[1] Whether the input tax amount for the transaction should be deducted in case where the tax invoice issued before the supply date arrives within the taxable period to which the issue date belongs and the transaction is confirmed as genuine in view of the transaction as other entries in the tax invoice (affirmative in principle)

[2] Whether the subject or scope of the proviso of Article 17(2)2 of the former Value-Added Tax Act concerning "tax invoices that are different from the facts" is limited pursuant to Article 9(3) of the same Act and Article 54(2) and (3) of the Enforcement Decree of the same Act (negative)

[1] In light of the language, content, structure, and purport of Article 17(1) and (2)2 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013); and Article 60(2)2 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24359, Feb. 15, 2013; hereinafter “Enforcement Decree”), barring any special circumstance, such as where an entrepreneur does not bear value-added tax and is issued a tax invoice in advance before the time of supply for an early refund, even if the “tax invoice issued before the time of supply” arrives within the taxable period to which the date of issuance belongs and where it is confirmed that the transaction is true in view of other items of the tax invoice, the input tax amount on the transaction should be deducted pursuant to Article 60(2)2 of the Enforcement Decree.

[2] Article 9(3) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter “the Act”); Article 54(2) and (3) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013) provide for cases where “the date of issuance of a tax invoice issued before the time of supply is deemed the time of supply or the tax invoice is deemed to be issued pursuant to Article 16(1) of the Act.” This provision provides for cases where “the necessary entry is deemed the same as the fact,” and thus, it is difficult to view that the subject or scope of application of the proviso, etc. of Article 17(2)2 of the Act on “tax invoice that is different from the fact,” as a matter of course, is limited.

[1] Articles 17(1) and 17(2)2 (see current Article 38(1)2) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013); Article 60(2)2 (see current Article 75 subparag. 2) of the former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 24359, Feb. 15, 2013); Article 9(3) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013); Article 17(2)2 (see current Article 39(1)2) of the former Enforcement Decree of the Value-Added Tax Act (Amended by Act No. 11873, Feb. 15, 2013; Presidential Decree No. 2453, Feb. 25, 2013)

[1] Supreme Court en banc Decision 2002Du5771 Decided November 18, 2004 (Gong2004Ha, 2054)

Busan High Court Decision 2001Na14488 decided May 1, 201

Head of North Busan District Tax Office

Busan High Court Decision 2013Nu20516 decided January 24, 2014

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. For a normal operation of the pre-stage tax credit system adopted under Article 17(1) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter “the Act”), the main text of Article 17(2)2 of the Act, considering that it is essential to compare the input tax amount to be deducted by an entrepreneur at each transaction stage by taxable period with the output tax amount to be collected by the former business operator at each transaction stage, and to verify each other. The main text of Article 17(2)2 of the former Enforcement Decree of the Value-Added Tax Act, restricts the deduction of input tax amount under a tax invoice containing different descriptions from the facts, thereby securing accuracy and accuracy of the tax invoice. Meanwhile, even if a tax invoice containing different descriptions is deemed to disrupt the normal operation of the pre-stage tax credit system or undermine the essential functions of the tax invoice, permitting the deduction of input tax amount to be prescribed by the Enforcement Decree, considering the fact that it conforms with the basic principles of the value-added tax system.

In light of the language, structure, purport, etc. of these regulations, barring any special circumstance, such as where an entrepreneur, without any value-added tax, issues a tax invoice in advance before the time of supply with the intention to receive early refund of the input tax amount, even if the “tax invoice issued before the time of supply” arrives within the taxable period to which the date of supply belongs and where it is confirmed that the transaction is true in view of the fact that the tax invoice is other entries in the tax invoice, the input tax amount for the relevant transaction should be deducted pursuant to Article 60(2)2 of the Enforcement Decree (see Supreme Court en banc Decision 2002Du5771, Nov. 18, 2004). Meanwhile, Article 9(3) of the Act, Article 54(2) and (3) of the Enforcement Decree of the Act provide that where the issue date of the “tax invoice issued before the time of supply” is deemed to be the time of supply, or where the tax invoice is deemed to have been issued pursuant to Article 16(1) of the Act, it is difficult to deem the scope of mandatory entry or proviso to Article 27(2).

2. Based on the adopted evidence, the lower court acknowledged the following facts: (a) the Plaintiff contracted the instant tax invoice for KRW 3 billion out of the construction price on October 18, 201, which was issued by the said company on the basis of the payment basis or interim payments for the completion of the new construction of the Daeyang Industries Development Center; and (b) paid the said money on October 31, 201, which was the due date; (c) however, the instant tax invoice constitutes a tax invoice issued before the time of supply for the service; (d) the Plaintiff issued the said tax invoice prior to the due date to obtain the loan from the bank, along with evidentiary documents, for the purpose of paying the said construction price; and (e) the Plaintiff received the said tax invoice prior to the due date to obtain the loan from the bank; and (e) the Plaintiff did not return and pay the said tax invoice after deducting the above input tax amount; and (e) in view of the fact that the input tax amount on the instant tax invoice was not unfairly refunded, the lower court determined otherwise on the ground that the input tax amount partially exempted under Article 60(2).

In light of the above provisions and legal principles, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the interpretation and application of Article 17(2) of the Act and Article 60(2)2 of the Enforcement Decree.

Supreme Court Decision 2009Du3200 Decided May 14, 2009 cited in the ground of appeal is related to the case where an entrepreneur applied for an early refund of the total input tax amount without paying only a part of the proceeds from supply before the time of supply, and it is not appropriate to invoke the case in this case due to different reasons.

3. 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 Park Sang-ok (Presiding Justice)