Cho High Court Decision 201J 3374 (No. 05, 2012)

Where golf membership is purchased by the other party for the purpose of entertainment in connection with the business of the corporation, it is reasonable to hold the input tax amount as entertainment expenses.

The Plaintiff asserts that the Plaintiff purchased the instant golf membership solely for the purpose of contact with the customer regardless of the employee’s welfare, etc., and the acquisition cost of golf membership should be deemed as entertainment expenses. Therefore, the instant disposition that denied the deduction of the input tax amount and impose the value-added tax is lawful.

Article 60 of the Enforcement Decree of the Value Added Tax Act

2012Guhap1236 Disposition of revocation of Value-Added Tax

AAAAA system

port of origin

November 2, 2012

November 30, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of KRW 000 against the Plaintiff on July 7, 2011 is revoked.

1. Details of the disposition;

A. The plaintiff is a company established on February 6, 1996 with the manufacture, sale, etc. of semiconductor-related equipment as its business objective.

B. On January 29, 2009, the Plaintiff acquired golf membership (hereinafter “the instant golf membership”) from the BB network from KRW 000 (the supply price of KRW 000 and the tax amount of KRW 000), and the Plaintiff deducted the input tax amount of KRW 000 (hereinafter “the purchase tax amount”) due to the purchase of golf membership from the output tax amount, and made a preliminary return of value-added tax for the first term portion of KRW 100 in 2009.

C. The Defendant denied the input tax deduction for the instant input tax amount on the grounds that the instant input tax amount constitutes “the input tax amount related to the expenditure of entertainment expenses and other similar expenses prescribed by the Presidential Decree” under Article 17(2)3-2 of the Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010; hereinafter the same) (the Defendant clearly stated that the instant disposition is based only on the foregoing provision through the response of May 25, 2012), and issued a revised and notified the Plaintiff on July 11, 201 (hereinafter “instant disposition”).

D. On September 19, 201, the Plaintiff dissatisfied with the instant disposition, brought an appeal with the Tax Tribunal on September 19, 201, and was dismissed on January 5, 2012.

[Grounds for Recognition] The non-contentious facts, Gap evidence 1.2, Eul evidence 1, and 2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 17 (2) 3-2 of the Value-Added Tax Act, which provides for the non-deduction of input tax amount, stipulates that only "expenses" shall be non-deductible because the Plaintiff’s purchase of the instant golf membership is stipulated as "the input tax amount related to the disbursement of expenses." However, since the Plaintiff’s purchase of the instant golf membership was acquired for the purpose of using it in contact with the customer, the instant disposition that applied the above value-added tax provision by deeming the purchase tax amount for the acquisition of assets such as golf membership as expenses is illegal (the Plaintiff’s acquisition of the instant golf membership for the purpose of contact with the customer on November 2, 2012).

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

Article 17(2)3-2 of the Value-Added Tax Act and Article 60(5) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 18, 2010) provide that entertainment expenses and similar expenses shall not be deducted from output tax amount, and Article 25(5) of the Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) provides that "the amount of entertainment expenses paid by the corporation in connection with its business means entertainment expenses, school expenses, recompense, and other similar expenses regardless of their names." Thus, the amount of entertainment expenses paid by the corporation for the purpose of contact with the other party should be deemed entertainment expenses regardless of their names. Furthermore, unless the Value-Added Tax Act includes the input tax amount related to the supply of golf membership expenses, the Plaintiff’s acquisition of the entertainment expenses shall be deemed as entertainment expenses for the purpose of the purchase of the instant golf membership expenses, regardless of their names and characteristics.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.