Cho-2015-west-5750 (2017.09)

Payment guarantee services provided by parent company also constitute financial and insurance services exempt from value-added tax.

If operating funds necessary to engage in vehicle leasing business are borrowed and the payment guarantee fees are paid by the parent company, it constitutes "financial and insurance services provided in addition to the main business" and is subject to value-added tax exemption.

Article 26 of the Value-Added Tax Act on Supply of Goods or Services

2017Guhap60703 Disposition rejecting the rectification of value-added tax

Ma○○○○○○○○ Incorporated Company

○ Head of tax office

March 8, 2018

April 5, 2018

1. The Defendant’s refusal to rectify value-added tax for KRW 15,614,506 for the first period of value-added tax for September 3, 2015, KRW 34,578,831 for the first period of value-added tax for the year 2013, KRW 33,092,446 for the first period of value-added tax for the year 2014, and KRW 31,83,110 for the first period of value-added tax for the year 2015 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a lessor under the Specialized Credit Financial Business Act who is engaged in facility leasing business, installment financing business, and other financial services related to automobiles and commercial automobiles. The Plaintiff borrowed operating funds necessary for running vehicle leasing business from a foreign financial institution, and received payment guarantee services (hereinafter “this case’s payment guarantee services”) from the German corporation D○○○○ AG (hereinafter “DG”), which is the Plaintiff’s parent company, and paid the payment guarantee fees (hereinafter “the instant payment guarantee fees”).

B. The Plaintiff paid value-added tax on the instant payment guarantee fees on behalf of the Plaintiff in accordance with Article 52(1) of the former Value-Added Tax Act (amended by Act No. 14387, Dec. 20, 2016; hereinafter referred to as the “former Value-Added Tax Act”) at the time of filing the first scheduled plan in 2012, the first scheduled plan in 2013, the first scheduled plan in 2014, and the first scheduled value-added tax in 2015.

C. On May 26, 2015, the Plaintiff filed a request for correction to refund the value-added tax paid by proxy with the Defendant on the ground that the instant payment guarantee service constitutes a financial and insurance service exempt from value-added tax pursuant to Article 40(2)2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 26600, Oct. 23, 2015; hereinafter “former Enforcement Decree of the Value-Added Tax Act”). However, on September 3, 2015, the Defendant refused the Plaintiff’s request for correction on the ground that the instant payment guarantee service constitutes a financial and insurance service exempt from value-added tax pursuant to Article 40(2)2 of the former Enforcement Decree of the Value-Added Tax Act (hereinafter “instant disposition”). However, on September 3, 2015, the Defendant shall collect value-added tax from a foreign mother corporation where the Plaintiff

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on November 27, 2015, but was dismissed on January 9, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 4, 16, 17, Eul evidence 9 (including each number; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The payment guarantee service of this case against the plaintiff of the DAG is Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act.

section 1(1) of the same section shall apply to a person who engages in a business other than a financial or insurance business;

(1) Value-added tax shall be levied on a person who provides services identical or similar to financial or insurance services.

A. As such, the Plaintiff is exempt from the payment guarantee fees of this case paid to the DDA.

The defendant does not bear the duty of substitute payment pursuant to Article 52 of the Value-Added Tax Act.

(1) If the correction is made even if the party has a duty to refund value-added tax on the commission for payment guarantee of this case

The instant disposition that rejected was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) In accordance with the payment guarantee agreement with the Plaintiff, whether the Plaintiff from April 1, 201 to March 31, 2017, pursuant to the payment guarantee agreement with the Plaintiff.

(3) A payment guarantee against the money borrowed from a foreign financial institution, and the plaintiff

In return for the payment guarantee fee of this case to DAG, the terms and conditions of the above payment guarantee agreement

(4) Payment guarantee fees calculated accordingly are as listed in the following table:

Term of Payment Guarantee

Payment Guarantee Fee Rates

Payment Guarantee Fees

(B) A forest less than Won

Above April 1, 2011

March 31, 2012

With respect to a payment guarantee for the period from April 1, 201 to November 30, 2011, 0.03% per annum for the remainder of payment obligation for the lending period of not more than 364 days during the lending period (0.08% per annum for the payment obligation exceeding 364 days)

156,145,069 won

Above April 1, 2012

March 31, 2013

With respect to a payment guarantee during the period from December 1, 2011 to November 30, 2012, 0.03% (0.08% per annum for a payment guarantee for a period exceeding 364 days) for the remainder of the payment obligation during the lending period of not more than 364 days.

