National Tax Service Review Division 2009-0192 (20103.03)

the Corporation has comprehensively transferred its business.

The Plaintiff’s comprehensive transfer of the physical and human facilities, rights, and obligations of the hospital, including real estate shares, is equivalent to the transaction common sense and the empirical rule, and it cannot be deemed that the Plaintiff engaged in real estate rental business by transferring only a part of the business and leasing real estate separately. Therefore, the disposition imposing taxes on the premise that the Plaintiff does not constitute a comprehensive succession

2010Guhap1895 Revocation of Disposition of Imposition of Value-Added Tax

KimA

○ Head of tax office

April 7, 2011

June 23, 201

1. The Defendant’s imposition of value-added tax of KRW 342,573,100 against the Plaintiff on September 1, 2009 shall be revoked.

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

The phrase " September 10, 2009," written in the written complaint, seems to be a clerical error in the text.

1. Details of the disposition;

A. On June 10, 2006, the Plaintiff decided to transfer the hospital business to thisA, which had a doctor affiliated with ○○ Hospital, on the ground of business difficulties while operating ○○ Hospital in the building and its ground (hereinafter “instant land”) on 00 ○○○○, 00 ○○○, 00 Ma (hereinafter “instant land,” and “the instant building”; hereinafter “the instant real estate in combination with the instant land”).

B. On June 30, 2006, the Plaintiff reported the closure of the business of ○○ Hospital. From July 1, 2006, thisA commenced the business of the hospital from the building of this case to the name of △△ Hospital. On June 28, 2006, upon registering the business of △△ Hospital (on July 1, 2006, 2006), the Plaintiff submitted the registration of the business of △△ Hospital along with a real estate lease agreement in which the lessor is called 'Plaintiff' and the lessee is called 'A'. On April 6, 2007, the Plaintiff completed the registration of the ownership transfer on the ground of the Plaintiff's share in the land of this case, 3587/4641 shares (hereinafter referred to as "land share in this case") and 48254/57974 shares in the Plaintiff's share in the building of this case (hereinafter referred to as "share share in the building of this case").

C. The Plaintiff paid KRW 4,966,027 as the value-added tax for the first time in 2007 to the Defendant, but the Defendant: (a) deemed that the Plaintiff transferred the hospital business to EA while running the real estate leasing business on the instant building; (b) on April 6, 2007, the Plaintiff deemed that the Plaintiff transferred the instant building shares to EA; and (c) on September 1, 2009, the value-added tax for the first time in 2007, including the transfer value of the instant building shares, was revised and notified to the Plaintiff (hereinafter referred to as the “instant disposition”).

D. Accordingly, the Plaintiff filed a request for examination with the National Tax Service on November 27, 2009, but the said request was dismissed on March 3, 2010.

[Ground of recognition] Facts without dispute, Gap 1.2 evidence, Eul 1.23 evidence and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

On June 10, 2006, the Plaintiff comprehensively transferred all rights and obligations relating to the ○ Hospital’s business to the ○○ Hospital. This case’s disposition was unlawful on a different premise by the Defendant, even though the Plaintiff did not receive any deposit or rent from the ○○ Hospital, on the premise that the Plaintiff did not have sufficient means to pay the acquisition tax and registration tax required for the registration of the ownership transfer of the real estate in this case, and that the hospital’s business profitability was not confirmed, and that only about one year later was delayed since the time of the registration of ownership transfer of the real estate in this case’s portion of the time of the report of the establishment of the business and the establishment of the medical institution in this case.

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

(1) From October 2, 1999, the Plaintiff commenced the operation of ○○ Hospital. From December 30, 2000, the Plaintiff engaged in the real estate rental business as to stores adjacent to the instant building.

(2) On June 10, 2006, the Plaintiff agreed to transfer ○ Hospital under the condition that all the Plaintiff’s obligations arising in relation to the operation of ○ Hospital take over to ○○ Hospital as a result of the aggravation of the management of ○ Hospital and health problems. However, on June 30, 2006, the Plaintiff agreed to transfer ○ Hospital on the condition that the Plaintiff’s obligations arising in relation to the operation of ○ Hospital were all taken over, but the Plaintiff agreed to transfer ○ Hospital after about one year due to the circumstances of thisA.

