early 2009west2056 ( November 22, 2010)

The purpose of transferring the right to sell commercial buildings after purchasing 195 debentures is to make profits and to conduct continuous and repeated business activities.

After acquiring a commercial loan 195, a sales contract for commercial buildings was concluded for the purpose of obtaining profits from the market price through individual sales, and the special terms and conditions of the contract include the fact that a prior sales act cannot be performed without the seller's consent, and thus, transferring a sales right en bloc after acquiring a commercial building and paying an intermediate payment is a continuous and repeated business, and constitutes real estate sales business.

Article 2 of the Value-Added Tax Act

2011Guhap5322 Revocation of Disposition of Imposition of Value-Added Tax

XX

Head of Seodaemun Tax Office

May 26, 2011

June 30, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of KRW 129,446,530 against the Plaintiff on November 11, 2008 shall be revoked.

1. Details of the disposition;

A. On July 5, 2005, the Plaintiff entered into a sales contract with ○○ Construction Co., Ltd. (hereinafter referred to as the “instant shopping mall”) with a view to purchasing KRW 5,805,423,554 of the Eunpyeong-gu Seoul (hereinafter referred to as the “instant shopping mall”) from 100-00, and paying KRW 580,542,350 on the same day the down payment amount was paid to ○○ Construction Co., Ltd. (hereinafter referred to as the “○○ Construction”), and paying KRW 580,542,350 on the same day.

B. The Plaintiff failed to prepare any balance after the due date for the payment of the balance under the sales contract of the instant shopping mall. On September 12, 2005, the Plaintiff entered into a sales contract with △△ Consulting Co., Ltd. (hereinafter “△△△”) to sell the instant shopping mall at KRW 5,805,423,554 with the consent of △△△△△△, and transferred all of the rights and obligations of the instant shopping mall to △△ consulting around September 30, 2005 (hereinafter “transfer of the sales right of the instant shopping mall”). The Plaintiff filed a transfer income tax report with the competent tax office around May 2006 on the purport that the transfer gains did not accrue by selling the instant shopping mall in the same transfer value as the acquisition value.

C. Meanwhile, the director of Busan Regional Tax Office, upon conducting a tax investigation on ○○ Construction, confirmed that ○ Construction omitted the report after selling the instant commercial building to the Plaintiff, and notified the Defendant of the Plaintiff’s purchase data on the instant commercial building. Accordingly, the Defendant issued a disposition of imposition of value-added tax on November 11, 2008 against the Plaintiff on the ground that “the Plaintiff entered into the instant commercial building sales contract to run real estate sales business, and confirmed that only the intermediate payment was made without profit margin, and that the Plaintiff, a business operator, filed a non-declaration of value-added tax on the portion of the instant commercial building among the commercial buildings subject to taxation (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap 1 through 4 (including each number), Eul 1, 3-1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition shall be revoked on the grounds as follows.

(1) On June 20, 2005, the Plaintiff entered into a joint investment agreement with three parties, including A.A., and tried to operate the above leasing business by establishing the Doi-dong Development Co., Ltd., the main purpose of which is the leasing business of the instant commercial building (hereinafter referred to as “Gui-ri-si Development”). The Plaintiff entered into a contract in the name of the Plaintiff once it decided to change the purchaser’s name on the outstanding payment date because the corporate registration has not been completed until the conclusion of the sales contract of the instant commercial building. In light of such joint investment agreement and the developments leading up to the conclusion of the sales contract of the instant commercial building, the actual purchaser of the sales contract of the instant commercial building and the transferor of the sales right of the instant commercial building should be deemed to be Doi-ri Development

(2) Even in cases where the transferor of the shopping mall in this case is deemed to be the Plaintiff, the Plaintiff concluded the sales contract in this case and subsequently revoked the intention to purchase the shopping mall in this case and transferred the sales right to the shopping mall in △△ consulting to recover the investment principal. Thus, the transfer of the shopping mall in this case cannot be deemed to have been made as part of the business activities as a real estate broker because the purpose of profit, continuity, and repetition is not recognized. Accordingly, the Plaintiff is not a business operator under Article 2(1)1 of the Value-Added Tax Act.

(3) Even if the Plaintiff deemed as a business operator under the Value-Added Tax Act, the transfer of the instant shopping district sales right by the Plaintiff does not constitute the supply of goods under the Value-Added Tax Act, as the transfer of business comprehensively succeeding to all rights and obligations

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the first argument

In full view of the following circumstances, it is reasonable to view that the purchaser and the transferor of the right to sell the commercial building of this case under the sales contract of the commercial building of this case as the plaintiff, and the testimony of Gap 5 through 9 and 13 and witnessB is insufficient to reverse the plaintiff's assertion. The plaintiff's assertion is without merit.

(A) Under the sales contract of the instant commercial building, the purchaser is merely an individual of the Plaintiff, and does not include a change of the purchaser’s name in the special contract to the company established by the Plaintiff, such as △△ Development, etc.

(B) On June 30, 2005, prior to the conclusion of the sales contract of the instant commercial building, the △△△ Development (the representative director) had already completed the registration of establishment for the real estate sales business, lease business, and sales agency business on June 30, 2005, and there was no evidence to deem that the Plaintiff was directly involved in the process of concluding the sales contract of the instant commercial building and the transfer of the sales right of the instant commercial building. Furthermore, even if △△△ Development was established for the purpose of selling, leasing, selling by proxy, etc. of the instant commercial building, it may operate the business without changing the ownership of the instant commercial building in the name of the company.

