Court: "Golf cart rental business is not 'passenger transport'... No VAT reduction"

American golfer Tiger Woods is standing next to a golf cart at the PNC Championship golf tournament on December 19th last year. The photo is unrelated to the article content. [Image source=AP Yonhap News]

[Asia Economy Reporter Kim Daehyun] A court ruling has determined that operating golf carts or renting out golf carts as part of golf course business operations does not fall under the 'passenger transportation business' category eligible for value-added tax (VAT) reduction.

On the 2nd, the Seoul Administrative Court, Administrative Division 6 (Presiding Judge Lee Jooyoung) announced that in the first trial of a lawsuit filed by 27 companies including golf course operators and golf cart consignment operators against the heads of the Gangnam Tax Office and other respective tax offices, the plaintiffs lost the case regarding the cancellation of the refusal to correct VAT assessments.

Previously, the companies filed correction claims with the respective tax offices, requesting refunds of part of the VAT they had reported and paid from 2015 to 2019. A correction claim refers to a request for a refund when taxes have been overpaid or incorrectly paid.

They argued that 'passenger transportation services' are subject to VAT reduction under the VAT Act, and since 'golf cart services' also fall under passenger transportation services, they should be exempt from VAT.

On the other hand, the tax office heads refused the refunds, stating that these services are not eligible for reduction. After the Tax Tribunal also dismissed all related appeals, the companies filed this lawsuit requesting the cancellation of the tax offices' refusal to correct VAT assessments.

Since VAT is a general consumption tax, it is generally imposed on all supplies and transactions of goods or services. However, the VAT Act exempts certain items such as basic necessities for the general public, services closely related to public welfare, and cultural services, aiming to protect citizens' livelihoods based on national economic or social policy objectives.

The first trial sided with the tax authorities. It stated, "The reason passenger transportation services are designated as VAT-exempt is because they are essential services related to the basic livelihood of the public, intended to reduce the VAT burden on ordinary citizens," and added, "To qualify as a VAT-exempt 'passenger transportation service,' it is insufficient to merely be responsible for transporting passengers from one place to another."

The court explained, "Generally, it must also function as a public transportation means that enhances transportation convenience," and noted, "In the case of golf carts, since they can only be used by golf course users or caddies, they cannot be considered as such."

Furthermore, it added, "The rental and operation of golf carts are merely ancillary businesses subordinate to the main business of golf course operation and cannot be regarded as independent transportation businesses."

This content was produced with the assistance of AI translation services.