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

Cheong-gu Office

The Defendant’s imposition of value-added tax of KRW 4,088,532 (including additional tax) in 2014 against the Plaintiff on April 21, 2015 shall be revoked.

A. On September 15, 2014, the Plaintiff engaged in real estate rental business (hereinafter referred to as “BB”) ordered a contract for construction work to the elevator entrance of the O-OO building leased to BB (hereinafter referred to as “OB”) for the period from September 15, 2014 to December 5, 2014, by setting the construction cost of KRW 64,80,000 (including value-added tax) and the construction period from September 15, 2014 to December 5, 2014.

B. On November 4, 2014, the Plaintiff issued an electronic tax invoice (the supply price of KRW 36,363,637, the tax amount of KRW 3,636,363, and hereinafter referred to as “instant tax invoice”) stating the date of preparation from BB on December 30, 2014, and was deducted from the input tax amount at the time of the return of value-added tax return for the second period of value-added tax in 2014.

C. The Defendant, on April 21, 2015, deemed that the instant tax invoice is a tax invoice that contains part of the requisite entries differently from the fact, and thus, deemed that it is subject to the non-taxation of input tax amount, and accordingly, corrected and notified the Plaintiff of value-added tax amounting to KRW 4,088,530 (including additional tax) (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on June 16, 2015, but was dismissed on August 24, 2015.

[Ground of recognition] Unsatisfy, Gap evidence 1 to 5 (including branch numbers in case of additional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant tax invoice was issued delayed due to the error by BBB, which is the supplier, and the Defendant was not allowed to deduct the input tax amount of value-added tax deducted by the Plaintiff through legitimate transactions. The instant disposition is unlawful as it violates the principle of substantial taxation.

B. Relevant statutes

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

C. Determination

1) Article 39(1)2 of the Value-Added Tax Act (hereinafter “the Act”) provides that an input tax amount shall be excluded in cases where all or part of the requisite entry items under Article 32(1)1 through 4 of the Act are not entered or mistakenly entered in the tax invoice issued, but the input tax amount shall be excluded in cases prescribed by Presidential Decree. Article 75 subparag. 2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 26983, Feb. 17, 2016; hereinafter “former Enforcement Decree”) provides that an input tax amount may be deducted if some of the requisite entry items of the tax invoice issued are mistakenly entered or arbitrarily entered in the tax invoice but the transaction of the transaction is confirmed by considering the remaining entry or voluntary entry items in the tax invoice, and Article 32(1)3 provides that an input tax amount may be lawfully issued during the taxable period following the expiration of the pertinent tax period (including cases where value-added tax is issued pursuant to Article 34(3) of the Act).

2) A tax invoice is a documentary evidence to determine value-added tax, which is to ensure the truth of the documentary evidence to issue and deliver it at the time of transaction. However, under the current VAT system adopting the Act on Tax Credit at all stages, the tax invoice system has the function of mutual verification between taxpayers that facilitates the circulation of tax sources of income tax and corporate tax as well as value-added tax by exposing transaction between the parties, and it is essential that the preparation and issuance of a tax invoice is, in principle, made within the taxable period in order to properly operate the aforementioned mutual verification function due to the nature of value-added tax for which the calculation and mutual verification are conducted for each taxable period.

Article 39(1)2 of the Act provides that “Where the date on which an input tax invoice is partially entered, is entered differently from the fact that the actual date of preparation of the tax invoice is different from the fact.” However, even if the transaction is confirmed in accordance with the remaining entries of the tax invoice under Article 75(2) of the former Enforcement Decree, an input tax amount on the said transaction should be deducted. However, if the taxable period to which the actual date of preparation belongs belongs is the same (if a tax invoice is entered as the date of preparation, the date on which the tax invoice is entered shall be entered as the actual date, but shall not be asked as if the actual date of the transaction or the specific period of the transaction is entered retroactively.” Thus, even if a tax invoice is prepared after the expiration of the taxable period, it cannot be deemed that the Plaintiff’s legitimate tax invoice has already been entered as the date on which the tax invoice is delivered, and thus, it cannot be deemed that the pertinent tax invoice has been issued as a legitimate tax invoice for 20 years retroactively since it constitutes an input tax amount under Article 39(1)20 of the Value-Added Tax Act.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit, and the costs of lawsuit shall be borne by the plaintiff who has lost. It is so decided as per Disposition.