Cho High-2017-Seoul Government-5140 (O. 27 March 2018)

Where the customer pays the goods with the mileage accumulated in whole or in part, the amount equivalent to the mileage shall be included in the tax base.

The Plaintiff provided aviation services to the customer, and the customer received the payment for the air services with the customer’s funds and the mileage of this case, and the portion of mileage of this case was already paid to the Plaintiff by the partner, and thus, it cannot be viewed as a discount.

Article 29 of the Value-Added Tax Act

2017 Gohap81977 Revocation of Value-Added Tax Imposition Disposition, etc.

A****** Company

AA Head of the Tax Office

July 6, 2018

September 7, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Each disposition made by the defendant against the plaintiff (attached Form 1) and attached Form 2 shall be revoked.

1. Details of the disposition;

A. The Plaintiff entered into a business partnership with credit card companies, banks, etc. (hereinafter referred to as "affiliated companies"), and reported and paid the amount of use equivalent to the affiliated mileage (hereinafter referred to as "amount of use of the affiliated mileage in this case") to the tax base of value-added tax, including the amount of use equivalent to the amount of the affiliated mileage in this case, when the Plaintiff uses the mileage (hereinafter referred to as "second transaction") for the purchase of airline tickets provided by the Plaintiff, the use of the route, and the use of the route, etc. (hereinafter referred to as "affiliated mileage").

B. After Supreme Court en banc Decision 2015Du58959 Decided August 26, 2016, the Plaintiff asserted that the portion of the use of the connection mileage in the instant case constitutes a discount amount not included in the value-added tax base, and filed a request for correction to the effect that the refund of value-added tax equivalent to the same amount reported and paid during the second period from 201 to 2016 to 2016, and the first period from 2016 to 2017 (Provided, That the same shall not apply to the case, other than the transaction from March 30, 2017, which was entered into force on April 1, 2017, which was revised by Presidential Decree No. 27838, Feb. 7, 2017, which was received from the person who received the payment of goods or services from the person who received the payment of goods or services other than the payment of value-added tax (hereinafter referred to as “third party mileage”).

C. The Defendant: (a) deemed that the transaction structure of the instant case was similar to the foregoing en banc Decision; (b) determined the refund of value-added tax for the first period from 2011 to 2016; (c) the Plaintiff’s association mileage system differs from the first transaction and the second transaction supplier; and (d) the Plaintiff was compensated by money as much as the amount of the use of the association mileage in the instant case used by the customer; and (c) on July 5, 2017, on the ground that the transaction structure differs from the above en banc Decision, the Plaintiff was already subject to the exclusion period of imposition of value-added tax for the second period of 201, where the period of imposition was already set for the Plaintiff, excluding the value-added tax for the second period of 2011, where the period of imposition has already been set for the Plaintiff, as indicated in the list of [Attachment 1], and issued a correction notice for the total amount of value-added tax for the first period of 1, 759, 980 won (including additional tax, 2000.3).

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on September 28, 2017, but was dismissed on March 27, 2018.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 2-5, Eul evidence Nos. 3 (including more than one number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The issues of the instant case

Whether the amount of use of the mileage in this case constitutes a discount amount not included in the value of supply.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The main contents of the Plaintiff’s “A**a club membership guide” are as follows.

○ Members may accumulate mileages using credit cards, hotels, sirens, etc. that are associated with the Plaintiff and members, and accumulated mileages may be used for boarding, riding, use of excess cargo, etc., and shall be provided free of charge without paying additional economic costs.

Since the use standards are likely to be adjusted, the value measurement is impossible before use, and the value is determined only at the time of use of mileage through the issuance of mileage airline tickets.

