If rehabilitation claims are converted into equity according to the rehabilitation plan, the capital reduced shall not be deemed the final bad debt.

When rehabilitation claims are converted into equity according to the rehabilitation plan, the acquisition value of shares is not determined as the book value of the converted into equity and the amount of the reduced capital as the irrecoverable claim.

Article 45 of the Value-Added Tax Act (Special Cases concerning Deduction of Bad Debt Tax Amount)

Article 15 (Amount in Excess of Face Value of Issued Stocks, etc.)

Suwon District Court-2015-Gu 66715 disposition to revoke the imposition of value-added tax.

AAA, Inc.

o Head of the tax office

oly, 2016.16

2016.04.20

1. On April 16, 2015, the Defendant’s imposition of value-added tax No. 2015 against the Plaintiff on April 16, 2015 exceeding the OO won shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. One-fifth of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

The Defendant imposed value-added tax on the Plaintiff on April 16, 2015 by the second OOO in 2013 and the first OOO in 2014 respectively revoked the imposition of value-added tax on the Plaintiff.

1. Details of the disposition;

A. On February 28, 2013, AMC Co., Ltd. (hereinafter referred to as “AA”) issued each of the tax invoices (hereinafter referred to as “each of the instant tax invoices”) to the Plaintiff on March 1, 2013, for supply valueO,OO, OO, O, O, O, O, O,O, and supply value on March 1, 2013.

B. On February 7, 2013, the Plaintiff issued BB Special Observation (hereinafter “BB”) promissory Notes at par value O, OO, OO, and OO Won respectively on April 4, 2013. On February 7, 2010, the Promissory Notes as of June 5, 2010; and on April 4, 2010, the Promissory Notes as of April 201 were processed in default on the grounds of each legal limitation (hereinafter “BB Promissory Notes”); and on that basis, the Plaintiff filed an application for commencement of the rehabilitation plan with the Seoul Central District Court on June 3, 2013, and approved the rehabilitation plan as above by the Central District Court on July 1, 2010 (hereinafter “OBB”). The Plaintiff obtained authorization of the rehabilitation plan as of June 3, 2013 from the Seoul Central District Court on April 21, 2013.

D. Under the instant rehabilitation plan, 60% of the principal and interest prior to the commencement of the rehabilitation claim shall be converted into equity and 40% of the principal and interest prior to the commencement of the rehabilitation claim shall be repaid in cash, and any claim which amounts to not less than O00,000 out of the amount of the credit to be paid in cash shall be repaid in installments from the first to the tenth year.

The amount of the claim subject to conversion into investment is determined to be substituted for the repayment of the rehabilitation claim on the day following the date of the effect of the shares newly issued by the plaintiff (the next day after the date of authorization of the rehabilitation plan), and "The amount of the claim subject to conversion into investment shall be recombined into one common share with the face value of KRW 10,000 per share with the face value of KRW 10,000 per share in order to rationalize the amount of the capital after the consolidation and conversion of existing

E. As a rehabilitation claim against the Plaintiff, AA had the claims of OO, OO, OO, BB, OO, and OO. However, each of the above claims was modified as stated in the following table according to the instant rehabilitation plan.

F. On May 8, 2010, AA filed a bad debt tax deduction on the grounds that the difference between the book value of the shares converted into investment among the rehabilitation claims against the Plaintiff of AA and the OO, OO, orO(O,O, orO x 60% of the total amount of each tax invoice in this case) and the market value of the shares after the reduction of the capital has occurred to OO,OO, orO(O,OO x 10,000 won after the reduction of the capital x the face value x 10,000 won) with the head of the Z of the Z, and the head of the Z office deemed the above OO,O,O, orOO became final and conclusive as bad debt of AA, and thus the head of the ZZ office deducted the claim of bad debt tax amount from the FO,O,O(O,O, x x 10,100 won of the bonds at each of the tax invoice in this case (hereinafter referred to as "OO's').