(3) With respect to the instant real estate, the Plaintiff and Lee Dong-A prepared a real estate lease agreement with the lessor as "A," "10 million won for the lease deposit," "15 million won for the monthly rent," "from July 1, 2006 to June 30, 2008," and thisA submitted a registration application and report on the establishment of a medical institution to "△△ Hospital" in the instant building on June 28, 2006 (the instant building: the instant building and the business establishment of the instant building: July 1, 2006).

(4) From the date of the first return of value-added tax in 2007, the Plaintiff added the leasing business of the instant real estate to the stores rental business already operated (the lease deposit for the instant real estate was stated as KRW 300 million in the value-added tax return), and the Plaintiff filed a comprehensive income tax return in 2006 and 2007 on March 31, 2007 on the rental income of the instant real estate along with the store rental income. However, the said global income tax and value-added tax imposed on the Plaintiff was paid at the expense of the △△△ Hospital.

(5) The employees working at the ○○ Hospital continued to work at the △△ Hospital even after the closure of the ○ Hospital, and the retirement allowances of the employees retired after the commencement of the operation of the △△ Hospital on July 1, 2006 were paid at the expense of the △ Hospital.

(6) Since June 10, 2006, thisA paid on behalf of the Plaintiff the interest on the loan under the Plaintiff’s name. On November 13, 2006, the Plaintiff received a loan of KRW 1.05 billion from a bank in Yong-Namnam, and repaid the loan amount of KRW 1.046 billion from the foreign exchange bank and the Korean bank, and the remaining loans in the Plaintiff’s name were changed on June 21, 2007 into thisA’s name.

(7) On April 6, 2007, thisA submitted a real estate sales contract (hereinafter referred to as "the sales contract of this case") stating that "3.5 billion won of the purchase price, the method of paying the purchase price, and 3.5 billion won of the debt amount of financial rights, at the same time as the contract of April 6, 2007, shall be accepted by the buyer (AA), on the condition that the buyer (AA) will substitute for the payment of the purchase price."

(8) On June 30, 2009, the Plaintiff stated that “I would like to sell at low” and “I would inevitably lease to I would have to consider the purchase after the lease,” and that “I would like to receive 300 million won monthly interest rate of KRW 15 million on the deposit, but in fact, I would like to pay at least KRW 15 million on a monthly basis with no deposit amount and KRW 15 million on the deposit amount.” This was also prepared and submitted a written confirmation to that effect.

[Ground of recognition] Unsatisfy, Gap evidence l through 5, Eul evidence 1 to 9, witness satfy's testimony and the purport of the whole pleadings

D. Determination

(1) Article 6(6)2 of the former Value-Added Tax Act (amended by Presidential Decree No. 9915, Jan. 1, 2010) and Article 17(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 20720, Feb. 29, 2008; hereinafter the same) mean that the transfer of a business that does not constitute the supply of goods refers to the comprehensive transfer of physical, human, rights, and obligations, etc., including business property, to replace only a business owner while maintaining its identity. Thus, the business should be a organic combination of human and physical facilities that can be separated from the business owner and can be recognized as social independence (see, e.g., Supreme Court Decision 2004Du8422, Apr. 28, 2006).

(2) The following facts are acknowledged to change the purport of the Plaintiff’s share in the real estate sales contract (i.e., the Plaintiff’s share in the real estate 6-A, the Plaintiff’s share in the real estate 6-A-6-2-6-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-3-2-2-2-3-2-2-3-2-2-3-3-3-4-2-4-2-4-2-3-4-2-4-2-4-2-4-2-3-3-4-4-2-4-2-4-2-4-2-4-2-4-2-4-2-4-2-4-2-4-4-4-2-4-4-4-4-4-4-4-7-2).

(3) Therefore, the instant disposition based on the premise that the transfer of shares in the instant building does not constitute a comprehensive succession to the business under Article 17(2) of the former Enforcement Decree of the Value-Added Tax Act is unlawful.

3. Conclusion

If so, the plaintiff's claim is reasonable and acceptable.