early 2010 Heavy1088 (Law No. 13, 2010)

Any real estate rental business operator shall not be deemed to fall under the comprehensive transfer of business.

Since the act of selling real estate is nothing more than the business activities of the real estate sales businessman, the disposition imposed on the real estate rental business operator by deeming the act as the comprehensive transfer of business is legitimate.

Article 6 (6) of the Value-Added Tax Act

Article 17 (2) of the Enforcement Decree of the Value-Added Tax Act

2010 Gohap4044 Revocation of Disposition of Imposing Value-Added Tax

LAA

○ Head of tax office

April 19, 2011

June 7, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 440,465,360, which was imposed by the Plaintiff on December 14, 2009 against the Plaintiff on December 14, 2006 is revoked (it appears that the date of the tax disposition in the purport of the claim seems to be a clerical error).

1. Details of the disposition;

A. On September 8, 2006, the Plaintiff acquired a Class II neighborhood living facilities building with the size of 348.83 square meters from the 1st floor to the 9th floor above the ground on the ground and on the ground of ○○○-dong 372-39 large 607 square meters, and registered a real estate rental business on October 1, 2006 at the location of the instant real estate.

B. On November 20, 2006, the Plaintiff transferred the instant real estate to LeeA and KimB in KRW 4,900,000,000, and closed the real estate rental business on November 27, 2006.

C. The Plaintiff did not report the value-added tax by regarding the transfer of the instant real estate to EA and KimB as the comprehensive transfer of the business subject to non-taxation of value-added tax. However, on December 14, 2009, the Defendant deemed that the transfer of the instant real estate was not a comprehensive transfer of business, and determined and notified the Plaintiff at KRW 440,465,360 in 206 (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed a tax appeal on March 12, 2010, but was dismissed on July 13, 2010.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 3, Eul evidence 1 to 3, Eul evidence 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff comprehensively transferred all rights and obligations related to the instant real estate to the transferee, including the lease deposit, etc., and such transfer constitutes a transfer of business not deemed the supply of goods under the Value-Added Tax Act, but it is unlawful for the Defendant to consider it as the transfer of inventory assets and make the instant disposition.

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

(c) Fact of recognition;

(1) On November 20, 2006, the Plaintiff: (a) transferred the instant real property to AA KimB on November 20, 2006, stating that “No. 3) collateral mortgages, limited real rights, and lease deposit (4,020,00,000) will be succeeded to the remainder.”

(2) Meanwhile, the Plaintiff has been engaged in the real estate sale and lease business as follows.

(3) In 2006, the Plaintiff transferred the instant real estate to another person on 11 occasions (33 items of the instant real estate) including the instant real estate during the taxable period of value added tax in 2006, and filed a comprehensive income tax return in 2006 with the amount of income as KRW 6,952,606,000.

(4) The Plaintiff’s summary of the Plaintiff’s global income tax and value added tax return in 2006 is as follows.

(5) On November 20, 2006, EA and KimB, the transferee of the instant real estate, are operating real estate rental business until now after they registered the real estate at the location of the instant real estate.

[Reasons for Recognition] Class 2, 3, Eul evidence Nos. 2-1, 2-2, Eul evidence Nos. 4-1 through 3, Eul evidence No. 5, the purport of the whole pleadings

D. Determination

The transfer of business not deemed the supply of goods under Article 6(6) of the Value-Added Tax Act and Article 17(2) of the Enforcement Decree thereof means the comprehensive transfer of physical, human, rights and obligations, etc. including business property, and the replacement of only the management body while maintaining the identity of the business. Thus, the business should be deemed as an organic combination of human and physical facilities, which can be separated from the management body and can be recognized as social independence (see, e.g., Supreme Court Decisions 97Nu12778, Jul. 10, 1998; 2002Du8800, Jan. 10, 2003).

As seen earlier, even if the Plaintiff entered the phrase of succeeding to the security deposit in the sales contract in the transfer of the instant real estate, the following circumstances revealed: (a) in the case of the instant sales contract, it does not appear to have any circumstance to deem that there was a transfer of factual relations, such as trace or customer relations and business secrets, management organization, etc.; (b) the period of lease of the instant real estate was about 2 months and 15 days; (c) while the Plaintiff acquired 33 real estate including the instant real estate during the second taxable period of value added tax in 2006, most of them were acquired and transferred; (d) the Plaintiff voluntarily entered the gross income tax declaration in 2006 as real estate sales business; (e) the gross income amount was KRW 6,952,606,00; and (e) the Plaintiff’s sale of the instant real estate to the real estate dealer was merely a total amount of KRW 90,50,00,000; and (e) the Plaintiff’s sale of the instant real estate to the real estate.

Therefore, it is legitimate for the Defendant to take the instant disposition by deeming that the instant real estate transfer does not constitute a comprehensive business transfer, and the Plaintiff’s assertion on a different premise is without merit.

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.