G. BB filed a report on the deduction of bad debt tax amount for the second bad debt amount for the year 2013 with the head of the GG head of the tax office on July 25, 2010, when six months have elapsed since the date of the default on payment of the Promissory Notes, BB filed a report on the deduction of bad debt amount for the first bad debt amount for the year 2014, and the head of the GG head of the tax office filed a report on the deduction of bad debt tax amount for the six months after the date of the default on payment of the Promissory Notes ( June 5, 2010), on December 5, 2010, 2010, O,O,O,O, and 00, O, 10000 won x 30O, 1000 won (O, 2010) x 130O, 2000 won, 10000 won and 100O/200 won respectively.

H. The Defendant imposed value-added tax for the second term portion of 2013, which was deducted from the input tax amount that AA and BB had been deducted from the bad debt tax amount and the PPPP Co., Ltd. (hereinafter “PPP”) imposed value-added tax for the first term of 2013, on the Plaintiff.

I. The Plaintiff filed a request for examination with the Commissioner of the National Tax Service on June 30, 2010, but the Commissioner of the National Tax Service dismissed the Plaintiff’s request on September 23, 2010.

B. On the other hand, the Defendant confirmed that there was an error in calculating the bad debt amount of the PPP on September 3, 2010, and corrected the amount of the value-added tax for the second period of 2013 to reduce the amount of the PP,OO, andOO (hereinafter the above revised amount of the value-added tax for the second period of 2013, the imposition of the value-added tax for the second period of 2013, and the imposition of the value-added tax for the first period of 2014, the imposition of the value-added tax for the first period of 2014, "OO, andOO".

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 4, 6, 7, Eul evidence 1 to 7 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

A) Each of the instant claims is recovered through a debt-equity swap and the remaining 40% is repaid in cash, and thus, it does not constitute a claim finalized as impossible to recover according to the authorization decision of a rehabilitation plan under Article 19-2(1)5 of the Enforcement Decree of the Corporate Tax Act. In addition, for a bad debt tax credit, the bad debt amount should be determined. In addition, for a bad debt tax credit, the amount of bad debt should be determined. In the portion of the debt-equity swap into stocks, there are legal interests such as the claim for dividend, and economic interests arising from the increase of stock price, and since the remainder is out

B) Even if it is not so, the value-added tax claim was established at the time of commencement of rehabilitation procedures to constitute a public-interest claim, but the time limit for payment has not yet yet arrived. Since the value-added tax claim was established after the commencement of rehabilitation procedures on June 24, 2013, it does not constitute a public-interest claim under Article 179(1)9 (b) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Bankruptcy Act”). Therefore, the Defendant cannot issue an order to pay the said value-added tax to the Plaintiff until the repayment period stipulated in the instant rehabilitation plan expires.

2) The defendant's assertion

A) Since the difference between OO, OO, or OO which is the value converted into investment among the claims of this case and the market value of the shares received after capital reduction, OO, OO, or OO is determined as an impossible recovery, it is legitimate to view the above OO, OO, or OO as the bad debt amount and deduct the bad debt tax amount.

B) The deduction of bad debt tax against BB is based on the grounds that the BB’s credit constitutes a claim on a check or note and a credit account on which six months have elapsed since the date of default pursuant to Article 19-2(1)9 of the Enforcement Decree of the Corporate Tax Act, and otherwise, the Plaintiff’s assertion based on the premise that the Defendant’s credit constitutes a claim which is impossible to recover according to the rehabilitation plan approval plan is without merit.

C) Since the instant value-added tax claim was established after the instant rehabilitation order was rendered, it was established only during the second or first taxable period in 2013 to 2014, since the bad debt of A and BB became final and conclusive, it constitutes a priority claim for which the deadline for payment has not yet arrived under Article 179(1)9(1)9(b) of the Debtor Rehabilitation Act at the time the rehabilitation order

B. Determination

1) Whether the deduction for bad debt tax against A is legitimate

A) Whether the AA claim of this case became irrecoverable according to the rehabilitation plan approval plan

