[1] The meaning and standard of determining "person who receives service" subject to the issuance of tax invoices under Article 16 (1) 2 of the former Value-Added Tax Act where two or more business places exist in the same business operator

[2] The case holding that, in case where an entrepreneur having several places of business receives a service for one place of business and concludes a supply contract under the name of another general place of business and pays the price, and then receives a tax invoice, the person who received the service is a general place of business, and thus the person who received the service does not constitute a tax

[3] The method of calculating the amount of common input tax in which the actual attribution cannot be separated where an entrepreneur concurrently runs several taxable businesses and tax-free businesses

[1] Article 5 (1) of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006) provides that a person who starts a business shall register his/her business at each place of business to make a substantial tax payment unit. As such, where there are two or more places of business in the same business, the term “person who is provided with services” under Article 16 (1) 2 of the same Act refers to the place of business in which services are provided due to contractual or legal grounds. Therefore, in determining which place of business is provided with services due to contractual grounds, all the circumstances such as entering into a contract that causes the provision of services and the payment of the price was made at any place of business, whether the provision of services was made at any place of business, and how the details of the conclusion of the

[2] The case holding that where an entrepreneur with several places of business receives services related to a single place of business and concludes a supply contract under the name of another general place of business and pays the price, and then receives a tax invoice, the person to whom the services are supplied shall be a general manager, and thus, the person to whom the services are supplied shall not be

[3] Where an entrepreneur concurrently operates several taxable businesses and tax-free business, the input tax amount related to the tax-free business shall, in principle, be calculated by classifying the actual attribution, and the common input tax amount, which cannot be separated from the actual attribution, shall be calculated by calculating according to the ratio of the tax-free supply value to the total supply value of the taxable business and the tax-free business part related to the common input tax in calculating the calculated tax amount.

[1] Articles 5(1) and 16(1)2 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006) / [2] Articles 5(1) and 16(1)2 of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006) / [3] Article 17(1), (2)4 and (6) of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006), Article 61(1), (3)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 21304 of Feb. 4, 2009)

[1] Supreme Court Decision 2005Du1497 Decided December 22, 2006 / [3] Supreme Court Decision 82Nu170 Decided September 28, 1982 (Gong1982, 1026) Supreme Court Decision 86Nu753 Decided April 14, 1987 (Gong1987Sang, 831) Supreme Court Decision 99Du11615 Decided July 13, 2001 (Gong201Ha, 180)

Plaintiff (Attorney Lee Im-soo et al., Counsel for the plaintiff-appellant)

Head of Seocho Tax Office (Law Firm Doll, Attorneys O Jae-joon et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2006Nu8954 decided January 17, 2007

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

The grounds of appeal are examined.

1. As to the second ground for appeal

Article 5(1) of the former Value-Added Tax Act (amended by Act No. 8142 of Dec. 30, 2006; hereinafter “the Act”) provides that “a person who newly commences business shall register with the head of the competent district tax office at each place of business,” and Article 16(1) provides that “Where an entrepreneur registered as a taxpayer supplies goods or services, he/she shall issue a tax invoice stating the registration number (title 2) of the person who receives the provision of the goods or services, and Article 17(2)1-2 of the former Value-Added Tax Act provides that “Where all or part of the matters to be entered under Article 16(1)2, etc. are entered differently from the fact, the input tax amount shall not be deducted from the output tax amount.”

Article 5 (1) of the Act provides that a person who starts a business shall register his/her business as a unit of tax payment, so if there are two or more business places of the same business operator, "person who is provided with services" under Article 16 (1) 2 of the Act means the place of business that is provided with services, etc. due to contractual or legal grounds. In determining whether a business place is provided with services due to contractual grounds, it shall take into account all the circumstances such as the conclusion of a contract that serves as a ground for the provision of services, payment of the price, etc., for any place of business, for any place of business, for which the provision of services is for any place of business, and for which relationship between the details of the contract and each place of business (see Supreme Court Decision 2005Du1497, Dec. 22,

According to the reasoning of the lower judgment and the record, the Plaintiff’s Seoul Office (hereinafter “Seoul Office”) concluded a contract to manage the Plaintiff’s entire businesses including the instant workplace and received the instant tax invoice that entered into as the person who is supplied with the Seoul Office after payment of the price. In light of the legal principles as seen earlier, the person who is provided with the instant tax invoice is the Seoul Office, and thus, the person who is provided with the instant tax invoice does not constitute a tax invoice written differently from the fact.

The reasoning of the judgment below is somewhat inappropriate, but it is just in its conclusion that the tax invoice of this case is not a tax invoice written differently from the fact, and there is no error in the misapprehension of legal principles as otherwise alleged in the ground of

2. Regarding ground of appeal No. 1

Article 17(1) and (2)4 and (6) of the Act, Article 61(1) and Article 61(3)1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 21304, Feb. 4, 2009) provide that “in cases where an entrepreneur concurrently operates a taxable business and a tax-free business, the input tax amount related to the tax-free business not deducted from the output tax amount shall be calculated based on the actual attribution; Provided, That in cases of a common input tax amount that is commonly used for a taxable business or a tax-free business and thus is not distinguishable from the actual attribution, in principle, the common input tax amount related to the tax-free business shall be calculated by dividing the common input tax amount according to the ratio of the value of the tax-free supply to the total value of supply, and where the ratio

In full view of the language and legislative intent of the above provisions, in cases where an entrepreneur concurrently operates several taxable businesses and tax-free businesses, the input tax amount related to the tax-free business shall be calculated by dividing the actual reversion in principle, and the common input tax amount, which cannot be divided into actual attribution, shall be calculated by calculating according to the ratio of the value of the tax-free supply to the total value of the taxable business related to the common input tax and the tax-free business for the pertinent taxable period (see Supreme Court Decision 82Nu170 delivered on September 28, 1982).

After compiling the adopted evidence, the lower court acknowledged the facts as indicated in its holding, and determined that the common input tax amount of the instant case should be fully deducted on the ground that the pertinent management services aim to maintain and operate the logistics warehouse of the instant business establishment, and it is clear that the common input tax amount arising therefrom belongs only to the instant business establishment. However, on the ground that only the actual reversion between taxable businesses and the tax-free business within the instant business establishment is not divided, the input tax amount related to the instant common input tax amount related to the instant tax-free business should be calculated according to the ratio of the tax-free supply price to the total supply price of the instant business establishment only.

In light of the above legal principles and relevant statutes and records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to deduction of common input tax amount as otherwise alleged in the ground of appeal

3. Conclusion

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 Shin Young-chul (Presiding Justice)