[1] Criteria for determining the time of supply of goods which are real estate and commencement, discontinuance, etc. of business under the Value-Added Tax Act in relation to Article 9 (1) 2 of the former Value-Adde

[2] Requirements for the deduction of input tax amount under Article 60 (2) 3 of the Enforcement Decree of the Value-Added Tax Act, and whether such deduction applies to the case where an entrepreneur who supplied goods or services closes his/her business after the date of supply (affirmative)

[1] Article 9 (1) 2 of the former Value-Added Tax Act (amended by Act No. 8826 of Dec. 31, 2007); Article 21 (1) proviso of the Enforcement Decree of the Value-Added Tax Act provides that where the transfer of goods is not required, the time the goods are made available shall be the time of supply of the goods; Provided, That where the time of supply for the goods supplied prior to the closure of business arrives after the closure of business, the time of such cessation of business shall be deemed the time of supply. Here, the term "when the goods are made available" refers to the time when the goods are made available for actual use. Thus, where the goods supplied are real estate, the time when the real estate is ordered to be named, and the commencement, discontinuance, etc. of business under the Value-Added Tax Act shall be determined by the substance of such fact, regardless

[2] Article 60 (2) 3 of the Enforcement Decree of the Value-Added Tax Act provides that the input tax amount shall be deducted from the output tax amount, where “the tax invoice delivered after the time of supply for goods or services and delivered within the taxable period to which the time of supply belongs,” and where the input tax amount may be deducted under the above provision is limited to the case where the transaction is confirmed by the entry of the tax invoice, and the taxable period to which the date of actual preparation belongs belongs is the same as that of the tax invoice, and this does not change because the entrepreneur who supplied the goods or services closes his business after the supply date.

[1] Article 9 (1) 2 of the former Value-Added Tax Act (amended by Act No. 8826 of Dec. 31, 2007); Article 21 (1) of the Enforcement Decree of the Value-Added Tax Act / [2] Article 17 (2) 1-2 of the former Value-Added Tax Act (amended by Act No. 8826 of Dec. 31, 2007); Article 60 (2) 3 of the Enforcement Decree of the Value-Added Tax Act

[1] Supreme Court Decision 88Nu1745 delivered on March 28, 1989 (Gong1989, 691) Supreme Court Decision 96Nu16193 delivered on June 27, 1997 (Gong1997Ha, 2401) Supreme Court Decision 97Nu20625 delivered on September 18, 1998 (Gong1998Ha, 2534) / [2] Supreme Court en banc Decision 2002Du5771 Delivered on November 18, 2004 (Gong2004Ha, 2054) Supreme Court Decision 2004Du10425 delivered on June 23, 2005

Plaintiff (Attorney Kim Dong-dong, Counsel for the plaintiff-appellant)

Head of Mapo Tax Office

Seoul High Court Decision 2005Nu16736 decided May 4, 2006

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 9(1)2 of the former Value-Added Tax Act (amended by Act No. 8826 of Dec. 31, 2007; hereinafter “the Act”) and Article 21(1) proviso of the Enforcement Decree of the Value-Added Tax Act (hereinafter “Enforcement Decree”) provide that where the transfer of goods is not required, the time the goods are made available shall be the time of supply; Provided, That where the time of supply for the goods supplied before and after the closure of the business arrives after the closure of the business, the time the goods are made available shall be deemed the time of supply. The term “when the goods are made available” in this context refers to the time when the goods are made to be actually used. Thus, where the goods supplied are real estate, the time when the goods are ordered to be named as real estate (see, e.g., Supreme Court Decision 88Nu1745, Mar. 28, 198; 200Nu1645, Jul. 196, 1997).

In full view of the selected evidence, the court below concluded a sales contract with the non-party on October 24, 2003 for the real estate of this case (building and site) and completed the procedure for ownership transfer registration under the name of the plaintiff on October 24, 2003. After receiving an order from the non-party on November 1, 2003, the non-party entered into a new lease contract with the existing lessee on October 31, 2003. The non-party shall treat the amount of rent, etc. up to October 31, 2003 under the lease contract for the real estate of this case as belonging to himself and filed a tax return. The non-party reported the closure of the business with the tax authority on October 24, 2003, which is the date of ownership transfer registration as of October 24, 2003. The non-party shall settle the value-added tax amount on the real estate of this case and receive the settlement of value-added tax amount from the plaintiff on November 14, 2003.

In light of the above legal principles, relevant statutes, and records, the above judgment of the court below is just, and there is no violation of the law as to the time of supply of goods, the date of cessation of business, the incomplete hearing, and the rules of evidence.

2. Article 17 (2) 1-2 of the Act provides that an input tax amount shall not be deducted from the output tax amount in cases where all or part of the matters to be entered under Article 16 (1) 1 through 4 of the Act (hereinafter “necessary entry items”) are entered differently from the fact on the delivered tax invoice: Provided, That the input tax amount shall not be excluded in cases prescribed by the Presidential Decree, and Article 60 (2) of the Enforcement Decree of the Act provides that a tax invoice delivered after the time of supply for goods or services is delivered within the taxable period to which the time of supply belongs, and Article 60 (2) 3 of the Enforcement Decree of the Act provides that the input tax amount may be deducted from the input tax amount under Article 60 (2) 3 of the Act. In such cases, where the transaction is confirmed by the entry of the tax invoice, and the taxable period to which the date of actual preparation belongs, and where an entrepreneur supplies goods or services is declared differently from the date of actual preparation of the tax invoice (see, e.g., Supreme Court en banc Decision 2002Du1470.

In the same purport, the court below is just in rejecting the defendant's assertion that even if the date of preparation by the non-party on November 14, 2003, which was after the time of supply of the building of this case ( November 1, 2003), was prepared and delivered by the non-party on November 24, 2003, there was a transaction of the same content as that stated in the tax invoice of this case prior to the actual cessation date of business. Since the taxable period to which the date of actual preparation date of the tax invoice of this case belongs and the taxable period to which the actual transaction date belongs is the same, the input tax amount under the tax invoice of this case can be deducted from the output tax amount, on the ground that the non-party's tax invoice of this case was prepared differently from the fact that it was not in the position of the business owner after the cessation date, and there is no error in the misapprehension of legal principles as to the tax invoice on which

3. 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.

Justices Ahn Dai-hee (Presiding Justice)