Changwon District Court 2016-Gu Joint-52390 ( October 2017), Changwon District Court

Whether the difference in the rehabilitation claim of this case constitutes a claim for which collection of the difference is confirmed and subject to a bad debt tax credit.

It is difficult to deem that the difference part of the rehabilitation claim of this case constitutes a claim which is impossible to be recovered according to the decision to authorize the rehabilitation plan that is determined as bad debt under Article 19-2 (1) 5 of the former Enforcement Decree of the Corporate Tax Act or the court

2017Nu10237 Revocation of Disposition of Imposition of Value-Added Tax

AAAAAAAAAA corporation, which is a trustee of BBBB lawsuit taken place by the debtor, and is a trustee of CCC lawsuit taken place by the debtor.

Head of Changwon Tax Office

Changwon District Court 2016Guhap52390

December 19, 2018

on October 30, 2019

1. Upon the claim for a change in exchange in this Court, the part of the imposition disposition by the Defendant against the Plaintiff on June 1, 2017, which exceeds 36,616,630 won, among the imposition disposition by the second-class value-added tax 424 of the year 2013 against the Plaintiff, and at the same time, by the relevant party.

2. All costs of the lawsuit shall be borne by the defendant.

1. Purport of claim

The decision is as follows (the plaintiff sought revocation of the disposition of imposition of value-added tax 189 on February 1, 2016, No. 2013 of the defendant's 2016, a trade-level class, a trade-level class-based class-based class-based class-based class-based class-based class-based class-based class-based class-based class-based class-based, a trade-based class-based class-based class-based class-based class-based class-based class-based class-based

2. Purport of appeal

The part against the defendant in the judgment of the court of first instance shall be revoked, and the plaintiff's claim corresponding to the revocation shall be dismissed.

1. Details of the disposition;

A. Conversion into investment and consolidation of stocks according to the rehabilitation plan of this case

1) On May 8, 2013, when the Plaintiff engaged in civil engineering and construction works, etc., the Plaintiff was decided to commence rehabilitation procedures under DD District Court 2013 Gohap (at the time, the representative director BB was appointed as a custodian). On October 31, 2013, the Plaintiff was decided to obtain the rehabilitation plan approval on October 31, 2013 (hereinafter “instant rehabilitation plan”).

2) The instant rehabilitation plan provides that “The obligation corresponding to the rehabilitation claim shall be converted into equity and the interest accrued prior to the commencement of the rehabilitation claim, and shall be paid in cash by 20.5%, and the obligation to be converted into equity shall substitute for the repayment of the rehabilitation claim in question on the effective date of the shares newly issued by the Plaintiff. The amount of KRW 5,000 shall be issued at a face value of KRW 5,000 per common share, and the face value of KRW 5,00 per common share shall be combined into KRW 5,00 per common share on the day following the date of entry into force of new shares through a conversion into equity.”

3) According to the instant rehabilitation plan, the rehabilitation claim against the Plaintiff (hereinafter referred to as “the rehabilitation claim”) was converted into one share of 5,000 won per book value of 5,000 won per book value (issuance price) on November 1, 2013, and new shares issued through the said conversion into equity investment (hereinafter referred to as “stocks converted into equity investment”) were consolidated at the rate of 20:1 to reduce capital on November 2, 2013.

(b) Imposition of value-added tax on the plaintiff based on a bad debt tax credit for rehabilitation creditors;

1) As a result of the appraisal based on the cash flow discount model of EEE companies, the Plaintiff’s shares after consolidation were assessed as KRW 1,2 XX per share as of November 2, 2013. Rehabilitation creditors were deemed to have suffered bad debt under the Value-Added Tax Act on the difference between the book value of the claim converted into investment and the market value of the shares (hereinafter “the difference of this case”) delivered through a conversion into equity investment among the rehabilitation claims against the Plaintiff, and thus, received a bad debt tax credit for the amount equivalent to the value-added tax.

2) On February 1, 2016, the Defendant denied the Plaintiff’s input tax deduction amounting to the amount of bad debt tax credit for the difference in the instant case, and subsequently corrected the amount of KRW 235,280,30 from August 31, 2018 to the Plaintiff (including the first disposition of KRW 36,616,630, which was subject to bad debt tax credit for the bills). On June 1, 2017, the Defendant issued a disposition of imposition (hereinafter referred to as “the first disposition”) of the second-stage value-added tax for the Plaintiff (including the first disposition of KRW 36,616,630, which was subject to bad debt tax credit for the bills). Moreover, on August 31, 2018, the Defendant corrected the increase or decrease of KRW 235,280,530 from the first disposition of KRW 760,300 from the first disposition of bad debt tax credit for the instant case (hereinafter referred to as “the revised disposition”).

