In a case where Gap corporation transferred to Eul corporation all rights and obligations directly related to the pipe type steel and steel product manufacturing business, and the tax authorities did not report value-added tax by considering the comprehensive transfer of business subject to no value-added tax and considering it as the supply of goods, and imposed value-added tax on Gap corporation, the case holding that Gap corporation and Eul corporation determined the transfer price as the object of transfer of business rights and it constitutes intangible goods with property value, and thus, the above business rights constitute "goods" under Article 1 (1) 1 of the former Value-Added Tax Act.

Article 1(1)1 and (2) of the former Value-Added Tax Act (Amended by Act No. 9915, Jan. 1, 2010; see current Article 4); Article 1(2) of the former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 22043, Feb. 18, 2010; see current Article 2)

DSP Co., Ltd. (LLC Law LLC, Attorneys Park Il-hwan et al., Counsel for the defendant-appellant)

Head of North Busan District Tax Office

Busan High Court Decision 2013Nu925 decided August 21, 2013

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Article 6(6)2 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010; hereinafter the same) provides that “the transfer of business, which is prescribed by Presidential Decree,” as one of the items not deemed the supply of goods, shall be deemed to be “the transfer of business,” and Article 17(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 18, 2010; hereinafter the same shall apply) upon delegation from the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 2, 2010; hereinafter the same shall apply) provides that “the term “the term “the term “the term prescribed by Presidential Decree” under Article 6(6)2 of the Act shall be comprehensively succeeded to all rights and duties concerning the business by workplace.” In such cases, even if succession is not included in the following rights and duties

After recognizing the facts and circumstances as stated in its reasoning based on the adopted evidence, the lower court determined that the Plaintiff’s transfer of the pipe type and steel product manufacturing business to the non-resident company (hereinafter “non-resident company”) and the land and factory buildings in this case, excluding the subject matter of transfer, are directly related to the real estate used for the business subject to transfer, and thus, the Plaintiff’s transfer of business cannot be deemed as the “transfer of business” which is not deemed the supply of goods in Article 6(6)2 of the former Value-Added Tax Act, etc.

In light of the above provisions and relevant legal principles and records, we affirm the judgment of the court below as just, and there is no error in the misapprehension of legal principles or incomplete deliberation as to "transfer of business" under Article 6 (6) 2 of the former Value-Added Tax Act, as alleged in the grounds of appeal.

2. Regarding ground of appeal No. 2

Article 1(1) of the former Value-Added Tax Act provides that "the value-added tax shall be imposed on the transactions falling under any of the following subparagraphs," and Article 1(2) of the former Value-Added Tax Act provides that "the supply of goods or services" shall mean all tangible goods and intangible goods which have property value," and Article 1(2) of the former Enforcement Decree of the Value-Added Tax Act provides that "the intangible goods stipulated in Article 1(2) of the former Enforcement Decree of the Value-Added Tax Act shall include all intangible goods other than tangible goods having property value, such as power, heat and other natural power and rights that can be managed by them."

In light of the relevant legal principles and records, the transfer of the pipe type and steel manufacturing business of this case, which can be seen in the records, and the process of determining the price thereof, the Plaintiff and the unregistered person set the sales right of this case as the object of transfer and set the transfer price of 12.7 billion won, and this constitutes intangibles with property value. Therefore, the lower court’s rejection of the Plaintiff’s assertion that the sales right of this case constitutes “goods” under Article 1(1)1 of the former Value-Added Tax Act, and that the transfer price of this case should be excluded from the tax base of value-added tax, is justifiable. In so doing, it did not err by misapprehending the legal principles on the concept of “goods” under the former Value-Added Tax Act, or by omitting judgment or omitting reasoning.

3. Conclusion

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 Kim So-young (Presiding Justice)