Whether a tax claim for which a tax liability has been established after the date of adjudication of bankruptcy has been declared null and void.

Tax claims for which tax liability has been established after being declared bankrupt do not fall under bankruptcy claims or estate claims, and are not included in the scope of the authority to manage and dispose of assets by the trustee in bankruptcy, and thus the defects are so serious and clear that

Article 21 of the Framework Act on National Taxes comes into existence

Bad debt tax deduction under Article 17-2 of the Value-Added Tax Act

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

All of the records of this case and the judgment of the court below and the grounds of appeal were examined, but the grounds of appeal by the appellant are not included in the grounds provided by each subparagraph of Article 4(1) of the Special Act on the Procedure for Appeal. Thus, the appeal is dismissed in accordance with Article 5 of the same Act, and it is so decided as per Disposition by the assent

Daejeon High Court 2007Nu1086 ( November 29, 2007)

1. The defendant's appeal is dismissed.

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

1. Purport of claim

On October 13, 2005, the Defendant confirmed that each disposition imposing value-added tax on the Plaintiff listed in the separate sheet is null and void.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

The reasoning for the court’s explanation concerning this case is the same as the entry in the column of the judgment of the court of first instance, and thus, it is invoked in accordance with Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act (see Supreme Court Decision 2007Du7697, Jun. 15, 2007).

Therefore, the judgment of the first instance court is just, and the defendant's appeal against it is dismissed as it is without merit. It is so decided as per Disposition.

[Cheongju District Court 2006Guhap1093, May 16, 2007]

1. On October 13, 2005, the Defendant confirmed that each disposition imposing value-added tax on the Plaintiff on the attached list is null and void.

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

The same shall apply to the order.

1. On October 13, 2005, the Defendant confirmed that each disposition imposing value-added tax on the Plaintiff on the attached list is null and void.

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

1. Details of the imposition;

A. On March 22, 2005, the ○○○○ Incorporated Company (hereinafter referred to as the “Bankruptcy Company”) was declared bankrupt by the ○○ Local Way Board, and was appointed as the trustee in bankruptcy on the same day.

No.

Suppliers

Period of Transaction

Sales Bonds

1

(State) △△△△

January 31, 2004 and May 31, 2004

609,870.341 won

2

∇∇∇∇(주)

March 31, 2004

2,100,000,000

3

(주)▲▲▲▲

April 25, 2004

7,734,730 won

4

(State) Dogsan

April 30, 2004

2,805,000 won

5

(주)⊙⊙⊙⊙

May 31, 2004

7,260,000 won

6

(주)▣▣▣▣

May 31, 2004

9,007.900

B. The bankruptcy company received goods from six companies, including △△△△△, before being declared bankrupt, and paid bills for the change of the goods, but failed to pay the bills due to the bankruptcy or bankruptcy, the details are as follows.

C. Meanwhile, the above six companies including ○○○○, etc. filed an application for deduction of bad debt tax from the bankrupt company on the grounds that the bills received from the bankrupt company have been in the lapse of six months after the default or bad debt has been settled due to bankruptcy, and the head of the competent tax office notified each of the above bad debt tax data to the ○○ Tax Office which is the tax office having jurisdiction over the bankruptcy company around August 2005. The details are as follows.

No.

Suppliers

Bad Debt Grounds

Bad Debt Confirmation Date

The head of tax office

Bad Debt Tax Amount

1

(State) △△△△

Six months after dishonor;

January 31, 2005

○ Head of tax office

5,442,750

2

∇∇∇∇(주)

Six months after dishonor;

March 16, 2005

∇∇세무서장

190,909,090

3

(주)▲▲▲▲

Bankruptcy

may 22, 2005

▲▲세무서장

7,066,790

4

(State) Dogsan

Six months after dishonor;

February 6, 2005

Head of △ District Office

255,000

5

(주)⊙⊙⊙⊙

Six months after dishonor;

may 3, 2005

⊙⊙세무서장

660,000

6

(주)▣▣▣▣

Six months after dishonor;

may 3, 2005

▣▣세무서장

818,900

D. In this regard, on October 13, 2005, the head of ○○ Tax Office issued a notice of tax payment (hereinafter referred to as “each of the instant dispositions”) to the Plaintiff on October 13, 2005 under the proviso of Article 17-2(3) of the Value-Added Tax Act (hereinafter referred to as “each of the instant dispositions”), which added 254,333,630 won to the value-added tax for the first period of January 2005, as shown in the attached list, to the Plaintiff (hereinafter referred to as “each of the instant dispositions”).

E. On December 1, 2005, the Plaintiff filed a request with the National Tax Tribunal for a trial on December 1, 2005, alleging that each of the instant taxation claims should be revoked, since it is not harsh than a bankruptcy claim or estate claim, and was dismissed on March 6, 2006.