3) On April 21, 2016, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service against the initial disposition, but the request for examination was dismissed on June 10, 2016. On August 24, 2017, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service for objection to the instant disposition for increased or decreased assessment, but the said request for examination was also dismissed on September 15, 2017.

C. Plaintiff’s completion of rehabilitation procedures

On April 13, 2017, while the rehabilitation procedure was in progress, the administrator was changed to CCC. On August 3, 2017, the rehabilitation procedure was completed.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 7, Eul evidence Nos. 1 through 6, the purport of the whole pleadings

2. Relevant statutes;

Attached Form is as shown in the attached Form.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Defendant: (a) deemed that the instant difference portion constitutes “a claim finalized by an impossible recovery according to a decision to authorize the rehabilitation program under Article 19-2(1)5 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 25194, Feb. 21, 2014; hereinafter the same) and constitutes “a claim confirmed by an impossible recovery according to a decision to authorize the rehabilitation program under Article 19-2(1)5 of the Debtor Rehabilitation and Bankruptcy Act” and thus, was subject to a bad debt tax credit under Article

2) However, according to the proviso of Article 72(2)4-2 and Article 15(4)1 of the former Enforcement Decree of the Corporate Tax Act, when a debt-to-equity swap is conducted pursuant to the rehabilitation plan under the Debtor Rehabilitation Act, the acquisition price of shares arising from the debt-to-equity swap is the book value of the debt-to-equity swap, and thus, the bad debt amount occurs at the time of the debt-to-equity swap. In light of the methods and intent of the debt-to-equity swap under the Debtor Rehabilitation Act and the rehabilitation plan of this case, the original debt-to-equity swap can be deemed to have been fully repaid. Even in light of the legal principles as to the issuance of new stocks under the Commercial Act, it cannot be denied the substance of the share-to-equity swap as the "payment for shares" as to the difference in the instant case.

3) Therefore, the difference in the instant revised disposition is subject to the bad debt tax deduction under the Value-Added Tax Act, namely, the sum of the value-added tax imposed on the Plaintiff for the second time in 2013, and the cost of the class (i.e., the original disposition 189, the cost of the trade class, the cost of the trade class, the cost of the trade class, the cost of the trade class, the cost of the trade class, the cost of the trade class, and the cost of the trade class (including the original disposition 189, the cost of the trade class, the cost of the trade class, 235,280,5

B. Determination

1) The purpose and content of the bad debt tax credit system and interpretation of related provisions

A) In supplying goods or services (hereinafter “goods, etc.”), an entrepreneur under the Value-Added Tax Act imposes value-added tax only on the portion corresponding to added value created at the trading stage by paying the difference between the value-added tax collected at the time of the transaction’s supply of the goods, etc. (Article 31 of the Value-Added Tax Act) and the transactional partner’s collection of value-added tax (Article 31 of the Value-Added Tax Act), and paying the difference between the amount of tax collected at the time of the transaction’s receipt of the goods, etc. (sales tax amount) (see, e.g., “pre-stage tax credit method”). Since Korea adopting the pre-stage tax credit method has the form of transaction tax imposed on the external form of transaction, which is not a substantial income, unlike the income tax and corporate tax, the concept of tax credit is nonexistent, and it is imposed regardless of whether the entrepreneur’s profit or loss is made (see,

B) A person liable to pay value-added tax is not the supplier of goods, etc. (Articles 2 subparag. 3 and 3 subparag. 1 of the Value-Added Tax Act), and a supplier of goods, etc. is obliged to pay value-added tax within the due date for declaration and payment for the taxable period whereto belongs the time of supplying goods, etc., which is not the time of actual payment. As such, where an entrepreneur supplied goods, etc. on credit and fails to receive the payment for reasons of the opposite contractual party’s default or bankruptcy, etc., an entrepreneur suffers economic loss as well as the value-added tax paid by the State. In such a case, Article 45 of the Value-Added Tax Act provides for a system for a bad debt tax credit that is calculated by deducting the amount equivalent to value-added tax not paid by the opposite contractual party, i.e., bad debt tax amount from the output tax amount to be paid later (see, e., Supreme Court Decision 2006Du13855, Apr. 24, 2008).