The term of validity of mileage shall be determined according to the membership at the time of accumulation of aviation boarding or mileage, and the mileage not used within the term of validity shall be extinguished.The term of validity shall be the last day of the same month after 10 years in the case of each EE/actual/E/E/Ed members from "the date of boarding on board" or "the date of accumulation", and it shall be the last day of the same month in the case of outstanding members at least Damond. The term of aviation mileage shall be based on "the date of boarding on board" and the general mileage shall be based on "the date of accumulation". The term of validity of mileage accumulated from October 1, 208 shall be applied.

○ The effective period shall be deducted first from the mileage applied, and the remaining effective period shall be deducted in order from the short mileage when the mileage is applied.

○ The criteria for the deduction for the right to the development of the airline tickets are 10,000-day domestic line return, 30,000-day return from Japan and Northern Asia, 40,000-day return from south Asia, and 40,000-day return, etc. The criteria for the deduction for the use of the airline tickets are 4,500-day per head of Incheon Airport Airport Slives, and the criteria for the deduction for the excess cargo are 9,000-day distance between Korea and flight hours from 1 to 30-minute.

○○**A*A club reserve partner has hotels, sirens, finance (credit card, money exchange and remittance, card company’s point shift), Internet shopping mall, telecommunications company, duty-free shop, etc. ****** in the event of accumulation of mileage by credit card companies by credit card companies, the time of accumulation, ratio, terms and conditions for each credit card companies, less than 1,00 won for each credit card company (in the case of the B cardCC card, 1,500 won for each 1,000 won for each service, 1,000 won for each 1,000 won for each 2th choice), 1,000 won for each 1,000 won for each 2th choice, ** in the case of the members of a club association * * in the case of the members card members) after settling the amount of ordinary claims.

2) The main contents of the business partnership agreement entered into between the Plaintiff and cooperative BB bank (the operation of BB card, which is a cooperative credit card; hereinafter referred to as BB bank) and the Plaintiff are as follows.

"Basic Agreement on Business Partnership" (hereinafter referred to as "Basic Agreement") and "Article 2 (Definition of Terms)"

"1."Mad Card" means a credit card issued by BB bank, indicating the Plaintiff's trade name, route, and h**AE number on the credit card issued by BB bank, and the Plaintiff and BB bank's service together. "2. member" means a credit card that is provided by BB bank with the Plaintiff and BB bank's service. "A*** and A***** at the time of issuance of the membership card, or a person who was a member of a club or a person who was a member of a club******** a club at the time of issuance of the membership card". "3.Mad" means a club set operated by the Plaintiff ****," Article 8 (Accumulation and Use ofMadage).

1. BB Bank shall set aside the ○ma on the part of its member *** club accounts for the amount of money used on a new market (credit sales) that member has deposited normally on the settlement date of the relevant month by requesting the Plaintiff to the Plaintiff.

2.The mileage accumulated for members pursuant to paragraph 1 above shall take effect as from the time of accumulation ***A club mileage, the accumulated mileage shall take effect, and the accumulated mileage shall not be cancelled.

3. The mileage accumulated for its members shall be governed by the plaintiff**A*A club operation regulations. (h)*A club regulations shall include all kinds of regulations, including criteria for the use of mileage, criteria for the membership rating, changes in the mileage system.

Article 9 (Limit on Accumulation of Madage)

The limit on the accumulation of mileage for individual members is not separately set, and the limit on the accumulation of enterprise card members in the name of executive officers and employees shall be 05 days.

Article 16 (Term of Contract and Extension thereof)

2. If the contract is terminated, the Plaintiff and BB bank, notwithstanding the term of validity of the affiliation card issued to its members, shall suspend the service of mileage provision for a period of six months from the date of termination of the contract, taking into account the period of notification to its members. In addition, the termination of the contract shall not affect the validity of mileage already provided prior to the date of termination.

