Cho High-2014 Middle-5066 (2014.03.04)

Based on expenditure subject to value-added tax, the amount of proportional distribution shall be calculated according to the ratio of sales, and input tax shall not be deducted for excess purchases.

Among the research expenses of this case, the amount of proportional distribution according to the Plaintiff’s sales ratio is calculated based on the Plaintiff’s sales ratio, and the input tax amount cannot be deducted for the purchase exceeding this ratio. Thus, the disposition of this case is legitimate, and the Plaintiff’s assertion on a different premise is excessive between corporate tax and value-added tax.

Article 60 (Scope of Purchase Tax Amount) Article 48 (Non-Inclusion of Joint Expenses in Calculation of Losses) of the former Enforcement Decree of the Corporate Tax Act

2015-Gu Partnership-6091 Revocation of Disposition of Imposing Value-Added Tax

AA

o Head of the tax office

December 17, 2015

oly 2016.18

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

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

1. Details of the disposition;

A. The Plaintiff is a company engaged in the manufacture and sale of various vehicles and parts, and BB stock company (hereinafter “BB”) is an affiliated company belonging to the CCC enterprise group, which is a company engaged in the manufacture and sale of various vehicles, transportation machinery and appliances, and parts.

B. After acquiring the shares of BB around December 1998, the Plaintiff entered into a joint research and development agreement with the Plaintiff and CCC from June 2004 in the process of successively integrating the research institutes possessed by the Plaintiff and CCC, and set the matters concerning joint research and development and cost sharing. Around December 201, the Plaintiff and BB research institutes were completely integrated into DD with the Plaintiff.

Joint Research and Development Agreement

Article 4 (Definitions of Terms)

2. The term "research and development investment" means a prior development investment that can expect future economic effects prior to projectization, which is classified into pure prior research and development investment and research and development investment in the vehicle sector;

Article 6 (Provision of Human Resources and Equipment)

The number of persons and equipment related to joint research and development shall be provided jointly by Gap and Eul, and the number of persons and equipment provided shall be owned by the company to which the provision is made.

Article 7 (Advance Payment of Expenses)

Expenses incurred in relation to joint research and development shall be borne by A (or B).

Provided, That welfare expenses related to personnel expenses and personnel expenses shall be paid by the companies to which the number of persons of each research institute belongs.

Article 8 (Settlement of Expenses Incurred)

3. Research and development investments;

Expenses incurred in relation to joint research and development activities shall be settled monthly by A and B, including funds, after distribution in proportion to the sales ratio of the two companies in the immediately preceding year.

Article 9 (Time of Settlement of Costs)

1. Except in cases of temporary settlement, all expenses shall be settled by the last day of the following month as to the expenses incurred in the current month;

2.In the event of a delay in the payment schedule set forth in this contract, the payment shall be made by adding an amount computed by the recognized interest rate notified by the Secretary.

3. The settlement money shall be received in cash for both families; and

C. The Plaintiff and BB shall have the sales ratio for the immediately preceding business year in accordance with the joint research and development agreement.

Pursuant to the division of common expenses incurred in relation to the development of technology, each of the above companies received settlement payments from the other party for the amount paid in excess of the sharing ratio.

D. From February 2, 2008 to February 2, 2011, the Plaintiff reported and paid value-added tax by deducting the total input tax amount from the output tax amount during the pertinent period, excluding the labor cost, etc. among the common expenses incurred in relation to technology development when filing a value-added tax return (hereinafter “instant research cost”).

E. From September 3, 2013 to December 31, 2013, the director of the regional tax office, upon conducting a tax investigation with the Plaintiff, notified the Defendant of the taxation data to the effect that the amount exceeding the Plaintiff’s share of the research expenses of this case constitutes non-related expenditure not directly related to the business.

F. Accordingly, on January 14, 2014, the Defendant imposed the total value-added tax of KRW 2008, KRW OO on KRW 2008, and the total value-added tax of KRW OO from KRW 1, 2009 to KRW 2,01 (hereinafter “instant disposition”). After that, the director of the regional tax office decided to reduce the total value-added tax of KRW 2,008 ex officio by the director of the regional tax office.

G. Although the Plaintiff filed an objection, the commissioner of the △△ Regional Tax Office rendered a decision to dismiss the Plaintiff on September 26, 2014. The Plaintiff again filed a tax appeal, but did not receive a decision from the Tax Tribunal to 90 days after the date of the claim, and the Tax Tribunal rendered a decision to dismiss the Plaintiff’s claim on March 4, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 5 (including each number, if any) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the instant research cost is the price for goods and services supplied for the purpose of using the Plaintiff’s business, such input tax amount ought to be deducted from the total output tax amount under Article 17(1) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same).