C) The legislative intent of the system of bad debt tax credit is also known in its history, and the Value-Added Tax Act enacted by Act No. 2934 of Dec. 22, 1976 does not have a provision of bad debt tax credit, which was newly established under Article 17-2 of the Value-Added Tax Act as amended by Act No. 4663 of Dec. 31, 1993, which became entitled to the first bad debt tax credit from the portion first supplied or supplied after January 1, 1994.

Article 63-2 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 14081, Dec. 31, 1993) provides for the grounds for bad debt tax credit for the bankruptcy, compulsory execution, declaration of death, and decision of approval of a company reorganization plan. Article 63-2 of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 15103, Jul. 1, 1996) added the grounds for bad debt tax credit when the extinctive prescription under the Commercial Act expires and six months have elapsed from the date of default on checks or bills. Since the Value-Added Tax Act provides separate grounds for bad debt tax credit for a reasonable period of bad debt tax credit under the Corporate Tax Act and Article 63-2 (1) of the Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 1930, Feb. 9, 2006).

D) However, under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the legal text, barring any special circumstances, and it shall not be extensively interpreted or analogically interpreted without any justifiable reason. In particular, it accords with the principle of fair taxation to strictly interpret the provisions that can be seen as clearly preferential provisions among the requirements for reduction and exemption in accordance with the principle of no taxation without law (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009). In addition, in light of the fact that value-added tax has the nature of transaction tax, construing the reason that the Corporate Tax Act regulating the taxation of corporate income as early bad debt in the case of value-added tax should not be allowed unless there are special circumstances.

2) Whether the difference in the rehabilitation claim of this case is "a claim for which recovery has become definite" and is subject to a bad debt tax credit

A) Article 45(1) of the Value-Added Tax Act provides that "in cases where an entrepreneur is unable to recover bad debt due to the whole or part of credit sales or other sales claims (referring to those included in value-added tax) supplied goods or services subject to value-added tax due to bankruptcy or compulsory execution by a person who has been supplied with such goods or services or due to other reasons prescribed by Presidential Decree, the bad debt tax amount (i.e., bad debt amount x 10/110) may be subtracted from the output tax amount in the taxable period whereto belongs the date when the bad debt becomes final and conclusive," and Article 45(6) of the former Enforcement Decree of the Value-Added Tax Act provides that "the necessary matters concerning the scope of and procedures for the deduction of bad debt tax amount shall be prescribed by Presidential Decree." Article 87(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 26071, Feb. 3, 2015; hereinafter the same) provides that "in cases where an entrepreneur becomes unable to recover all or part of bad debt tax amount under Article 19-2(15).3).

B) In light of the aforementioned purport and content of the system of bad debt tax deduction and related provisions, in light of the following circumstances, it is difficult to view the difference part of the rehabilitation claim of this case as a "claim confirmed to be impossible to be recovered due to the decision to grant authorization for the rehabilitation plan or the court’s decision to grant immunity that Article 19-2(1)5 of the former Enforcement Decree of the Corporate Tax Act provides that the difference part among the rehabilitation claim of this case constitutes bad debt provided for in Article 19-2(1)5 of the former Enforcement Decree of the Corporate Tax Act, and thus, it is unlawful to rectify the instant increased portion of the rehabilitation claim of this case under the premise that it constitutes bad debt tax amount of rehabilitation creditors pursuant to Article 87(1) of the former Enforcement Decree of the Corporate Tax Act.

(1) In order to fully or partially repay obligations, a debt-equity swap is a type of adjustment of claims and obligations that the debtor issues equity securities to the creditor, thereby adjusting obligations through a change in the capital structure converted into equity capital. As can be seen, in cases where the debtor and the creditor agree on the value of existing claims to be extinguished due to a debt-equity swap, if there exists any agreement or agreement on the value of existing claims to be extinguished due to a debt-equity swap, and if there is no agreement thereon, it is reasonable to deem that the existing claims equivalent to the appraised value of new shares as of the effective date of issuance of new shares have been repaid (see Supreme Court Decision 2008Da18376, Jul. 24, 2008). However, in the case of a rehabilitation plan, the rehabilitation creditor consent of at least 2/3, 3/4 or 4/5 of the rehabilitation secured creditor-backed consent (Article 237 of the Debtor Rehabilitation Act) have been obtained from the court and the interested parties are in accordance with the rehabilitation plan so far as an agreement exists between the parties as the rehabilitation plan exists.