(C) On May 2006, the Plaintiff completed the transfer income tax return in the name of the Plaintiff’s individual in relation to the transfer of the instant shopping district sales right at the competent tax office.

(2) As to the second argument

Whether the transaction of real estate constitutes a real estate transaction, which is a requirement for taxation of business income tax and value-added tax, shall be determined in light of social norms, considering whether the transaction is for profit, and whether the transaction has continuity and repetition to the extent that it can be seen as a business activity in light of its size, frequency, mode, etc., and as such, Article 1(2) of the Enforcement Rule of the Value-Added Tax Act is merely an exceptional provision that can be seen as a real estate transaction, and so long as the real estate transaction has continuity and repetition under the overall business purpose, even if the transaction occurred below the number of sales under the above provision, the business feasibility of the transaction during the pertinent taxable period cannot be deemed to be denied. (See Supreme Court Decision 96Nu8758 delivered on October 11, 1996, which is related to Article 1(1) of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 193, Apr.

In full view of all the following circumstances, it is reasonable to view that the Plaintiff’s purchase of the instant commercial building and the transfer of the sales right of the instant commercial building constitutes real estate sales business under the Value-Added Tax Act, which aims at profit and has continuity and repetition of business activities. The Plaintiff’s assertion is without merit.

(A) The construction of ○○○ Construction, the contractor of the instant commercial building, received the instant commercial building in lieu of the construction cost, and the Plaintiff entered into a sales contract for the instant commercial building between the Plaintiff and the Plaintiff in order to recover the construction cost by means of a lump sum discount because it is difficult at the time to sell the instant commercial building in lots. Since the Plaintiff lack of sufficient capacity to pay the total purchase price of the instant commercial building, the Plaintiff appears to have entered into the sales contract for the instant commercial building for the purpose of obtaining profits from the market price by means of investors invitation and financing loan after acquiring the instant commercial building through individual sale, which includes the fact that the number of the instant commercial building is KRW 1950,00 and KRW 5.8 billion, and that the purchase price is large, among the special terms and conditions of the sales contract for the instant commercial building, the Plaintiff is unable to perform the sales act in advance without the consent

(B) In light of the developments leading up to the purchase of the instant commercial building, which the Plaintiff became 195B, the Plaintiff may be deemed to have purchased the instant commercial building as a continuous and repetitive business operator. Moreover, even if the Plaintiff, after the conclusion of the said sales contract, failed to procure any balance, thereby having transferred the right to acquire the instant commercial building at once to approximately three months, and the profits therefrom did not actually accrue, such circumstance alone is insufficient to deem that the transfer of the instant commercial building is irrelevant to the activities of the real estate sales business under the social norms.

(C) Furthermore, on October 13, 2005, after the transfer of the right to sell the instant commercial building, the Plaintiff prepared a contract on the succession of the right and duty between 9018 and △△MS (hereinafter “△△S”) with respect to 10018 among the instant commercial building, the Plaintiff entered into between △△MS Co., Ltd. and △△MS (hereinafter “△△S”), with respect to the title of 193, except for 9018 and 10018 among the instant commercial building. Since then, with respect to 9018 among the instant commercial building, the ownership transfer registration was completed on July 5, 2005 as to the remaining 193 commercial building due to the sales contract of this case was made on July 5, 2005, respectively. In light of the actual division between △△S and the transfer nature of the right to sell the commercial building in this case into 193 commercial building.

(D) The confirmation document submitted by the Plaintiff to the public official in charge of the Defendant on August 20, 2008 includes the following: “The Plaintiff reported value-added tax (the part on the supply value of a building among contract payments and intermediate payments) pursuant to the modified contract in the transfer of the right to sell and sell real estate, but there is no other evidence to acknowledge that the content was written against the Plaintiff’s will.

(3) As to the third argument

Article 6 (6) of the Value-Added Tax Act provides that the transfer of business shall not be deemed the supply of goods subject to value-added tax, and Article 17 (2) of the Enforcement Decree thereof provides that the transfer of business under Article 6 (6) of the Act shall be comprehensively succeeded to all rights (excluding rights related to amounts receivable) and obligations (excluding rights related to amounts payable) with respect to the business at each place of business. The term "transfer of business" in this context refers to the comprehensive transfer of physical and human facilities, including business property, and rights and obligations, and the replacement of business owners while maintaining the identity of the business. As such, the business shall be separated from the business owner as an organic combination of human and material facilities so that the social independence can be recognized. The fact that the business is not a simple physical facility subject to transfer but a organic combination of such facilities is not a value-added tax, and the taxpayer bears the burden of proving such transfer on the grounds of the tax disability (see, e.g., Supreme Court Decision 97Nu12778, Jul. 10, 19

In light of the above facts, the Plaintiff is deemed to have sold “the right to acquire the commercial building of this case with the consent of ○○ Construction, which is difficult to procure any balance after concluding the sales contract of this case for operating real estate sales business.” There is no evidence to recognize that the Plaintiff, as an organic combination of human and physical facilities at the time of transferring the right to sell the commercial building of this case, was the object of the transfer of the business that can be recognized as having social independence. The Plaintiff’s assertion also has no reason.

(4) Sub-determination

Therefore, the instant disposition is lawful.

3. Conclusion

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