Review-department -2013-0152 ( October 11, 2013)

Whether an input tax amount, such as oil expenses, by a business operator operating an advertisement media industry and passenger transport business, constitutes a common input tax amount.

Purchase goods, such as oil expenses and components, constitute an input tax amount related only to passenger transportation business, which is a tax-free business, and thus, it may not be deducted from the output tax amount.

Article 61 of the Enforcement Decree of the Value-Added Tax Act

2013Guhap62350

AA Transport Corporation

BB Director of the Tax Office

2014.02.7

2014.028

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

On February 12, 2013, the Defendant revoked all of the disposition rejecting the Defendant’s claim for rectification with respect to KRW 1,305,479 in 209, KRW 1,66,70,298 in 2010, KRW 21,966,705 in 2010, KRW 1,966,357,245 in 2011, KRW 22,484,450 in 201, KRW 1,346,245 in 201, and KRW 2,484,450 in 201.

1. Details of the disposition;

A. On January 22, 2005, the Seoul Metropolitan GovernmentCC transport business association, representing the Plaintiff, entered into a contract for vicarious execution of urban bus advertising business with DDR companies (hereinafter referred to as "D newspaper companies") on behalf of the Plaintiff to design, manufacture, install, and manage advertisements at its own expense, and attract advertisers, and the bus companies in Seoul, including the Plaintiff, etc. entered into a contract for vicarious execution of the advertising business with the city bus that is exempt from value-added tax as well as the advertising media business (hereinafter referred to as "advertising media business"), which is non-value-added tax-free business.

B. In 209, the Plaintiff: (a) deemed that the purchase price of buses, oil cost, part-time cost, etc. for repair is related to passenger transport business; and (b) reported and paid value-added tax without deducting the input tax amount as the input tax amount, from the second period (the taxable period of value-added tax; hereinafter the same shall apply) to the first period of 2012.

C. Since then, the Plaintiff, on January 12, 2013, deducted the amount divided in proportion to the supply value of the advertising media business, deeming that the instant input tax amount is jointly related not only to passenger transport business but also to the advertising media business, as the input tax amount, and filed a claim for correction regarding the value-added tax of KRW 12,10,422 as follows.

D. However, the Defendant rejected all of the Plaintiff’s claim for correction on the ground that the instant input tax amount was inevitably incurred in the course of carrying on passenger transport business only due to the operation, maintenance, repair, etc. of urban buses (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, 4, Eul evidence 1-6, Eul evidence 1-2, Eul evidence 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The advertising media business run by the Plaintiff is premised on the operation of buses for the business of providing services for bus passengers or pedestrians to display advertisements, and thus, the instant input tax amount related to the operation of buses, such as bus purchase cost, oil cost, and parts for repair, is an input tax amount common to not only the passenger transport business but also the commercial advertising media business, which is a taxable business. However, since each business is used as a means of bus operation at the same time, the amount belonging to each business among the total input tax amount cannot be actually distinguishable, the amount calculated in proportion to the sales ratio of the advertising media business among the input tax amount in the instant case should be deducted from the output tax amount. Accordingly, the instant disposition on a different premise should be revoked as it is unlawful.

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination

1) Article 17(1) and (2)4 of the former Value-Added Tax Act (Amended by Act No. 915, Jan. 1, 2010); Article 17(1) and (2)6 of the former Value-Added Tax Act (Amended by Act No. 11129, Dec. 31, 201); Article 17(1) and (2)6 of the former Value-Added Tax Act (Amended by Act No. 11608, Jan. 1, 2013); Article 61(1) of the former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 24359, Feb. 15, 2013); where an entrepreneur concurrently runs a taxable business and a tax-free business, the amount of input tax related to the tax-free business shall be calculated according to the actual calculation of the tax-free business; where the actual amount of input tax cannot be reverted to a taxable business and a tax-free business, the amount of input tax shall be calculated by 170.

2) As to the instant case, even if the Plaintiff’s advertising media business is premised on the operation of buses, it is naturally necessary to cover expenses incurred for passenger transport business, which is a duty-free passenger transport business, such as bus purchase cost, oil cost, parts for repair, etc., even in cases where the Plaintiff does not run an advertising media business. The costs incurred for design, manufacture, installation, and management of advertisements are fully borne by a DNA newspaper company, and as such, the instant input tax amount falls under the input tax amount related only to passenger transport business, which is a duty-free passenger transport business, and thus, it cannot be deducted from the output tax amount, unless the costs incurred for the design, manufacture, installation, and management of advertisements are additionally required by the DNA newspaper company. Accordingly, the instant input tax amount falls under the input tax amount related

3. Conclusion

The plaintiff's claim is dismissed without merit, and the costs of lawsuit are assessed against the plaintiff who has lost. It is so decided as per Disposition.