables 11 and 2.

C. The Plaintiffs asserted that the value-added tax is exempted as above, and filed a claim for correction with the Defendant on January 25, 2018, seeking the refund of value-added tax declared and paid, as shown in the attached Tables 1 and 1(2) (hereinafter “instant claim for correction in total”).

D. On March 26, 2018, the Defendant rejected the instant request for correction by deeming that the land without fault reported by the Plaintiffs as subject to taxation is not subject to value-added tax exemption under Article 26(1)1 of the Value-Added Tax Act, Article 34(2) of the Enforcement Decree of the same Act, and Article 24(1) [Attachment Table 1] of the Enforcement Rule of the same Act, since the land without fault is packed and sold on an independent trade unit (hereinafter “instant disposition”).

E. The Plaintiffs were dissatisfied with the instant disposition and filed an objection against the Defendant on June 14, 2018, but the Defendant dismissed all the Plaintiffs’ objections on July 5, 2018. The Plaintiffs filed an appeal seeking revocation of the instant disposition with the Tax Tribunal again on October 2, 2018, but the Tax Tribunal dismissed all the Plaintiffs’ appeals on December 6, 2018.

[Reasons for Recognition] Unsatisfy, Gap evidence 1-1, 2, 3, Eul evidence 1-2 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

Article 28 (2) 1 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter the same) and Article 34 (2) 1 of the Enforcement Decree of the Value-Added Tax Act stipulate "Simple processed food prescribed by Ordinance of the Ministry of Strategy and Finance, such as kimchi and wharfs, as non-processed food exempt from value-added tax." In light of the purport, text, history, etc. of the above provision, the above provision only delegates the authority to present simple processed food similar thereto to the Ministry of Strategy and Finance, other than kimchi and wharfs, and it cannot be deemed as delegation of the authority to restrict the scope of kimchi and wharfs, etc. falling under the object of value-added tax exemption. Nevertheless, in the case of value-added tax, Article 10 (1) [Attachment 1] of the former Enforcement Rule of the Value-Added Tax Act and Article 24 (1) [Attachment 1] of the Enforcement Rule of the Value-Added Tax Act, which includes the scope of simple manufacturing facilities to temporarily supply them for sale purposes.

Therefore, the disposition of this case, which is based on the premise that the provision of this case is valid, is unlawful.

(2) shall be revoked.

B. Relevant statutes

Attached Table 2 shall be as stated in the relevant statutes.

C. Determination

Article 12 (1) 1 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) and Article 26 (1) 1 of the Value-Added Tax Act provide that food not processed [including agricultural products, livestock products, fishery products and forest products provided for food] as one of the goods exempt from the value-added tax, and "agricultural products, livestock products, fishery products and forest products prescribed by Presidential Decree that are produced and not provided for food" and Article 28 of the former Enforcement Decree of the Value-Added Tax Act and Article 34 of the Enforcement Decree of the Value-Added Tax Act provide that "food not processed under Articles 12 (1) 1 and 26 (1) 1 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply] shall be referred to as "unprocessed food products" under Article 12 (2) of the former Enforcement Rule of the Value-Added Tax Act.

In full view of the purport, language, structure, history, etc. of the above relevant provisions, Article 28(2)1 of the former Enforcement Decree of the Value-Added Tax Act and Article 34(2)1 of the Enforcement Decree of the Enforcement Decree of the Value-Added Tax Act shall be deemed to be the delegation of authority to determine the scope of exemption of value-added tax among the simple processed food of a similar kind, including kimchi and dubs, to the Ministry of Strategy and Finance. The instant provision is legal and effective as it was established within the scope of delegation, and thus, the Plaintiffs’ assertion on different premise

1) Article 12(1)1 of the former Value-Added Tax Act and Article 26(1)1 of the Value-Added Tax Act stipulate that the subject matter of value-added tax exemption is to reduce the burden of livelihood and promote the stabilization of prices by offering the burden of value-added tax on the basic food materials necessary for the daily life of the general public. Accordingly, Article 28 of the former Enforcement Decree of the Value-Added Tax Act and Article 34 of the Enforcement Decree of the Value-Added Tax Act provide that the basic food materials necessary for the daily life of the general public are to reduce the burden of livelihood and promote the stability of prices. Accordingly, besides the food that is entirely unprocessed as unprocessed food that can be seen as unprocessed food within a prior meaning, the primary processing of the original food is to be made to the extent that the original nature of the original food does not change (Article 12(1)), and simple processed food (Article 26(2)1) are included in unprocessed food (Article 28(2)1).

'Simple processed foodstuffs' in Paragraph 2 Item 1 of the above is reasonable to mean only food that has undergone simple processing to the extent that the original nature of the original product is excessively changed or that the economic value is not significantly increased in light of the purport of exempting unprocessed foodstuffs from value added tax, and the relationship with the foods that have undergone the primary processing. Thus, a wide range of legislative discretion should be recognized as to which requirements among various simple processed foodstuffs are met to recognize simple processed foodstuffs as eligible for tax exemption.