The proviso of Article 72(2)4-2 of the former Enforcement Decree of the Corporate Tax Act and Article 15(4)1 of the former Enforcement Decree of the Corporate Tax Act refer to “stocks acquired through debt-to-equity swap with respect to the acquisition value of assets.” However, in cases where a corporation whose rehabilitation plan including the content of conversion of debts into investments under the Debtor Rehabilitation Act conducts a debt-to-equity swap, the book value of the debt-to-equity swap should be the acquisition value of the stocks at the time of the debt-to-equity swap, and should be considered not to impose the profits from the debt-to-equity swap at the time of the debt-to-equity swap. The above provision is difficult to regard only as a provision excluding the profits from debt-to-equity swap, and it is also applicable in principle to determine whether the debt-to-equity swap constitutes a ground for a bad debt tax credit under the Value-Added Tax Act.

In the instant case, since the instant rehabilitation plan (No. 5) provides that "79.5% of the principal and interest prior to the commencement of rehabilitation claims shall be converted into equity, and 20.5% shall be repaid in cash." The debt to be converted into equity shall be substituted for the repayment of the relevant rehabilitation claims on the date when the shares newly issued by the Plaintiff take effect," the remainder of the rehabilitation claims, excluding the portion that the Plaintiff would have paid in cash, shall be extinguished in lieu of the repayment through a debt-equity swap, and it is reasonable to view the acquisition value of the shares so acquired as the book value of the bonds converted into equity pursuant to Article 72 (2) 4-2 of the Enforcement Decree of the Corporate Tax Act. Therefore, the instant difference, which is a part of the rehabilitation claims converted into equity, cannot be deemed as falling under "a claim confirmed as impossible to be recovered pursuant to the decision to authorize the rehabilitation plan or the court'

② As seen earlier, in principle, the scope of repayment of existing bonds in a debt-to-equity swap shall be calculated based on the value of new stocks as of the effective date of the debt-to-equity swap, barring any special circumstances, if there is an agreement between the creditor and the debtor on the value of existing bonds to be extinguished by a debt-to-equity swap. Therefore, a debt-to-equity swap for the reduction of capital after the effective date of the debt-to-equity swap is merely a capital transaction between the rehabilitation creditors who already become the shareholders through a debt-to-equity swap and the rehabilitation company, and thus, cannot be deemed to have any impact on the assessment of the acquisition value of the pre-to-equity swap (see Supreme Court Decision 2009Da47739, Nov. 12, 2009 referred to by the defendant). In principle, in cases where the principal obligation, which is a rehabilitation claim, was extinguished by a debt-to-equity swap under Article 250(2)1 of the Debtor Rehabilitation Act, and thus, it is difficult to view the scope of repayment directly determined by a rehabilitation claim.

③ If rehabilitation creditors are entitled to a bad debt tax deduction, and accordingly, it is deemed that the Defendant may impose value-added tax on the Plaintiff for the taxable period that belongs to the rehabilitation plan after the rehabilitation procedure commenced by excluding the amount of the relevant tax from the input tax amount. Unlike other rehabilitation creditors who do not have the liability to pay value-added tax, rehabilitation creditors, unlike other rehabilitation creditors, who have received a bad debt tax credit, are entitled to a refund of the amount of value-added tax through a bad debt tax credit additionally after the rehabilitation claim is converted into equity and repaid at the same ratio with other rehabilitation creditors according to the rehabilitation plan, and as a result, the Defendant has the priority claim (Article 179 (1) 9 (b) of the Debtor Rehabilitation Act), and the rehabilitation company bears the duty to pay the relevant tax amount. This would not only cause difficulties in promoting efficient rehabilitation of the rehabilitation company which is the subject of the Debtor Rehabilitation Act, but also cause unreasonable discrimination that is expected among rehabilitation creditors. Considering such circumstances, it is difficult to view that the scope of the tax credit should be extended as an exception to the principle of taxation of bad debt tax reduction.

④ According to Articles 421(1) and 423(1) and (2) of the Commercial Act, in the case of issuance of new shares, the underwriter of new shares is obligated to pay the subscription price in full with respect to his/her shares subscribed on the date of payment. If the underwriter of new shares fails to pay or make an investment in kind on the date of payment, his/her rights are lost, and the effect of issuance of new shares is limited to the shares that have been made on the date of payment on the date of payment. In light of the legal relationship of issuance of new shares, in the case of issuance of shares through a debt-to-equity swap, the whole debt to be converted into a debt-to-equity swap is deemed to have been paid with the subscription price for the shares to be issued, but the effect of issuance of new shares takes effect with respect to the whole shares to be issued. As such, inasmuch as only the portion exceeding the market price of the shares issued on the ground of economic effect revealed as a result, it cannot be denied as the payment for shares (see Supreme Court

