Board of Audit and Inspection 2009 depth0152 ( December 30, 2010)

Value-added tax is levied in the case of the supply of game items which are intangible goods of property value.

Game items constitute a kind of intangible goods with property value, and they constitute goods under the Value-Added Tax Act, where game items are supplied for value to game users through a broker, value-added tax is levied and the total amount of money received in return is the base of value-added tax.

Article 2 of the Value-Added Tax Act

2011Guhap280 The revocation of Disposition of Imposition of Value-Added Tax and Invalidity Thereof

2011Revocation of revocation of the imposition of value-added tax, 1184(combined)

2011Guhap2118 (Joint) revocation of revocation of the imposition of value-added tax

Ma XX

Head of the North Mine District Tax Office and one other

October 27, 2011

November 10, 201

1. Of the instant lawsuit, the part of the Defendant’s claim for revocation of the disposition imposing value-added tax amounting to KRW 3,984,740 for the second term of January 1, 2007 against the Plaintiff is dismissed.

2. All remaining claims of the Plaintiff are dismissed.

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

Each value-added tax imposed by the defendant against the plaintiff shall be revoked.

1. Details of the disposition;

O Business Contents of the Plaintiff

On April 27, 2005, the Plaintiff registered his/her business as retail or telecommunications sales business (i.e., a simplified taxable person or trade name) from 00-0, Gwangju Northern-dong, in order to purchase game items at a cost, and then changed the game items to service/online information, and then closed the business on May 14, 2009 after the Plaintiff purchased the game items at a cost, and then sold the game again through the Internet site, such as Ga item ○○○, etc. using the Internet site. On February 1, 2008, the Plaintiff converted the game to a general taxable person on February 1, 2008.

O Each disposition imposing value-added tax by the Defendants

The Defendants imposed each value-added tax, such as the instant Nos. 1, 2, and 3 in the separate sheet.

O Pre-trial Proceedings

(Attachment of Procedure in the Previous Trial)

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 3, 4 and Eul evidence Nos. 1, 3, 4, 7 through 11 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the part concerning the claim for revocation of the First Disposition is lawful

Article 22-2 of the Framework Act on National Taxes (amended by Act No. 6782, Dec. 18, 2002; hereinafter “amended by Act No. 6782, etc.”) provides that “any correction that increases the amount of tax initially determined under the provisions of tax-related Acts shall not affect the rights and obligations provided for in this Act or tax-related Acts with respect to the amount of tax originally determined.” The purport of the revised disposition is to re-determine one tax amount as a whole by including the increased amount of tax, not including the original return or the tax amount initially determined, but also the increased portion of tax (see, e.g., Supreme Court Decisions 91Nu9596, May 26, 1992; 2003Du12721, Jun. 10, 2005; 2003Du1272969, supra. 209). The same purport is that, in principle, the subject matter of a lawsuit seeking the tax return or rejection disposition should be construed as an independent one’s claim for objection.

According to the above legal principles, Eul evidence Nos. 4-2, and the purport of the entire pleadings, the defendant, as the first disposition of this case, issued a disposition to reduce value-added tax of 3,984,740 won for the second period of January 1, 2007 against the plaintiff on January 1, 2009, but again issued a disposition to reduce value-added tax of 41,067,060 won for the second period of July 1, 2007, one of the second dispositions of this case. Accordingly, the first disposition of this case, which was the initial corrective disposition, loses the existence value of value-added tax due to absorption of 41,067,060 won for the second period of July 1, 2007 among the second dispositions of this case, and thus, the part of the claim of this case of this case of this case of this case of this case of this case of this case of this case of this case of this case of this case of this case of this case of this case, shall be dismissed.

3. Determination of the grounds for illegality of disposition No. 1 of this case and the legitimacy of disposition No. 2 and No. 3 of this case

A. The plaintiff's assertion

(1) Common arguments regarding the grounds for illegality of Disposition 1 of this case and Disposition 2 and 3 of this case

The imposition of value-added tax in relation to the Plaintiff’s game item sales business shall be imposed on ① the difference in the amount sold at a price after the Plaintiff purchased at a price) as the tax base. ② Although the amount of purchase of game items verified by the details of passbook transactions shall be deducted from the input tax, the reason for the first disposition in this case and the disposition in this case’s Nos. 2 and 3 are unlawful on different premise.

(2) Claims regarding the ground for illegality of Disposition No. 1 of this case

In this regard, the defendant recognized that the plaintiff omitted sales of KRW 9,219,300, but the above amount was caused by the game items purchased by the plaintiff due to fraud or hacking, so even though it does not constitute an omission of sales, the ground for Disposition 1 of this case, which was made on a different premise, is unlawful.

(3) The assertion regarding the second disposition of this case

① According to relevant Acts and subordinate statutes, the provisions governing cyber-malls as business operators subject to value-added tax were enforced from July 1, 2007, and thus, the imposition of value-added tax for the preceding period is unlawful as violating tax law or retroactively imposed, and ② The amount omitted for sale for the second period of February 2005 is not related to the Plaintiff since NewA had made business registration separate from the Plaintiff, and thus, it is unlawful to impose value-added tax for the preceding period.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

(1) As to the ground of illegality in Disposition 1 of this case and the common assertion regarding Disposition 2 and 3 of this case

(A) As to the tax base related to the Plaintiff’s game item sales business

According to Articles 1, 2(1), 4, 6(1), and 13(1) of the Value-Added Tax Act, and Article 1 of the Enforcement Decree of the same Act, value-added tax is imposed on the supply (i.e., the delivery or transfer of goods by all contractual or legal causes) of all tangibles and goods which are intangibles (i.e., the delivery or transfer of goods by all contractual or legal causes), and on an entrepreneur who independently supplies goods for business regardless of whether it is for profit-making purposes. In such cases, the value-added tax base for the supply of goods is prescribed as the total amount of consideration if he receives money.