The attached contract for business partnership (hereinafter referred to as the "attached contract")

Article 2 (Accumulation of Madage)

1. The criteria for the accumulation of mileage shall be 00 won per 1,000 won for the amount of new boards used which a member has deposited normally on the settlement date of the relevant month by using a membership card, such as Article 8(1) of the basic contract;

2. Notwithstanding Article 8 of the Framework Agreement and Article 2(1) of this Agreement, for FF cards of the affiliation card, the criteria for accumulation of mileage shall be 00 days of the record of the use of new cards which a member has deposited normally on the settlement date of the relevant month.

Article 3 (Methods of Accumulation of Madages)

1.B Bank shall notify the Plaintiff of the results of its member's affiliation cards through the leased circuits every month.

2. The plaintiff shall set aside a member card within seven business days from the date on which he/she received the notice of the results of the use of the member card from the BB bank, and shall notify the BB bank of the records of the accumulation of mileage.

3. The Plaintiff and BB Bank shall decide upon the format of the information in question through mutual consultation.

Article 4 (Bearing of Marketing Costs following Accumulation of Madage)

1. Pursuant to Article 2(1), BB bank will pay to the Plaintiff the marketing cost following the Plaintiff’s accumulation of mileage to its members and share the marketing cost on a per-math day.

2. Pursuant to Article 2(2), BB bank will pay to the Plaintiff KRW 0 perma day for marketing costs following the Plaintiff’s accumulation of mileage to FF card members.

4. The Plaintiff shall issue a stamp to BB bank to claim the allocation of the mileage marketing cost incurred during the first month of the preceding month by the fifth day of the following month, and BB bank shall deposit the mileage cost into the account designated by the Plaintiff by the last day of the claim: Provided, That if the relevant day is a legal holiday, it shall be the previous business day.

5. If the payment of the requested amount is delayed, BB Bank shall pay an amount equivalent to 1/000 of the claimed amount per day of the payment delay as compensation for delay.

Article 6 (A*** club Information Exchange Method)

BB bank shall exchange the details of its member cards to the Plaintiff, and the amount of mileage that the Plaintiff provided to the members to the BB bank as an exclusive line.

[Grounds for recognition] Evidence Nos. 1, 1, 2, and 1, 2, and the purport of the whole pleadings

D. Determination

1) The former Value-Added Tax Act (wholly amended by Act No. 15223, Dec. 19, 2017; hereinafter the same shall apply) and the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply) (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013; Inasmuch as the overall amendment is identical to the content, the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Act No. 1523, Dec. 19, 2017); and Article 29(1) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 27838, Feb. 7, 2017); Article 29(3) provides for the tax base of the supply of goods or services provided.

On the other hand, Article 29(5) of the former Value-Added Tax Act provides that "the amount not included in the supply value" is one of the "amount to be reduced directly from the ordinary price in accordance with the quality, quantity, conditions of delivery, payment method of the consideration for the supply of goods or services, or other supply terms and conditions," and Article 29(5) of the former Value-Added Tax Act provides that "the amount to be reduced directly from the ordinary price, i.e., the amount to be reduced directly," and Article 29(6) provides that "the bounty or other similar amount to be paid by the business operator to the person who receives the

In light of the contents and purport of the relevant laws and regulations, where a supplier receives money or a service from a third party, other than the person who receives the goods or service, in relation to a certain supply, and the supply has a quid pro quo relationship, it may be included in the tax base for value-added tax if it is included in the supply. However, if it is only related to a different supply between a third party and a supplier that is separate from the supply and it cannot be seen as having a quid pro quo relationship, it is correct

Furthermore, whether money or monetary value paid by a third party is in a quid pro quo relationship with the relevant supply ought to be determined by comprehensively taking into account various circumstances, including the pretext and grounds for the payment, the purpose and motive pursued by a supplier and a third party in connection therewith, the existence of legal relations, such as a separate contractual relationship between a supplier and a third party, and whether the payment of money, etc. at issue can be evaluated as performance according to such legal relationship.