(1) Equity swap ratio

(A) The main sentence of Article 45(1) of the Value-Added Tax Act provides that “where an entrepreneur supplies goods or services subject to value-added tax, and all or any other sales claims (referring to those including value-added tax) are irrecoverable due to bankruptcy or compulsory execution against a person who receives the supply, or other causes prescribed by Presidential Decree, an amount obtained by multiplying the bad debt amount by 10/110 may be subtracted from the output tax amount for the taxable period whereto belongs the date when the bad debt becomes final and conclusive.” Article 87(1) of the Enforcement Decree of the Value-Added Tax Act provides that “the main sentence of Article 45(1) of the Act provides that “where an existing rehabilitation plan is declared bankrupt and compulsory execution, or any other cause prescribed by Presidential Decree” means that an agreement on the acquisition value of new shares is acknowledged as bad debt under Article 55(2) of the Enforcement Decree of the Income Tax Act and Article 19-2(1)5 of the Enforcement Decree of the Corporate Tax Act that provides for the conversion of the existing rehabilitation plan into equity securities to an existing rehabilitation plan for repayment.”

(B) In the instant case, health class, 60% of the principal and interest prior to the commencement of the instant rehabilitation plan shall be converted into equity and 40% shall be repaid in cash. The amount of claims subject to a conversion into equity shall be equivalent to 60% of the Plaintiff’s newly issued shares, so long as the amount of claims subject to a conversion into equity is determined to be substituted for the repayment of the relevant rehabilitation claim, the amount of claims subject to a conversion into equity shall be equivalent to 60% of the instant AA claim, and the acquisition value of shares shall be deemed to be the book value of the claim to be converted into equity, and thus, it cannot be deemed that a claim equivalent to the amount of the capital which has been reduced due to the decision to reduce shares after the conversion into equity has been made has become final and conclusive as an irrecoverable claim. Accordingly, the amount of claims subject to a conversion into equity among the instant claims cannot be deemed to constitute an un

(2) The portion of cash repayment

According to the provisions of Article 19-2 of the Corporate Tax Act and Article 19-2 of the Enforcement Decree of the same Act, the cases where the right to claim the form of bad debt is legally extinguished and the legal claim is not extinguished, but the former recognizes that it is impossible to recover from the perspective of the debtor's asset value in light of the debtor's asset status, payment ability, etc. Notwithstanding the accounting of the corporation, the former is included in the loss of the business year which includes the date on which the right to claim is extinguished, but the latter exists in the bonds itself. Therefore, only when the corporation is unable to recover and disposes of bad debt due to the obvious cause of the impossibility of recovery, it may be included in the loss of the business year in which the bad debt becomes final and conclusive (see, e.g., Supreme Court Decision 2001Du489, Sept. 24, 2002). In this case, there is no evidence clearly acknowledged that the portion of the claim is extinguished in cash or that it is impossible to recover from the original rehabilitation plan.

B) The instant claim cannot be deemed to have been confirmed as irrecoverable. Of the instant disposition, the part arising from the deduction of bad debt tax amount of AA is unlawful.

2) Whether the bad debt tax deduction against BB is legitimate

A) Whether the requirements for bad debt deduction are met

(1) Whether it falls under Article 19-2(1)5 of the Enforcement Decree of the Corporate Tax Act

As recognized in the above 1.g., BB’s bad debt tax deduction is based on the grounds that six months have elapsed since the date of default pursuant to Article 19-2(1)9 of the Enforcement Decree of the Corporate Tax Act, and the OO,OO, and OOO of the amount of claims BB’s credit purchase stipulated in the rehabilitation plan of this case is not included in BBB’s rehabilitation claim in the rehabilitation plan of this case, since BB’s credit is not included in the rehabilitation claim in the rehabilitation plan of this case, the plaintiff’s assertion that the BB’s credit of this case is included in the rehabilitation plan of this case is without merit.