However, as seen above, the Plaintiff purchased game items at a cost, and run a business selling them for price again to the game users through the Internet site, such as an item ○○○○○, etc. As such, the game items sold for price after the Plaintiff purchased at a cost and it is clear that they constitute "goods" under the Value-Added Tax Act, as the type of intangible goods with property value. As such, the sum of money received by the Plaintiff as the Plaintiff supplied the game items, which are "goods", to the game users through the brokerage company, is the value-added tax base.

Therefore, this part of the Plaintiff’s assertion is without merit, on the premise that the Plaintiff’s money, which is the price for selling game items at a cost, is not the money itself, but only the money equivalent to the difference in the amount sold at a cost after the Plaintiff purchased at a cost (the Plaintiff’s brokerage commission).

(B) As to whether a game item purchase amount can be deducted by the details of the passbook transaction

According to Articles 13(1), 17 subparag. 1, and 17(2)2 of the Value-Added Tax Act, the input tax amount shall not be deducted from the output tax amount in a case where an entrepreneur does not receive a purchase tax invoice stating the necessary matters, such as the sum of the supply values for the transaction period and the sum of the tax amounts, from the “sale tax amount calculated by subtracting the purchase tax amount collected at the time of purchase from the “sale tax amount calculated based on the price, etc. received at the time of sale.” The purport of such provision is to ensure that the tax invoice forms the basis of the operation and maintenance of the value-added tax system, and thus, to establish a kind of sanctions to secure the accuracy and reliability of the tax invoice (see, e.g., Supreme Court Decision 2002Du4761, Dec. 11, 2003).

However, in relation to the purchase amount of game items verified by the transaction details of passbook in which the Plaintiff asserts the input tax deduction, even in the Plaintiff’s assertion, the Plaintiff did not receive purchase tax invoices stating the necessary entry items, such as the sum of the supply value for the transaction period and the sum of the tax amounts from the supplier at the time of purchase of game items. In this case, there is no input tax collected by the Plaintiff, and thus, it cannot be allowed to deduct the input tax amount when calculating the value-added tax amount as seen above (3) (However, it is a separate issue that the Plaintiff can be recognized as necessary expenses for the purchase amount actually proven when calculating the global income tax).

Therefore, the plaintiff's above assertion is without merit, under the premise that the input tax amount for the game items purchased without the purchase tax invoice should be deducted.

(2) As to the allegation regarding the ground for illegality of Disposition 1 of this case

In full view of the following facts: (a) No. 1-2 and No. 2-2, and the purport of the entire pleadings, the game item amount sold by the Plaintiff to the brokerage company ○○○, etc. using the Internet site for the second period of two years in 2007 can be recognized as omitting sales amount of KRW 9,219,300, compared to the sales amount of KRW 390,281,400, which is the sales amount reported by the Plaintiff during the above period; and (b) as alleged by the Plaintiff, even if the game item purchased was caused by the omission of the sales amount of KRW 9,219,300, the difference between the sales amount of KRW 390,281,40, which is the sales amount reported by the Plaintiff, even if the game item purchased was caused by the fraud or hacking, it is related to purchase, and there is no evidence to prove that the sales amount of the Plaintiff’s game item itself was revoked, this part of the Plaintiff’s above assertion has no merit.

(3) As to the argument regarding the instant disposition No. 2

(A) Whether the imposition of value-added tax on the period before July 1, 2007 violates the principle of no taxation without the law or is illegal as a retroactive taxation.

Article 4(1)14 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 18, 2010) provides that business operators engaged in the mail order business that registers personal information and supplies goods or services in a cyber mall and determine the location of their main place of business as their workplace. This was newly established on February 28, 2007 and enforced on July 1, 2007 for the purpose of clarifying the business place which forms the basis for filing an application for business registration, etc. to the value-added telecommunications business operators engaged in the mail order business while operating a cyber mall in the existing Internet space, and it is not related to the establishment of the duty to pay value-added tax on the plaintiff who engaged in the item sales (in particular, whether the second disposition of this case, which was made on the return of value-added tax by omitting some sales by the plaintiff), and as seen above, the game item transaction is subject to the imposition of value-added tax under the Value-Added Tax Act, and the defendant cannot be held that the above provision was unlawful in the game item.

(B) Whether the omission in the sale for the second term of 2005 caused the occurrence of the newA

In full view of the entries in the evidence No. 6 and the purport of the entire pleadings, new AA shall be deemed to have registered the business on August 20, 2005 with the trade name of 00-0, Nam-dong, Nam-gu, Gwangju and reported the value-added tax for the second term portion of 2005, and new AA may recognize the fact that the plaintiff lent his name to operate the above "YY" and submitted it to the head of the defendant Gwangju District Tax Office. According to the purport of the entire pleadings, the omitted sales for the second term of 2005 cannot be deemed to have been the sales amount generated after the registration of the new AA separately from the plaintiff, and there is no other evidence to acknowledge it. Therefore, the plaintiff's above assertion in this part is without merit.

(4) The theory of lawsuit

Ultimately, the grounds for the first disposition of this case and the second and third dispositions of this case are all legitimate.

4. Conclusion

Therefore, the part of the claim for revocation of the First Disposition among the lawsuit of this case is unlawful and dismissed, and the remaining claims of the plaintiff are all dismissed as it is without merit. It is so decided as per Disposition.