It is a taxable transaction where the head office supplies services, such as the use and operational support of trade names, trademarks, etc. at each branch office without receiving a tax invoice.

The supply of the instant service cannot be deemed to be an internal transaction between the main office and each branch office, or an educational service that is exempt from value-added tax, and it is reasonable to view that the supply of the instant service is subject to value-added tax.

Articles 1 and 4 of the former Value-Added Tax Act

Cheongju District Court-2015-Gu Partnership-54 (O. 21, 2015)

Co., Ltd. 000 global

Head of Dong District Office

2015.04.30

205.21

1. The plaintiff's claim is dismissed.

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

Disposition of imposition of value-added tax of KRW 00,00 for the first period of April 1, 2014, value-added tax of KRW 00,00 for the second period of 2009, KRW 00,462,747 for the second period of 2009, KRW 00,640 for the second period of 2010, KRW 00,597,185 for the second period of 2010, KRW 00,80,647 for the first period of 2011, KRW 00,00,506 for the second period of 201, KRW 00,284,838 for the second period of 2012, KRW 200,751 for the second period of 20,701, KRW 305,30 for the second period of 2050 for the second period of 2013, and each disposition of imposition is revoked.

1. Details of the disposition;

A. The Plaintiff is a company established on October 0, 200, and is running early childhood education business with the brand called "000 Le" with the authorization of the lifelong education center from the Office of Education. The Plaintiff has its head office in 00-Gu 00-dong 0077, Cheongju-si (hereinafter referred to as the "head office business establishment"), and has 00 branches as shown in the attached sheet 1 (hereinafter referred to as "each branch business establishment").

B. On April 1, 2014, the Defendant conducted a separate investigation into the item of value-added tax on the Plaintiff between November 26, 2000 and February 8, 2000, and issued a disposition to impose value-added tax (including penalty tax on unfair non-declaration) (hereinafter “instant disposition”) on the ground that the Plaintiff’s principal office supplies the Plaintiff’s services, such as the use and operation support of trade name, trademark, etc. (hereinafter “instant services”) at each branch office, without any tax invoice, at each branch office’s place of business. The Defendant received the payment of the price from each branch office. The Plaintiff filed an appeal with the Director of the Tax Tribunal on June 13, 2014, but the said claim was dismissed on October 16, 2014;

D. On the other hand, on March 30, 2015, the Defendant, while proceeding in the instant lawsuit, corrected and notified the Plaintiff’s imposition disposition of unfair non-reported additional tax as an imposition disposition of general non-reported additional tax.

[Ground of recognition] Facts without dispute, Gap evidence 2, 3, Eul evidence 1 through 6, 8, 9 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The defendant's disposition of this case is unlawful for the following reasons.

1) The supply of the instant service is merely an internal transaction between the main office and each branch office, and is included in the supply of services exempt from value-added tax, as it constitutes services inevitably incidental to the Plaintiff’s supply of educational services exempt under Articles 12(1)6 and 12(3) of the former Value-Added Tax Act (amended by Act No. 11608, Jan. 1, 2013; hereinafter “former Value-Added Tax Act”). Accordingly, the supply of the instant service is not subject to value-added tax.

2) Even if the supply of the instant service constitutes value-added tax taxable, the Defendant did not deduct the input tax amount pursuant to the list of the purchase tax invoices submitted by the Plaintiff to the Defendant in rendering the instant disposition.

B. Relevant statutes

Attached Form 2 shall be as shown in attached Table 2.

(c) Fact of recognition;

1) The Plaintiff’s place of business concluded a contract between each branch and each branch’s place of business to pay each month management fees (hereinafter “instant contract”) in return for the joint use of trade name, trademark, service mark, emblem, operating method, etc. (hereinafter “instant contract”). Under the instant contract, each branch’s place of business supplied the instant services to each branch’s place of business, and each branch’s place of business pays the total amount of KRW 192,00,000,000 and management fees (hereinafter “the total amount of management fees”) from May 15, 2009 to June 30, 2013.

3) The Plaintiff’s head office and each branch office are reported to each competent office of education under Article 38 of the Lifelong Education Act as lifelong education facilities. The Plaintiff is registered as an education facility under the Lifelong Education Act as a value-added tax-free shop.

4) The Plaintiff did not separately register its business under the Value-Added Tax Act, and did not register its business as a business unit or obtain approval for the total payment.

[Ground of recognition] Facts without dispute, Gap evidence 2, Eul evidence 1 to 7, 10, 11, and the purport of the whole pleadings

D. Determination

1) Whether the supply of the instant service constitutes a taxable object of value-added tax

(4) Comprehensively taking account of the provisions of Article 1(1), (2), and (3) of the former Value-Added Tax Act, the supply of all goods or services shall be subject to value-added tax unless otherwise provided for in the Act, and the interpretation of tax laws and regulations shall not be strictly interpreted in accordance with the law, barring any special circumstance, and it shall not be extensively interpreted or analogically interpreted without reasonable cause (see Supreme Court Decision 94Nu1381, Feb. 14, 1995). Under the provisions of Article 12(3) of the former Value-Added Tax Act, the scope of the supply of goods or services is deemed to be included in the supply of the goods or services that are necessarily exempt from value-added tax, and each place of business related to the supply of the goods or services shall be deemed to be an entity that actually supplies the goods or services to which the goods or services are exempt from value-added tax and its establishment shall be deemed to constitute an entity that actually provides education for each place of business (see Supreme Court Decision 200Du7131, Mar. 15, 2001).

2) Whether the input tax deduction is recognized

Article 5 (1) of the former Value-Added Tax Act provides that a person who newly starts a business shall register with the head of a tax office having jurisdiction over the place of business within 20 days from the date of commencing the business under the conditions as prescribed by the Presidential Decree. Article 2 (1) of the same Act provides that a person who independently supplies goods or services for business purposes regardless of the existence of profit-making profit shall be liable to pay the value-added tax under this Act. According to Article 20 (5) of the same Act and Articles 8 and 67 (1) of the Enforcement Decree of the same Act, the head of a tax office having jurisdiction over the place of business shall grant a unique number corresponding to the registration number to a tax-exempt business operator to efficiently handle taxation data. Article 168 (1) of the Income Tax Act provides that a person who newly starts a business shall register with the head of a tax office having jurisdiction over the place of business. In full view of the purport of each provision regarding the above business registration, since a person liable for registration of value-added tax is limited to a person liable for registration under Article 17 (2).4).

Therefore, as seen earlier, inasmuch as the Plaintiff continues to operate the value-added tax taxable business before making a general tax exemption while continuing the business, even if the input tax amount, as alleged by the Plaintiff, constitutes the input tax amount prior to registration under Article 17(2)7 of the Value-Added Tax Act excluded from the subject of deduction in calculating the value-added tax. Therefore, the Plaintiff’s assertion on this part

3) Therefore, the Defendant’s instant disposition is lawful.

3. Conclusion

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