2) Article 17(2)3 of the former Enforcement Decree of the Value-Added Tax Act provides that “The purchase tax amount for expenditure not directly related to the business shall not be deducted from the output tax amount.” Article 60(3) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013; hereinafter the same) provides that the scope of expenditure not directly related to the business shall be determined pursuant to Article 48 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 26981, Feb. 12, 2016). The common expenses under Article 48 of the former Enforcement Decree of the Corporate Tax Act, which set the scope of inclusion in deductible expenses, include not only external expenses such as the instant research expenses, but also internal expenses such as personnel expenses, so the total amount of the common expenses shall be divided in proportion to the sales amount for the immediately preceding business year,

3) Even if the Plaintiff’s external expenses are calculated on the basis of only external expenses, the external expenses include transactions that are not subject to value-added tax or transactions that are exempt from value-added tax. If the research expenses of this case include expenses that are subject to value-added tax except for this part, this does not exceed the Plaintiff’s share amount calculated on the basis of external expenses, and thus, the input tax amount included in the research expenses of this case should

The Defendant, among external expenses, issued the instant disposition on the premise that only the transaction amount subject to value-added tax is divided in the ratio of sales amount, but this is against the language and text of the relevant Value-Added Tax Act and the Enforcement Decree of the Corporate Tax Act, and it is unreasonable in that it limited the expenses that were paid even though the input tax deduction was determined after first examining the business relevance among the expenses that were paid, to be incurred in the transaction subject to value-added tax and determined whether the business relation

B. Relevant statutes

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

C. Determination

1) The relevance of the project in the joint project

Article 17 (1) of the former Value-Added Tax Act provides that the input tax amount for the supply of goods or services used or to be used for its own business shall be deducted from the output tax amount, and Article 17 (2) 3 of the same Act provides that the input tax amount for payments not directly related to the business shall

In order to clarify whether to deduct the input tax amount, Article 17(2) of the former Value-Added Tax Act provides that the cases naturally recognized under the principle of value-added tax shall be excluded as a matter of course from the opposite interpretation of Article 17(1) (see Supreme Court Decision 94Nu1449, Dec. 21, 1995). Thus, the business relevance under the two provisions shall be interpreted as the same meaning.

Meanwhile, Article 60(3) of the former Enforcement Decree of the Value-Added Tax Act provides that Article 48 of the former Enforcement Decree of the Corporate Tax Act, which limits the scope of expenses included in deductible expenses among common expenses to the proportional amount in proportion to sales ratio, shall apply mutatis mutandis to joint business activities. This is to limit the scope of expenses that can be deducted for each business entity to the proportional amount in proportion to sales ratio, even if there is business relevance, so it can be deemed that business relevance itself is deemed as sales ratio.

Therefore, the Plaintiff’s assertion that the input tax amount should be deducted in full due to business relations is reasonable only when the research expenses in this case are within the scope of the proportional amount of sales ratio deemed to have business relations among the common expenses, which eventually leads to the issue of how to grasp the common expenses, which serve as the basis for calculating the proportional amount of sales pursuant to Article 48 of the former Enforcement Decree of the Corporate Tax Act. In other words, if the Plaintiff calculates the proportional amount based only on external expenses, such as the research expenses in this case, out of the expenses disbursed for joint technological development with BB, the amount exceeding the ratio of sales of the Plaintiff would be subject to non-taxation for input tax, but if the amount of apportionment is calculated based on the total expenses disbursed, including the internal expenses, such as labor expenses, the input tax amount on the research expenses in this case may be deducted as long as the research expenses in this case does not exceed the proportional amount of sales ratio of

In this regard, I will examine this issue in dividing the clauses.

2) Article 48 of the former Enforcement Decree of the Corporate Tax Act that applies mutatis mutandis to the scope of input tax deduction.

The meaning of "joint expenses"

Article 60 (3) of the former Enforcement Decree of the Value-Added Tax Act provides that Article 48 of the former Enforcement Decree of the Corporate Tax Act shall apply mutatis mutandis to the scope of expenditure for which the input tax amount is not deducted because it is not directly related to the business, and Article 48 (1) 2 (a) of the former Enforcement Decree of the Corporate Tax Act provides that the amount exceeding the share amount according to the ratio of sales among the losses paid by the non-joint investment business operators

The plaintiff asserts that the amount paid as the research costs of this case does not exceed the amount permitted to include the common expenses in deductible expenses under Article 48 of the former Enforcement Decree of the Corporate Tax Act, i.e., the amount of contribution according to the ratio of the plaintiff's sales, so the whole input tax amount

However, for the following reasons, it is reasonable to view that the common expenses under Article 48 of the former Enforcement Decree of the Corporate Tax Act are limited to the expenditure subject to value-added tax, i.e., the external expenses, unlike the corporate tax, when applying mutatis mutandis the scope of input tax deduction.