245,788,311 won

Above April 1, 2013

March 31, 2014

From December 1, 2012 to November 30, 2013, for each payment guarantee period, 0.125% per annum for the remainder of each payment guarantee obligation.

30,924,466 won

Above April 1, 2014

March 31, 2017

From December 1, 2013 to November 30, 2014, for each payment guarantee period, 0.125% per annum for the remainder of each payment guarantee obligation.

318,831,104 won

2) The amount of value-added tax (the amount claimed for correction) paid by the Plaintiff to DAG upon the declaration of value-added tax scheduled in 2012, 199, 2013, 199, 2014, and 199, which was paid by proxy for the instant payment guarantee fee paid by the Plaintiff to DAG at the time of the declaration of value-added tax scheduled in 2015 is as listed below:

(unit: Won)

Taxation Period

Classification

Tax Base and Value-Added Tax

Reduction

(Amount of Request for Correction)

Original Return Amount

Justifiable Amount of the argument

1, 2012

Estimated Plan

Tax Base

866,144,195

709,99,126

156,145,069

Value-added Tax

86,614,370

70,99,864

15,614,506

1, 2013

Estimated Plan

Tax Base

388,808,938

143,020,627

245,783,311

Value-added Tax

38,880,885

14,302,054

24,578,831

1, 2014

Estimated Plan

Tax Base

395,005,936

64,081,470

30,924,466

Value-added Tax

39,500,536

6,408,090

3,092,446

1, 2015

Estimated Plan

Tax Base

408,753,421

89,922,317

318,831,104

Value-added Tax

40,875,249

8,992,139

31,883,110

Total Value-Added Tax

205,871,040

100,702,147

105,168,893

3) The main business contents listed in the business report during the Plaintiff’s taxable period are as follows.

The Plaintiff is a subsidiary of DAG, which is a German automobile manufacturing company, and is a mer○○○○○○○○○○○ Company and a commercial tea sales company, which provides financial products and services most suitable for the sales vehicles of Da○○○○○○ Korea Co., Ltd. . We are taking charge of the key role in the business structure of the Daler Group, which provides best financial services in order to satisfy the consumer expectations suitable for the increase in sales and the reputation of Ma○○○○○○○○○○○○○○○○○○○○○○○○ Co., Ltd. through the provision of financial products for domestic sales vehicles of Da○○○ Group.

4) The Plaintiff provided for domestic sales from 2012 to 2015 of the vehicles manufactured by DG.

the percentage of the manner in which the financial instruments are combined shall be as follows:

Classification

2012

2013

2014

2015

Total number of vehicles sold;

20,891

24,521

35,985

45,638

Number of Financial Products Used

8,346

12,085

18,020

25,017

Use Rate of Financial Products

39.95%

49.28%

50.08%

54.82%

[Ground of Recognition] Unsatisfy, Gap evidence Nos. 3, 5, 17 through 19, Eul evidence No. 9, oral argument

The purport of the whole

D. Determination

1) Relevant statutes

Article 26 (1) 115 of the former Value-Added Tax Act (amended by Act No. 13474, Aug. 11, 2015) provides that "financial and insurance services prescribed by Presidential Decree as tax-free services" and Article 40 (1) 6 of the former Enforcement Decree of the Value-Added Tax Act provides that "financial and insurance services under Article 26 (1) 11 of the former Enforcement Decree of the Value-Added Tax Act shall be services falling under any of the following subparagraphs", while "financial and insurance services under Article 26 (1) 11 of the former Enforcement Decree of the Value-Added Tax Act shall be services incidental to banking services under the Banking

On the other hand, Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act provides services identical or similar to the financial and insurance services under Article 26 (1) 11 of the Act, even where a person who runs a business other than the financial and insurance business under each subparagraph of paragraph (1) provides services identical or similar to the financial and insurance services under the same paragraph as incidental to the main business, it is considered that ① a person who runs a business other than the financial and insurance business (hereinafter referred to as "the first requirement of this case"), ② a person incidental to the main business (hereinafter referred to as "the second requirement of this case") and ③ a person who provides services identical or similar to the financial and insurance services (hereinafter referred to as "third requirement of this case") is included in the financial and insurance services subject to tax exemption.