[Ground for Recognition: Facts without dispute, entry of Gap's 1 through 3 (including each number), entry of Gap's 5 to 8 (including each number), entry of Eul's 1-1 to 4-4, each entry of Eul's 3-5 (including each number), entry of Eul's 3-5 (including each number), the purport of Eul's 7, and the whole pleadings]

2. Whether each of the dispositions of this case is legitimate

A. The parties' assertion

(1) The plaintiff's assertion

Each taxation claim of this case is established after the bankruptcy company is declared bankrupt, and it does not constitute an estate claim under Article 38 subparagraph 2 of the former Bankruptcy Act (repealed by Act No. 7428 of March 31, 2005; hereinafter the same shall apply) or a bankruptcy claim under Article 14 of the Act, and thus, it is deemed that there is no tax liability for the plaintiff as a strike, and thus each disposition of this case issued by the defendant against the plaintiff is null and void due to significant and apparent defects.

(2) The defendant's assertion

First, the Plaintiff filed an appeal with the National Tax Tribunal regarding each of the dispositions of this case, and the decision of the National Tax Tribunal that dismissed the Plaintiff’s claim was served on March 10, 2006, and the lawsuit of this case was filed on July 11, 2006, which had been more than 90 days earlier, and thus, the lawsuit of this case is unlawful for the filing period. Next, each of the dispositions of this case is lawful as it was imposed in accordance with Article 17-2(3) of the Value-Added Tax Act. Further, each of the respective taxation claims of this case is lawful as it was imposed in accordance with Article 17-2(3) of the Value-Added Tax Act. Each of the taxation claims of this case was issued by each of the above suppliers before the bankruptcy company is declared bankrupt, and was imposed on them before the bankruptcy was declared.

(b) Related statutes;

former Bankruptcy Act (amended by Act No. 7428 of March 31, 2005)

6Legal Foundation

Any property owned by the bankrupt at the time that the bankrupt is declared bankrupt shall be considered as the bankrupt estate.

Article 7. Management and Disposal

The right to manage and dispose of the bankrupt estate shall belong to the bankruptcy trustee.

Article 14 Definition of Bankruptcy Claims

Any claim on property against the bankrupt arising before the bankruptcy is declared, shall be a bankruptcy claim.

Article 38 (Scope of Estate Claims)

The following claims shall be regarded as estate claims:

2. Claims that can be collected pursuant to the example of the National Tax Collection Act or the collection of national taxes: Provided, That claims on grounds arising after bankruptcy is declared shall be limited to those arising against the bankrupt estate; and

Basic Act

Article 21 Time when tax liability comes into existence

(1) A liability to pay national taxes shall accrue at the following time:

7. For value-added tax, when a taxable period expires: Provided, That for imported goods, when an import declaration is filed with the head of customhouse;

Value-Added Tax Act

Article 3 Taxable Period

(1) The taxable period of value-added taxes for entrepreneurs shall be as follows:

First period: from January 1 to June 30; and

2. Second period: from July 1 to December 31.

(3) Where a business operator closes his/her business, the taxable period shall begin in the taxable period to which the date of closedown belongs.

Article 17-2 Tax Credit for Second Bad Debt

(1) Where an entrepreneur supplies goods or services subject to the imposition of value-added tax, and where the whole or part of credit account receivable or other sales claims (referring to those containing value-added tax) related to the supply of the relevant goods or services cannot be recovered from bad debts due to the bankruptcy, compulsory execution or other causes as prescribed by the Presidential Decree, the amount calculated by the following formula (hereinafter referred to as the " Bad debts tax amount") may be deducted from the output tax amount for the taxable period whereto belongs the date when the bad debts became final and conclusive: Provided, That where the relevant entrepreneur recovers the whole or part of bad debts amount, the bad

Bad debt tax amount = bad debt amount = 10/110

(3) In the application of the provisions of paragraphs (1) and (2), when the business operator in receipt of the supply of goods or services has the whole or part of bad debt tax amount deducted as the input tax amount under Article 17, and when the bad debt of the supplier is finalized before the business closure of the relevant supplied business operator, the relevant bad debt tax amount shall be subtracted from the input tax amount in the taxable period whereto belongs the date when the bad debt becomes final and conclusive: Provided, That where the relevant business operator

Enforcement Decree

Article 63-2 (Scope of Tax Credit for Second Bad Debt)

(1) "Cases prescribed by Presidential Decree, such as bankruptcy, compulsory execution and others" in Article 17-2 (1) of the Act means any of the following cases:

1. Bankruptcy under the Bankruptcy Act (including compulsory composition);

6. Where six months have passed since the date on which a check or a bill was defaulted; or

Enforcement Regulations of the Value-Added Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 549 of April 2, 2007)

Article 19-3 Bad Debt Tax Credit

For the purpose of Article 63-2 (1) 6 of the Decree, the term “date of occurrence of default” means the date on which a financial institution confirms default on the relevant check or bill.

