The costs of appeal are assessed against the Plaintiff.

Article 1 (1) 1 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006; hereinafter “the Act”) provides that “the supply of goods or services” shall be subject to value-added tax, and Article 1 (3) of the former Value-Added Tax Act provides that “any services and other acts having property value other than goods” shall be “all services and other acts having property value other than goods,” and Article 13 (1) of the Act provides that “the tax base of value-added tax on the supply of goods or services shall be the total amount of the value in each of the following subparagraphs” and Article 13 (3) of the former Value-Added Tax Act provides that “if the price is paid in money, such price shall not be deducted from the tax base.”

The contents and purport of each of the above provisions, unlike income tax and corporate tax, Korea's value-added tax that adopts the pre-stage tax credit system has the form of transaction tax imposed on the external appearance of transaction, which is not a real income. It is not a concept of deduction of expenses because it is not a business operator's profit or loss. The game business operator's provision of merchandise coupons to the game machine users is a game machine use. It is reasonable to view that merchandise coupons are used as an incidental gift provided by each game machine user after the use of the game machine and there is room to view that there is a characteristic of incentive under Article 13 (3) of the Act. The standard of free gift handling of the former game machine (amended by the Ministry of Culture and Tourism No. 2006-24 of Nov. 1, 2006) is strictly restricted to make it easy for the game business operator to make a gift gift, and even if realization is guaranteed, it is reasonable to view that the game business operator's total value-added tax cannot be deducted from 2008.

In the same purport, the court below acknowledged the facts as stated in its holding, and judged that the plaintiff's supply to the game users in the game of this case is merely a service of using the game machine and cannot be viewed as a merchandise coupon, and it is reasonable to not deduct the face value of merchandise coupon provided by the plaintiff to the game machine users in calculating the value-added tax base of the game of this case.

The court below did not err in the misapprehension of the legal principle as to the substance over form principle as otherwise alleged in the ground of appeal.

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 on the bench.

Justices Cha Han-sung (Presiding Justice)