2) Whether the instant first requirement is satisfied

A) Article 40(1) of the former Enforcement Decree of the Value-Added Tax Act provides for financial and insurance business exempt from value-added tax pursuant to Article 26(1)11 of the former Value-Added Tax Act (amended by Act No. 13474, Aug. 11, 2015). Article 40(2) of the former Enforcement Decree of the Value-Added Tax Act provides that "persons engaged in any business other than those listed in each subparagraph of Article 40(1) shall be subject to the application of the former Enforcement Decree of the Value-Added Tax Act. The fact that DAG is a corporation whose main business is "automobile manufacture and sales business", which is a business other than financial and insurance business listed in each subparagraph of Article 40(1) of the former Enforcement Decree of the Value-Added Tax Act, is either disputed between the parties or can be recognized by the statements stated in Article 5, 6, 13, and 14

B) As to this, the Defendant asserts that the 'person who runs a business other than those under each subparagraph of Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act' refers to a financial or insurance business entity not listed as a provider of financial or insurance services under each subparagraph, and that the above provision should not be expanded and applied to a business entity which runs a main business different from the financial or insurance business, and that the DAG, which runs a main business of the automobile manufacturing business, cannot be subject to the above provision. However, considering the fact that Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act does not limit the main business to the financial or insurance business, and it is difficult to present any other financial or insurance business because Article 40 (1) of the former Enforcement Decree of the Value-Added Tax Act provides for the financial or insurance business other than those under each subparagraph of Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act, it is difficult to accept the above assertion by the Defendant.

3) Whether the instant requirements are satisfied

A) We examine the following circumstances, which are acknowledged by the overall purport of the statements and arguments as stated in Gap evidence Nos. 5 through 17, namely, ① the Plaintiff’s subsidiary company established for the purpose of expanding the sales of automobiles manufactured by DNAG; ② all of the Plaintiff’s above services are provided to consumers who purchase vehicles manufactured by DNAG, such as Medo○○○, etc.; ② Plaintiff’s financial assets and financial lease claims related to the sales of DNA vehicle, among the Plaintiff’s assets, are 91% in 2015, 94% in total, 2014, 88% in total, 2013; ③ the combination of financial products of the Plaintiff in the domestic sales of vehicles manufactured by DNAG, and ④ the Plaintiff’s main sales of the Plaintiff’s vehicle was not provided to the Plaintiff through the promotion of new exchange programs, etc. for the Plaintiff’s sales of new vehicles, or the Plaintiff’s payment guarantee was not provided to the Plaintiff for the purpose of the instant sales of the instant vehicles.

B) In regard to this, the defendant asserts that the "services to be provided as an accompanying to the main business" under Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act should be interpreted only as "services to the main business" under each subparagraph of Article 14 (2) 5 of the Value-Added Tax Act. However, Article 40 (2) of the former Enforcement Decree of the Value-Added Tax Act only provides that "the provision of financial and insurance services as an accompanying to the main business" is "the provision of services to the main business," and does not require that the financial and insurance services be provided as an incidental to the main business or must be inevitably or naturally incidental to the main business as provided under each subparagraph of Article 14 (2) of the Value-Added Tax Act, and the meaning of services to be provided as an accompanying to the main business is too reduced in the scope of application of the above provision as it is highly likely to fundamentally block the application of the above provision itself

4) Whether the instant third requirement is satisfied

A) Article 2 subparagraph 6 of the former Banking Act (amended by Act No. 13448, Jul. 24, 2015; hereinafter referred to as the "former Banking Act") provides that "payment guarantee means that a bank guarantees or accepts another person's obligations." Article 27-2 (2) 1 of the former Banking Act provides that "payment guarantee" is one of the incidental business affairs of a bank.