① Where a statutory provision governing certain items of taxation applies mutatis mutandis to a statutory provision governing other items of taxation, even if the scope of application is not explicitly restricted, the provisions of other tax statutes governing specific items of taxation shall be deemed to apply mutatis mutandis only to the extent that it does not go against the essence of the tax to be governed by tax statutes.

(2) Corporate tax is levied on income for each business year after deducting the total amount of deductible expenses from the total amount of gross income in the relevant business year. If there are business relations among the expenses disbursed by the relevant corporation and ordinary expenses, all the expenses including the internal expenses, such as the personnel expenses, shall be calculated as deductible expenses; however, value-added tax is a taxable object of added value created in the production and distribution stage of goods or services, and it may be deducted as an input tax amount only

They are common in that they require ‘business relevance', but corporate tax shall be the income of the corporation.

Since it is subject to taxation, if the cost related to the business is cost, the whole cost paid regardless of whether it is subject to value-added tax can be included in deductible expenses, while in the case of value-added tax, even if the transaction is related to the business, it is not subject to value-added tax under the Value-Added Tax Act, and there is no room for problem as to whether the deduction is made

Therefore, Article 60(3) of the former Enforcement Decree of the Value-Added Tax Act does not deduct input tax amount.

Although Article 48 of the former Enforcement Decree of the Corporate Tax Act applies mutatis mutandis to the scope of application mutatis mutandis under the law and does not explicitly limit the scope of application mutatis mutandis under the law, it is reasonable to view that it shall apply only to the extent

(3) Article 17 (2) 3 of the former Value-Added Tax Act, Article 60 (3) of the Enforcement Decree of the same Act, the former Corporate Tax Act

Article 48 of the Enforcement Decree provides that an input tax amount shall not be deducted by deeming that the amount exceeding the apportionment amount out of the expenses disbursed by a joint business entity for a joint business entity shall not be related to the joint business entity. In ordinary cases, considering the fact that the portion disbursed by each corporation out of the goods or services provided by one of the joint business entities is expected to be internally settled, and the subject to whom the apportionment is attributed is substantially different, the portion exceeding the input tax amount shall be deemed to have business relevance only with the portion actually reverted to each corporation. The purport of the provision is to avoid deducting the input tax amount.

Therefore, Article 48 (1) of the former Enforcement Decree of the Corporate Tax Act is included in deductible expenses of corporate tax which is its original applicable area.

In order to determine the scope of sales, the common expenses, which are the basis for calculating the amount of sales, mean all common expenses, including internal expenses, regardless of whether they are subject to value-added tax.

However, in cases where the above provision is applied mutatis mutandis to the scope of input tax deduction of value-added tax, the scope of expenditure for which input tax deduction is allowed among transactions subject to value-added tax. In such cases, the common expenses, which are the basis for calculating the amount of sales, shall be deemed limited to the expenditure subject to value

As such, the common expenses referred to in Article 48 of the former Enforcement Decree of the Corporate Tax Act mean the whole of expenses related to internal expenses and external expenses and business related expenses at the stage of inclusion of the corporate tax in deductible expenses. However, in the case of applying mutatis mutandis in relation to the scope of deduction of the input tax of value-added tax, it is an interpretation that it means only external expenses and other expenses subject to value

④ In contrast to the Plaintiff’s assertion, if Article 48 of the former Enforcement Decree of the Corporate Tax Act also applies to the purchase deduction of value-added tax, it is unreasonable in that the purchase deduction is also included in the input tax deduction of internal costs or purchase amount exempt from value-added tax, not subject to value-added tax.

(5) Meanwhile, pursuant to Article 18(2) of the Enforcement Rule of the Value-Added Tax Act, in cases where an association or similar organization organized by its partners supplies or receives goods or services for its members or other members, it shall issue a tax invoice to the person to whom the entrepreneur is supplied, and the nominal owner shall hold a way to deduct the input tax amount related to the joint business by issuing the tax invoice to the person who is actually consumed within the limit of the value of supply indicated in the tax invoice issued by him/her, and thus, it shall not be deemed that the taxation agency

3) Sub-determination

Therefore, the calculation of the proportional distribution amount according to the Plaintiff’s sales ratio based on the Plaintiff’s sales ratio among the research funds of this case, and the purchase amount in excess of the input tax cannot be deducted. Thus, the disposition of this case rendered by the Defendant to the same purport is legitimate, and the Defendant’s assertion on different premise is based on the difference between the corporate tax and the value-added tax

3. Conclusion

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

(c)