C. Determination

(1) Judgment on the Defendant’s main defense

The defendant's claim for nullification is essentially the same as the plaintiff's claim for revocation of the disposition. Thus, since the plaintiff filed the lawsuit of this case more than 90 days after the decision of the National Tax Tribunal became known, the plaintiff's lawsuit of this case is an illegal lawsuit with the lapse of the period for filing the lawsuit of this case. However, the plaintiff's claim for nullification of the lawsuit of this case is not subject to the period for filing the lawsuit of this case under the Administrative Litigation Act (the plaintiff is not seeking nullification in the form of revocation lawsuit) and therefore the defendant's defense for safety is without merit.

(2) Whether each of the instant taxation claims constitutes a bankruptcy claim

According to Article 14 of the Act, each taxation claim in this case shall be a property claim arising from the cause that occurred before bankruptcy is declared in order to constitute a bankruptcy claim. However, in order for certain taxation claims to be arising from the cause that occurred before bankruptcy is declared, it is not necessary to arrive before the date of adjudication of bankruptcy or at least before the adjudication of bankruptcy is declared. Thus, the time of establishment of each taxation claim

According to Article 17-2 of the Value-Added Tax Act, the time when the value-added tax related to the confirmation of bad debt tax amount is the last day of the taxable period to which the date when the bad debt becomes final belongs. Since each supplier of this case supplied goods to the bankrupt company before the bankruptcy company was declared bankrupt, but the bill delivered from the bankrupt company was not paid within six months from the date when the default occurred, the supplier of this case reported bad debt to the chief of the competent tax office and received the deduction of bad debt tax amount of 25,152,530 won in total from the value-added tax for the first period of January 23, 2005 until March 22, 2005 as the bad debt becomes final and conclusive between January 23, 2003 and March 22, 2005. Accordingly, each of the value-added tax in this case was imposed on the bankrupt company. Thus, the supply of goods subject to bad debt tax deduction was made before the bankruptcy declaration, but the cause for taxation becomes final and conclusive after the bankruptcy declaration.

Therefore, each taxation claim of this case does not constitute a bankruptcy claim under Article 14 of the Act, since the taxation claim of this case occurred due to the cause after bankruptcy is declared.

As to this, although each of the dispositions in this case was made after the bankruptcy declaration of the bankrupt company, the supply of goods, which is the cause of the disposition, was before the bankruptcy declaration of the bankrupt company, and thus, the taxation claim in this case constitutes bankruptcy claim as a property claim arising from the cause arising before the bankruptcy declaration of the bankrupt company. However, unlike the taxation claim that is established at the same time as the taxation claim or the corporate tax or the value-added tax, the taxation liability is not immediately established on the ground that the income or transaction has occurred at the same time as the taxation claim, but the tax liability is established at the end of the taxable period, and even if there is a substantial relationship between the value-added tax and the value-added tax newly imposed on the plaintiff at the time of the original transaction, Article 17-2 of the Value-Added Tax Act provides that the bad debt tax amount shall be deducted from the output tax amount for the taxable period which belongs to the date when the bad debt becomes final and conclusive, and that the defendant's assertion that the bad debt tax amount should not be added to the output tax amount for the above taxable period.

(3) Whether each of the instant taxation claims constitutes estate claims

According to Article 38 subparagraph 2 of the Act, each taxation claim of this case should be either a cause arising prior to the declaration of bankruptcy or a claim arising from a cause subsequent to the declaration of bankruptcy in order to constitute an estate claim. As seen earlier, each taxation claim of this case should be related to the bankrupt estate after the declaration of bankruptcy. Since it is apparent that each taxation claim of this case is a value-added tax imposed on each supplier of this case on the deduction portion of bad debt tax amount of each supplier of this case, which is not related to the bankrupt estate, each taxation claim of this case shall not constitute an estate claim under Article 3

(4) Effect of each of the instant dispositions

Therefore, each taxation claim of this case does not belong to estate claims or bankruptcy claims, and as a result, it does not include the scope of the plaintiff's right to manage and dispose of the bankrupt estate which consists of the bankrupt's assets when the bankruptcy is declared. Thus, each disposition of this case against a person who is not liable for tax payment, which is serious and obvious, is null and void.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition by admitting it.

Table 3

No.

Sub-Items :

Suppliers

A taxpayer of duty payment;

The notified tax within the payment period;

1

For the first term, 2005

Value-added Tax

(State) △△△△

○ Head of tax office

5,442,750 won

2

For the first term, 2005

Value-added Tax

∇∇∇∇(주)

190,909,090 won

3

For the first term, 2005

Value-added Tax

(주)▲▲▲▲

7,066,790 won

4

For the first term, 2005

Value-added Tax

(State) Dogsan

255,000 won

5

For the first term, 2005

Value-added Tax

(주)⊙⊙⊙⊙

60,000 won

6

For the second period, 2004

Value-added Tax

(주)▣▣▣▣

818,900 won

Total

255,152,530 won

Finally.

* Note *

(iii)