On the other hand, payment guarantee in the form of credit transaction is a transaction in which the bank guarantees a third party’s debt owed by the transaction partner in accordance with the entrustment of the transaction partner (payment guarantee applicant), and the bank is established by concluding a guarantee agreement again with the creditor as stipulated in the guarantee entrustment agreement concluded between the bank and the transaction partner (see, e.g., Supreme Court Decision 2001Da62374, Oct. 11, 2002).

B) On the other hand, as seen above, DNA entered into a contract with a foreign financial institution to guarantee the Plaintiff’s debt with a foreign financial institution so that the Plaintiff can borrow operating funds from a foreign financial institution, and received the instant payment guarantee fee from the Plaintiff as a consideration therefor. This is identical with the guarantee of debt under the former Banking Act and its essential contents and nature. DoG provided the Plaintiff with services identical or similar to the financial and insurance services under Article 40(1) of the former Enforcement Decree of the Value-Added Tax Act, so the requirements of this case were satisfied.

5) Whether the Plaintiff’s liability to pay by proxy exists

A person who receives services or rights in the Republic of Korea from a nonresident or a foreign corporation with no domestic place of business shall collect value-added taxes from the recipient of the services except for cases where the services, etc. supplied pursuant to Article 52 of the former Value-Added Tax Act are provided for a taxable business, and pay them by proxy. The purport of the above provision on the payment by proxy is to enhance the unfair taxation of the services supplied by a foreign corporation with no domestic place of business, to maintain the neutrality of taxation in the supply of services, and to determine whether to exempt the value-added tax related to the above services if the taxing authority belongs to the Republic of Korea after the domestic place of business and the place of the services supplied by a foreign corporation falls under the category of services exempt from value-added tax under the Value-Added Tax Act. In light of the above, the payment guarantee of the instant services provided to the Plaintiff is exempt from value-added tax under the Value-Added Tax Act, and thus, the Plaintiff is not obligated to pay the value-added tax on behalf of the domestic tax-exempt service provider.

6) Sub-determination

Therefore, even though the Plaintiff’s payment guarantee fees of this case should be fully refunded KRW 3,092,446 of value-added tax of 15,614,506 of value-added tax of 2012, value-added tax of 1,578,831 of 2013, value-added tax of 1, 2014, value-added tax of 1,092, 446 of value-added tax of 2014, value-added tax of 1, 2015, and KRW 31,83,110 of value-added tax of

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition.

1) Article 34 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) shall apply to the provisions applicable in relation to the value-added tax for the year 2014 and 2015 that the Plaintiff paid by proxy, and Article 34 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) shall apply to the value-added tax for the year

2) Articles 33(2) and 40(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013; Presidential Decree No. 24638, Jun. 28, 2013; Presidential Decree No. 24638) shall apply to the payment of the value-added tax by proxy for the first time in 2014, which was paid by the Plaintiff on behalf of the Plaintiff, with respect to the value-added tax for the first time in 2012 scheduled by the Plaintiff on behalf of the Plaintiff on February 15, 2013. The same shall apply to the payment by proxy for the first time in 2014 under the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 25945, Dec. 30, 2014).

3) If a head office of a foreign financial institution instructs a domestic branch to execute a loan to the Plaintiff, the local branch office shall execute the loan to the Plaintiff.

4) Although the Defendant is disputing the amount of the instant payment guarantee fee paid by the Plaintiff to DAG, according to the purport of Gap evidence Nos. 16 through 19, and Eul evidence Nos. 9 and all pleadings, it can be acknowledged that the Plaintiff received the instant payment guarantee service from DAG and paid the amount indicated in the following table “payment guarantee fee” to DAG as the instant payment guarantee fee, and it is difficult to view it differently solely on the circumstances alleged by the Defendant and the evidence submitted by the Defendant.

5) In the above provision, the supply of any of the following goods or services incidental to the main business is deemed a separate supply, but it follows the taxation of the main business and whether the main business is exempted or not, etc., while carrying out the "goods or services which are supplied by chance or temporarily in relation to the main business in subparagraph 1, and the "goods inevitably generated in the course of production of the main goods or provision of services" in relation to the main business in subparagraph 2.