(2) Whether it falls under Article 19-2(1)9 of the Enforcement Decree of the Corporate Tax Act

Article 19-2 (1) 9 of the Enforcement Decree of the Corporate Tax Act provides that "bonds on checks or bills and credit sales on which six months have elapsed from the date of occurrence shall be deemed bad debts." Meanwhile, in applying Article 45 (3) of the Value-Added Tax Act, where an entrepreneur supplied with goods or services deducts all or part of the bad debts tax amount as an input tax amount under Article 38, and where the supplier of goods or services has received a bad debts tax credit under paragraph (1) before the entrepreneur closes down his/her business, the entrepreneur supplied with the goods or services shall deduct the amount equivalent to the bad debts tax amount from his/her input tax amount in the taxable period including the date of confirmation of bad debts: Provided, That where the entrepreneur supplied with the goods or services fails to deduct the amount equivalent to the bad debts tax amount, the head of the tax office having jurisdiction over the entrepreneur shall determine or revise the input tax amount to be deducted, as prescribed by Presidential Decree."

In this case, the Promissory Notes, dated February 7, 2013, as of June 5, 2013, and April 4, 2013, were disposed of on July 1, 2013, as recognized by the preceding 1.B. As such, the face value of the Promissory Notes as of February 7, 2013, KRW 89,766,361, which was six months after the date of default (as of June 5, 2013), shall be deemed to have been disposed of as of December 5, 2013; KRW 42,471,00 from the face value of the Promissory Notes as of April 4, 2013, and KRW 15,00 from the date of default (as of July 1, 2013), and the amount of bad debt under Article 14-13 (2) of the Enforcement Decree of the Value-Added Tax Act (as of Article 14-Added Tax Act) shall be disposed of as of the said bad debt tax amount.

B) As to the assertion on priority claims

The Debtor Rehabilitation Act, in principle, includes tax claims arising from the grounds before the commencement of rehabilitation procedures by treating tax claims equally as general claims, but claims arising from the commencement of rehabilitation procedures are recognized as public-interest claims only in exceptional cases, such as when established with respect to the debtor’s business and the management and disposal of assets (Article 179). Here, a tax claim arising prior to the commencement of rehabilitation procedures refers to a tax claim that meets the taxation requirements under the Act prior to the commencement of rehabilitation procedures. As such, whether a certain tax claim constitutes a rehabilitation claim is determined depending on whether a tax liability becomes effective at the time of commencement of rehabilitation procedures. Furthermore, Article 179(1)9 of the Debtor Rehabilitation Act provides that, even if a tax amount having the nature of a tax withheld and specially collected or indirect tax, the payment deadline has not yet arrived even after the commencement of rehabilitation procedures. Article 181(1) of the Debtor Rehabilitation Act provides for a public-interest claim arising from the grounds that accrue after the commencement of rehabilitation procedures,

In this case, the decision to commence the rehabilitation procedure of this case was made on June 24, 2013. The second value-added tax claim of this case in 2013 was established on December 31, 2013 and June 30, 2014 at the end of the taxable period. The value-added tax claim of this case was established on the grounds that the taxable period of value-added tax expires after the commencement of the rehabilitation procedure. However, it is reasonable to deem the Plaintiff’s claim concerning his business as a priority claim as a claim after the commencement of the rehabilitation procedure. Even if it is not, it is reasonable to deem that the Plaintiff’s claim as a claim concerning his business falls under the “other claims after the commencement of the rehabilitation procedure” under Article 181(1) of the Debtor Rehabilitation Act. As to other claims after the commencement of the rehabilitation procedure, when the repayment period under the rehabilitation plan expires (referring to when the rehabilitation procedure is completed before the authorization of the rehabilitation plan is granted, when the repayment period has been completed before the expiration of the rehabilitation plan, the repayment period cannot be limited or exempted from the provisional execution (excluding).

3) Among the instant dispositions, KRW 37,259,375 of the value-added tax of KRW 2013 related to AA in 2013 should be revoked as it is illegal, and KRW 8,160,578 of the value-added tax of KRW 2013 related to BB and KRW 1,000 of the value-added tax of KRW 2013 and KRW 1,000 of the value-added tax of KRW 201

3. Conclusion

The plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.