In the case of a housing sale trust where a business entity, a truster and a trustee, transfers the ownership of real estate due to a housing sale trust contract to a housing sale guarantee company, whether the supply of separate goods distinct from the transfer of the original trust property can be deemed to exist solely on the ground that the sales guarantee company refunded the sale price to the purchaser based on the housing sale guarantee contract (negative)

In the case of a housing sale trust for which a business entity, a truster and a trustee, transfers the ownership of real estate due to a housing sale trust contract to a housing sale guarantee company, the sales guarantee company, takes over the ownership of trust property from a business entity in accordance with a trust contract and manages and disposes of the trust property on the premise thereof. As such, the sales guarantee company cannot be deemed to have supplied separate goods separate from the transfer of the original trust property solely on the ground that the sales guarantee company refunded the sale price to the seller based on the housing sale guarantee contract, and there is a supply of goods to the opposite contractual party, only when disposing of the trust property in the position of the trustee.

Article 6(1) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) (see current Article 9(1))

Sok SND Co., Ltd.

Gangwon-gu Director of the District Office

Seoul High Court Decision 2013Nu32580 decided August 22, 2014

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 6(1) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) provides that “The supply of goods shall be a delivery or transfer of goods on all contractual or legal grounds.”

A trust under the Trust Act requires a trustee to manage and dispose of property rights for the purpose of trust by transferring a specific property right to a trustee or disposing of it. Therefore, in cases where the trustee supplies goods while managing and disposing of the trust property transferred by the truster, the trustee himself/herself becomes a contracting party as the person to whom the rights and duties to the trust property belongs. Therefore, the person liable to pay value-added tax at this time shall be deemed the trustee who transferred the right to use and consume the goods to the opposite contractual party through the transaction, such transaction, such as the supply of goods, and the fact that the profits and expenses incurred from the management and disposal of the trust property ultimately accrue to the truster or the beneficiary who does not have a direct legal relationship with the opposite contractual party does not change (see Supreme Court en banc Decision 2012Du2485, May 18, 2017).

In addition, in the case of a housing sale trust for which a business entity, a truster and a trustee, transfers the ownership of real estate to a housing sale guarantee company due to a housing sale trust contract, the housing sale guarantee company shall acquire the ownership of the trust property from the business entity in accordance with the trust contract and manage and dispose of the trust property on the premise of the transfer, so the housing sale guarantee company shall not be deemed to have the supply of separate goods separate from the transfer of the original trust property merely because the sales guarantee company refunded the proceeds to the seller based on the housing sale guarantee contract, and there is the supply of goods to the opposite contractual party the right to use and consume the goods only when disposing of the trust property

2. A. The reasoning of the lower judgment and the evidence duly admitted by the lower court reveal the following facts.

(1) On July 2007, the Plaintiff entered into the instant trust agreement with the Korea Housing Guarantee Co., Ltd. (hereinafter “Korea Housing Guarantee”), with the purpose of managing, selling, and disposing of trust real estate (Article 2), and completed the instant trust registration on July 23, 2007 with respect to the instant land as to the instant land, which consists of three and forty-seven households, on the ground of the said land, and the building constructed or constructed on the said land (Article 1). If the Plaintiff is unable to carry out the sales contract due to the construction of the said apartment, the Plaintiff entered into the instant trust agreement with the purpose of managing, selling, and disposing of trust real estate (Article 2).

(2) In addition, on July 25, 2007, the Plaintiff entered into the instant housing sale guarantee contract with the Korea Housing Guarantee Co., Ltd. to implement the sales contract when the Plaintiff becomes unable to perform the sales contract due to the guarantee accident.

(3) Article 7(3) of the instant trust agreement provides that, when the Korea Housing Guarantee is performing a refund or performing a sale in lots, trust property may be disposed of in a reasonable manner. The disposal amount is determined as follows: (i) taxes and public charges, various expenses incurred in performing trust affairs, and (ii) in the order of claims against the Plaintiff of the Korea Housing Guarantee; and (iii) Meanwhile, Article 7(4) of the instant trust agreement provides that the Korea Housing Guarantee shall be refunded to the Plaintiff where any remainder remains.

(4) On January 11, 2010, Sungwon Construction Co., Ltd., the contractor, suspended the foregoing construction project at the rate of 22%, and Korea Housing Guarantee refunded the down payment and intermediate payment already paid to the seller, and filed a claim against the Plaintiff for reimbursement of the performance amount of the guaranteed obligation and damages for delay.

(5) On November 10, 201, the Defendant issued the instant disposition to rectify and notify the Plaintiff of KRW 5,449,141,280 for value-added tax for the first period of November 2010, deeming that the Plaintiff’s guarantee was the supply of goods under Article 6(1) of the former Value-Added Tax Act, by completing the seller’s performance of liability for refund and claiming the Plaintiff to reimburse the repayment of the guaranteed obligation.

(6) Meanwhile, on December 28, 201, the instant land and the instant building were sold to ELSD Co., Ltd. on the other hand.

B. Examining these facts in light of the aforementioned legal principles and records, the instant trust agreement constitutes a housing sale trust with the beneficiary and trustee, and the Korea Housing Guarantee is transferred the ownership of the instant building on the ground of the said trust agreement and disposed of it to a third party as the trustee. Therefore, solely on the ground that the Korea Housing Guarantee refunded the sale price under the Housing Sale Guarantee Agreement, the supply of goods distinct from the transfer of trust property pursuant to the trust agreement to the Plaintiff as to the instant building cannot be deemed separate from the transfer of trust property pursuant to the trust agreement to the Plaintiff. Nevertheless, the lower court determined otherwise, that the right to the instant building was transferred from the Plaintiff to the Korea Housing Guarantee around 2010 by paying the down payment, etc. to the seller of the Korea Housing Units and by notifying the Plaintiff of the payment of the deposit for indemnity. In so doing, the lower court erred by misapprehending the legal doctrine on the supply of goods under the former Value-Added Tax Act, thereby adversely affecting the conclusion of the judgment.

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)