2) Comprehensively taking account of the following circumstances acknowledged in light of the aforementioned legal principles and the purport of the entire pleadings, the mileage used in the second transaction constitutes “money worth a value of money in the second transaction”. Thus, the amount used in the second transaction is included in the price received by the Plaintiff as the price received by the Plaintiff, and cannot be deemed as “amount of discount”.

A) The association mileage system has been concluded with the Plaintiff to carry out an agreement between the association member and the customer that the association member will accumulate the association mileage according to the transaction performance (the explicit or implied agreement between the association member and the customer that the association member will accumulate the association mileage according to the transaction performance of credit card) and then notify the Plaintiff of the customer's transaction performance to the Plaintiff, and let the Plaintiff accumulate the association mileage corresponding to the transaction performance (Article 8(1) of the Basic Agreement, Article 3(1) and (2) of the subsidiary agreement, regardless of whether the association member uses the association mileage, the amount equivalent to the amount of the association mileage accumulated in advance shall be paid to the Plaintiff regardless of whether it is used by the customer (Article 4 of the subsidiary agreement), and the Plaintiff shall be deducted by receiving all or part of the price of goods or services provided to the customer as the association.

B) Examining the substance and form of the aforementioned transaction, even if the payment process in the instant case is bypass, it constitutes a payment made by an affiliate to the Plaintiff on behalf of the Plaintiff for the goods or services provided by the Plaintiff on behalf of the customer at its own expense.

Supreme Court Decision 2014Du144 Decided June 23, 2016, Supreme Court Decision 2014Du298, 304 (combined), and 311 (Consolidated) Decided June 23, 2016 presented by the Plaintiff. In the event that an open market enterprise or home shopping enterprise is discounted by customers using discount coupons, etc. issued by it and deducts the amount equivalent to the discounted amount from the service fees or sales fees that the supplier receives from the supplier, the mutual-aid money is related only to the transaction of a separate service or consignment between the open market enterprise or home shopping enterprise and the supplier, and it is difficult to view that there is a quid pro quo relationship between the supply of goods to the customer of the open market enterprise or home shopping enterprise. Thus, it is difficult to view that a business partnership agreement between the Plaintiff and an open market enterprise and the Plaintiff has the quid pro quo for the supply of goods or services to the customer, and thus, it does not constitute a separate case of supply of goods or services.

C) According to Article 29(3) of the former Value-Added Tax Act, “any goods or services received from a person who receives goods or services, regardless of their title, are included in the value of supply.” Since the Plaintiff receives, in cash, an amount equivalent to the alliance mileage accumulated by a customer from a partner, it constitutes “money value.” Thus, if the Plaintiff receives all or part of the price of the goods or services provided to a customer, from the Plaintiff’s standpoint, it constitutes “where the Plaintiff receives the payment in money.” Nevertheless, it is difficult to accept the Plaintiff’s exemption from the value of supply by deeming that the Plaintiff did not directly receive money equivalent to the amount of the alliance mileage used from the customer, on the ground that it is difficult to accept in light of the substance over form principle.

Meanwhile, in Supreme Court en banc Decision 2015Du5899 Decided August 26, 2016, where the points accumulated by other suppliers to customers are used in the second transaction, the settlement amount received by the second supplier from such other suppliers is merely compensation for losses arising from the settlement agreement, not the proceeds from the second transaction. In addition, if the supplier bears its own burden, and is compensated only to the extent exceeding it, and the supplier continues to use the points and mutually settle accounts between the association companies, it is ultimately liable for the amount of self-deposit points used by the supplier from a long-term perspective, and thus, the points do not constitute “money with monetary value” from the supplier’s standpoint, and it is merely “the point indicated in numericalizing the terms of the discount agreement as promised to the customer at the time of the first transaction,” and it cannot be deemed that the same constitutes “the case where the second supplier receives money from the second supplier upon receiving all or part of the prices of goods or services provided to the customer” under Article 28(1) of the former Value-Added Tax Act, which is different from the supply value of goods in the second case.

3. Conclusion

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

(c)