⑤ 피고는, 대법원 2018. 6. 28. 선고 2017두68295 판결 및 대법원 2018. 7. 11. 선고 2016두65565 판결 등의 법리가 이 사건에도 적용되어야 하므로, 이 사건 회생채권 중 이 사건 차액 부분은 구 법인세법 시행령 제19조의2 제1항 제5호에서 대손금으로 정한 '회생계획인가의 결정에 따라 회수불능으로 확정된 채권'에 해당하고, 그에 상응하는 금액을 원고의 2013년 제2기 부가가치세 매입세액에서 제외해서 한 이 사건 증액경정처분은 적법하다고 주장한다. 그러나 위 대법원 판례들은 이 사건과 달리 회생계획에서 출자전환과 함께 출자전환주식을 전부 무상으로 소각하기로 정한 예외적인 경우로서, 그와 같은 경우에는 종전 채권자가 주주로서의 권리를 행사할 여지가 없고, 출자전환된 주식 전부가 아무런 대가 없이 그대로 소각될 것이 확실하게 된다. 그에 반하여 이 사건과 같이 출자전환 후 출자전환된 주식을 일정한 비율로 주식병합하여 잔존 주식이 있는 경우에는 회생채권자가 주주의 지위를 유지하게 되어 장래에 주식 가치가 상승할 경우 그 이익을 얻을 수 있게 되고, 출자전환된 주식과 주식병합 후 남은 주식 사이에 실질적 가치에는 아무런 변동이 없어 출자전환된 주식이 무상으로 전부 소각되는 것과 동일하게 볼 수 없으므로, 이 사건 회생채권 중 이 사건 차액 부분이 회생계획인가의 결정에 따른 출자전환으로 인하여 회수불능으로 확정되었다고 보기는 어렵다(갑 제8호증의 기재에 의하면, 원고는 2017. 6. 30. 인가된 변경회생계획에서 "종전 회생계획에 따라 현금변제해야 할 회생채권 중 변제하지 못한 미변제금액의 원금 및 개시전이자는 7.XXXXXXX%를 현금변제하고, 나머지는 전액 출자전환하며, 종전에 발생된 원고의 보통주 3,XXX,XXX주 및 위와 같은 회생채권의 출자전환에 따라 발행되는 신주는 출자전환주식의 효력발생일 다음 날에 전부 무상소각한다."고 정하여, 결국 이 사건 회생계획에 따라 주식병합 후 남은 주식도 전부 무상소각되었으나, 이는 이 사건 회생계획과는 별개의 2017. 6. 30.자 회생계획으로 인한 것이므로, 이를 이 사건 증액경정처분의 근거로 삼을 수는 없다).

(6) A rehabilitation plan may be approved only when rehabilitation creditors pass a resolution, and since rehabilitation creditors may freely pass a resolution on whether to substitute for repayment or only a part of the remaining rehabilitation claims after converting the whole amount of the rehabilitation claims, other than the portion of the rehabilitation claims repaid in cash on the premise that the rehabilitation claims are modified according to the rehabilitation plan, and as such, it is difficult to deem that it is unreasonable to recognize a change of the rehabilitation claim according to the rehabilitation plan. Even though a certain ratio of the rehabilitation claims are determined in the rehabilitation plan to be substituted for repayment by converting the total amount of the rehabilitation claims into equity, if it is deemed that only the amount equivalent to the market price of the shares actually denied and the remaining amount of the claims are deemed as final and conclusive due to impossible recovery, the rehabilitation company bears the unforeseeable obligations, and some rehabilitation creditors are deemed to have accrued profits that were not anticipated in the rehabilitation plan, and thus, it goes against the purpose of the rehabilitation

4) Sub-committee

Therefore, under the premise that the instant difference in the instant disposition is subject to bad debt tax deduction under the Value-Added Tax Act, the Plaintiff’s input tax deduction for the said portion is denied, and the portion exceeding KRW 424 in total, 2013 imposed on the Plaintiff, and the portion exceeding KRW 36,616,630 due to bad debt tax deduction due to the non-negotiable bills among the capital gains and capital gains, should be revoked.

3. Conclusion

If so, the plaintiff's claim of this case is reasonable (the second value-added tax No. 201, Feb. 1, 2016; the second-class tax of Feb. 1, 2016; the party at issue; the party at issue; the party at issue; the party at issue; the party at issue; the party at issue; and the party at issue; the party at issue was withdrawn from the exchange of the claim at this court