Cho Jae-2016-west-3638 ( December 20, 2016)

The acquired bonds of this case do not meet the requirements for bad debt tax deduction under the Value-Added Tax Act.

The instant transfer claim that the Plaintiff received in return for the supply of goods does not vary between the sales claim, the debtor, the cause of occurrence, etc., and there are no grounds to deduct the bad debt tax amount prescribed by Presidential Decree, and thus the instant disposition is legitimate.

Article 87 of the Enforcement Decree of the Value-Added Tax Act of the Special Cases concerning Deduction of Bad Debt Tax Amount

2017Guhap1988 Dismissal Disposition for Bad Debt Income Deduction

A○○○ Industries Co., Ltd.

○ Head of tax office

May 24, 2018

July 5, 2018

1. The plaintiff's claim is dismissed.

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

The defendant's rejection disposition of correction of KRW 29,318,181 against the plaintiff on June 30, 2016 is revoked.

1. Details of the disposition;

A. On December 24, 2012, the Plaintiff, a corporation that runs the wholesale and retail business of computers and peripheral devices, supplied 539 million won (i.e., purchase price of KRW 490 million + value-added 490 million + value-added 49 million, and hereinafter referred to as “sale claim”). On March 23, 2000, the Plaintiff was a corporation that runs the software development business and issued sales tax invoices. The Plaintiff is a corporation that continuously carried on the software development business on March 23, 200, and the profit and loss of the current net market continuously since 2012 is a black-listed corporation.

B. The Plaintiff, on August 14, 2013, filed a lawsuit against CO on the claim for the purchase of goods against CO on the ground that COO was unable to receive KRW 539 million of the sales claim of this case (O district court 20OOOO). In the instant case, CO was involved in the transaction between the Plaintiff and COB upon receipt of a proposal from the representative director KimA of the Plaintiff, and CO was in contact with CO on January 15, 2013, so COB could not recover the price of the goods of this case from BB, OO could not pay the Plaintiff the sales claim of this case. In the instant case, the conciliation between the Plaintiff and CO on September 29, 2014 (hereinafter “instant conciliation”).

1. (a) A.O. A.O shall pay to the Plaintiff KRW 200,00,000,000, in total, over four times on September 30, 2014; December 31, 2014; March 31, 2015; and June 30, 2015.

B. If the COO delays the payment of the division described in paragraph (1), the OO shall immediately lose the benefit of the due date (the following day of the due date) and shall pay to the Plaintiff the full amount of the unpaid amount and the delay damages calculated at the rate of 8% per annum from the day the above-mentioned benefit is lost to the day the payment is complete.

C. The plaintiff waives the remainder of the claim against the OO.

2. (a) A.O.O shall transfer to the Plaintiff the claim amounting to KRW 322,50,000,000,000 (including surtax; hereinafter the same shall apply) out of KRW 539,00,000 (including surtax; hereinafter the same shall apply) the amount of which shall be paid by the O to the Plaintiff under paragraph (a) of paragraph 1 of Article 1, and the remainder of KRW 322,50,000,000, excluding the amount of gains from transfer.

B. The Plaintiff has the authority to notify the head of BB of the transfer of claims on behalf of the director with respect to the assignment of claims under paragraph (1).

C. Of the claims held by the OO against the head BB, the remainder of KRW 216,50,000 that is not transferred to the Plaintiff shall be held by the O as it is.

C. On April 13, 2010, the headB had already been declared bankrupt (O district court 20OO). The Plaintiff filed an application for the execution of the seizure of corporeal movables against the headB during the period when the Plaintiff was not paid the claim 322,50,000 won against the headB acquired from O due to the instant conciliation, but the execution of the seizure was not carried out on September 10, 2015 because the headB did not reside at the domicile.

D. After receipt of the report on impossibility of executing the seizure of corporeal movables on September 10, 2015, the Plaintiff filed a final return on the second taxable period of value-added tax in May 16, 2016 with the Defendant on May 16, 2016, the Plaintiff filed a claim for rectification by deducting KRW 29,318,181, which was already paid by the Plaintiff, from the bad debt tax amount, the amount of value-added tax 29,318, and181, which was already paid by the Plaintiff, as bad debt tax amount in February 2015. Accordingly, the Defendant filed a claim for the rectification of bad debt tax amount for a third party’s claim that was transferred by the court under the court protocol, but the Defendant rejected the Plaintiff’s claim for rectification on June 30, 2016 on the ground that it does not constitute a ground for deduction of bad debt tax amount under Article 55(2) of the Enforcement Decree of the Income Tax Act and Article 19-2(1) of the Enforcement Decree