2) Article 28(2)1 of the former Enforcement Decree of the Value-Added Tax Act and Article 34(2)1 of the Enforcement Decree of the Value-Added Tax Act stipulate that "a simple processed food prescribed by Ordinance of the Ministry of Strategy and Finance, such as kimchi and dub, which is an unprocessed food subject to tax exemption." The prior meaning of "a, etc." indicates that the prior meaning of "a person, etc." is more than that of the same kind, such as "a person, etc." and "a person, etc." is used for the same purpose as prescribed by Ordinance of the Ministry of Strategy and Finance, such as "a person, etc." generally indicates some of the items to be stipulated in subordinate statutes to clarify the scope and limit of delegation by specifically presenting some of the items to be stipulated in subordinate statutes, and it cannot be readily concluded

Therefore, considering the fact that Article 28 (2) 1 of the former Enforcement Decree of the Value-Added Tax Act and Article 34 (2) 1 of the Enforcement Decree of the Value-Added Tax Act stipulate "kimchi and dub, etc." as well, the concept of simple processed foodstuffs is somewhat comprehensive and abstract, and a wide range of legislative discretion is granted with regard to simple processed foodstuffs subject to tax exemption, it shall be deemed that the purpose of setting the scope of simple processed foodstuffs, including kimchi and duba, is to help understand the concept of simple processed foodstuffs by presenting specific items of simple processed foodstuffs, while it shall be deemed that the purpose of determining the scope of simple processed foodstuffs corresponding to the same type, such as kimchi and duba, is to be recognized as simple processed foodstuffs subject to tax exemption without any restriction

3) The instant provision provides that “the head of a Si/Gun/Gu shall be equipped with manufacturing facilities and shall not be supplied by packaging in an independent transaction unit for the purpose of sale in an independent transaction unit, but shall include the cases of temporary packing such as government-in, sick, etc. for simple transportation.” As such, the form of packing, unit, purpose, etc. is the basis of value-added tax exemption.

Accordingly, the plaintiffs asserts that the exemption of value-added tax does not vary depending on packaging since Article 28(1) of the former Enforcement Decree of the Value-Added Tax Act and Article 34(1) of the Enforcement Decree of the Value-Added Tax Act provide that the first processed food shall be classified as non-processed food. However, the purport of Article 28(1) of the former Enforcement Decree of the Value-Added Tax Act and Article 34(1) of the Enforcement Decree of the Value-Added Tax Act lies in the first processing of a package to the extent that its original nature does not change, such as a simple form of packing for transportation or storage, and it does not purport to consider all packages as the first processing regardless of the details of the packing (see Supreme Court Decision 84Nu478, Feb. 26, 1985). Therefore,

Furthermore, in the event that the manufacturing facilities are equipped with the manufacturing facilities as stipulated in the instant provision and are supplied in an independent trading unit for the purpose of sale by packaging in an independent trading unit, the leakage of contents is prevented, and the convenience in the use, such as distribution and possession, increases considerably in the value of the goods. Therefore, it can be evaluated that the inherent nature of the manufacturing facilities exceeds the scope of the primary processing without changing the original nature.

Therefore, the provision of this case provides for the determination of tax exemption based on the form of "Packing" and cannot be deemed contrary to the purport of the mother law.

4) Article 12(1)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 8409 of Dec. 31, 1976) provides for unprocessed foodstuffs (including agricultural products, livestock products, fishery products, and forest products for food) as exempted from value-added tax (Article 12(1)1), and Article 28(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 8409 of Dec. 31, 1976) provides for "one of unprocessed foodstuffs, livestock products, fishery products, forestry products, and other simple processed foodstuffs prescribed by Ordinance of the Ministry of Finance and Economy other than subparagraphs 1 through 11 of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 1246 of Mar. 11, 1977).

In addition, as the Enforcement Decree of the Value-Added Tax Act was amended by Presidential Decree No. 17041 on December 29, 2000, Article 28(2)1 provides that "a simple processed food prescribed by the Ordinance of the Ministry of Finance and Economy, such as kimchi and dub, etc.", and separately separate provisions concerning simple processed food in the Enforcement Decree. In addition, Article 10(1) [Attachment Table 1] of the Enforcement Rule of the Value-Added Tax Act as amended by Ordinance of the Ministry of Finance and Economy No. 193 on April 3, 2001, Article 10(1) [Attachment Table 1] of the Enforcement Rule of the Value-Added Tax Act provides that "kimchi, single, bunked, bunked, buned, bed, livered and livered, boomed, and supplied in an independent transaction unit for the purpose of sale shall be excluded, but Article 28(2)1 of the Value-Added Tax Act provides that the above Enforcement Rule No. 24(1) of the Value-Added Tax Act provides.

The plaintiffs asserted that the Enforcement Decree of the Value-Added Tax Act was amended as of December 29, 200 to extend the scope of exemption from value-added tax by recognizing it as simple processed food subject to exemption from value-added tax without any restriction. However, as seen earlier, since the amendment of the Enforcement Rule of the Value-Added Tax Act on January 19, 1978, the scope of simple processed food subject to exemption from value-added tax is consistently defined as "gymnas, single, gymnas, gymnas, gymnas, gymnas, gymnas, gymnas, gymnas, gymnas, etc. (excluding those packaged in other similar forms)" and there is no special reason to regard it as simple processed food subject to exemption from value-added tax as "gymnas, gymnas, gymnas, g., g., 2007.

Rather, in light of the above amendment history of the Value-Added Tax Act, our VAT has consistently maintained the long-standing attitude of excluding the object of value-added tax exemption in the case of simple processed foodstuffs, including kimchi and dubal, from among simple processed foodstuffs, and the purport of excluding the object of value-added tax exemption in the case of simple processed foodstuffs, such as kimchi and dubal, is difficult.

3. Conclusion

Therefore, the plaintiffs' claims are dismissed in entirety as it is without merit. It is so decided as per Disposition.