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal, but was dismissed on December 20, 2016.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, evidence 8 through 11, each entry in Eul evidence 1 and 2 (including each number), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since SiO supplied the instant goods supplied by the Plaintiff to BB, the instant claim for acquisition of the instant goods is recognized as identical to the instant sales claim, and the Plaintiff, upon the instant adjustment, could only file a claim for KRW 322,50,000,00, which constitutes the instant claim for acquisition of the instant sales claim, with the head of BB, rather than the OO. However, the instant claim for acquisition of the instant goods was discontinued, and the headB went bankrupt, and compulsory execution is impossible, and thus, the instant claim for acquisition of the instant goods is impossible. As such, Article 45(1) of the Value-Added Tax Act does not require the bankruptcy, compulsory execution, and discontinuation of the instant business, even if the head of BB was supplied with the instant goods through the OO, the instant claim for acquisition of the instant goods constitutes an unlawful disposition of Article 19-2(1)8 of the Enforcement Decree of the Corporate Tax Act, and thus, constitutes a bad debt tax subject to deduction as prescribed by Article 45(1)4 of the Value-Added Tax Act.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Article 45(1) of the Value-Added Tax Act provides that the bad debt tax may be subtracted from the output tax amount in the taxable period whereto belongs the date when the bad debt becomes final and conclusive if all or part of the sales claim cannot be recovered due to the bankruptcy of the person who received the supply or compulsory execution or other reasons prescribed by Presidential Decree. The above bankruptcy, compulsory execution or other reasons prescribed by Presidential Decree refers to any of the subparagraphs of Article 19-2(1) of the Enforcement Decree of the Corporate Tax Act, as prescribed by Article 87(1) of the Enforcement Decree of the Value-Added Tax Act. Article 45(1) of the Value-Added Tax Act provides for claims which cannot be recovered due to

In full view of the provisions of the above related Acts and subordinate statutes, ① a sales claim subject to deduction is ② a bad debt cause such as bankruptcy of a person who received the supply. ③ In the event that bad debt is not recoverable, the entrepreneur can obtain a bad debt tax deduction from the output tax amount in the taxable period to which

2) In light of the requirements for a bad debt tax credit in light of the following circumstances revealed in full view of the purport of the entire pleadings as seen earlier, the instant acquired claim does not meet the requirements for a bad debt tax credit, and thus, the Plaintiff is not entitled to a bad debt tax credit under Article 45(1) of the Value-Added Tax Act. The Plaintiff’s assertion is without merit,

A) Article 45(1) of the Value-Added Tax Act provides that, in the event of the bankruptcy of the supplier who received the goods of this case, the transaction partner who received the goods of this case can be deducted from the output tax amount in the taxable period to which the date when the bad debt becomes final belongs. The acquisition claim of this case is not the sales claim which is included in the value-added tax base in February 2015 of the Plaintiff, but the sales claim of this case, debtor, cause of occurrence, etc. are different and both are different. In addition, in light of the language and text of the above provision and the purport of the system of a bad debt tax credit to resolve the loss of the supplier who did not collect the value-added tax from the other party, the head B who is not the other party who received the goods of this case directly from the Plaintiff does not constitute the "person

B) The bad debt tax amount subject to a bad debt tax credit should not be recovered as bad debt due to the reasons such as bankruptcy of the person who received the sales credit. However, there was no reason for bad debt tax credit regarding the claim of this case before the mediation of this case, since the plaintiff as the person who received the goods of this case from the plaintiff did not have any reason for bad debt such as bankruptcy. Nevertheless, the plaintiff, according to the mediation of this case, has given up the sales claim of this case against the head BB in lieu of the part of the sales claim of this case against the O, and has given up the sales claim of this case against the O. The reason why the plaintiff could not recover the sales claim of this case is merely 'the takeover of claims against the head BB of O and the waiver of claims against the O', and there is no reason for bad debt

C) Even if the Plaintiff’s assertion, i.e., “B” can be deemed as “person who received supply” from the Plaintiff, and even if the Plaintiff could assert the cause of bad debt based on the long-term BB, the Plaintiff cannot be deemed as satisfying the requirements for bad debt tax credit in the following respect. In other words, while Article 87(2) of the Enforcement Decree of the Value-Added Tax Act limits the scope of bad debt tax credit to “ bad debt tax amount finalized by the deadline for filing a final return for the taxable period in which five years have elapsed from the date of supply after the Plaintiff supplied the goods or services subject to value-added tax, and then the scope of the bad debt tax credit was limited to “the bad debt tax amount finalized by the deadline for filing a final return for the taxable period in which the five years have elapsed from the date of supply.” Unless there were special circumstances, “BB bankruptcy” of the 2010 already declared bankrupt on April 13, 2010, the Plaintiff cannot be deemed as the date of termination of enforcement of the 1201B bad debt tax credit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.