Whether it is excluded from the tax base because the oophone discount amount falls under sales discount;

The sales discount amount of this case does not correspond to sales discount, and the rejection disposition of this case based on this premise is legitimate because it constitutes sales incentive.

Articles 21 and 48 of the Value-Added Tax Act

Daejeon District Court 2014Guhap104536

Home Plusco, Ltd.

Daejeon Head of the District Tax Office

on October 2015 09

October 28, 2015

1. Details of the disposition;

A. The plaintiff's status

The plaintiff is a company that operates a business such as the development and operation of a supermarket store.

(b) Point and coophone system of the Plaintiff;

1) The Plaintiff sent cash coophones converted one point into one won to the members who accumulated 2,00 points or more each time they purchase goods from the Plaintiff’s stores or online shopping mall. The Plaintiff sent cash coophones converted into one won to the members who accumulated 1 point.

(c) Return and payment of value-added taxes;

The Plaintiff reported and paid the value-added tax for 2010 to 2012, including the amount equivalent to the face value of the coophone in the tax base when customers purchase goods using the coophone in store or online shopping mall.

D. Plaintiff’s request for correction and Defendant’s rejection

1) On July 25, 2013, the Plaintiff asserted that the face value equivalent to the coophone of this case used for the second transaction of July 25, 2013 corresponds to the discount amount excluded from the value-added tax base, and filed a claim for correction of the refund of value-added tax returned and paid at the second through 2012.

2) On October 29, 2013, the Defendant notified the Plaintiff of the refusal of the Plaintiff’s request for correction on the ground that cash coophone does not fall under the discount amount stipulated in Article 13 (2) of the Value-Added Tax Act and Article 52 of the Enforcement Decree thereof.

E. Implementation of the pre-trial procedure

On January 27, 2014, the Plaintiff appealed, and the Tax Tribunal dismissed the appeal on May 26, 2014.

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

For the following reasons, the instant rejection disposition is unlawful.

1) The coophone discount amount of this case constitutes a discount amount, and thus should be excluded from the tax base.

2) The oophone does not constitute a sales incentive.

(b) Omission of relevant statutes;

(c) Fact of recognition;

1) The main contents of the membership terms are as follows.

D. Determination

1) Whether the coophone of this case constitutes a discount

A) Article 13(2) of the former Value-Added Tax Act provides that the amount of discount under each of the following subparagraphs shall not be included in the tax base. Article 52(2) of the former Enforcement Decree of the Value-Added Tax Act provides that the amount of discount under Article 13(2)1 of the former Enforcement Decree shall be the amount of direct deduction from the ordinary supply value at the time of supply of goods or services in accordance with the terms and conditions of the quality, quantity, delivery, settlement of proceeds from supply, and other terms and conditions of supply. Exclusion of such discount from the tax base is the purport of excluding the amount of discount from the supply value as the conditions of supply on the quality, quantity, delivery, etc. of goods or services are not the amount actually received from the other party, so it is not the amount of discount from the tax base of value-added tax. Accordingly, in order to constitute a discount amount which is deducted from the secondary tax base as alleged by the Plaintiff, it is related to the supply of goods in the second transaction.

B) Meanwhile, Article 13(3) of the former Value-Added Tax Act provides that bad debts, incentives, and other similar amounts for the value of supply after the supply of goods or services shall not be deducted from the tax base, and where subsidies, etc. are paid in cash after a transaction is made, regardless of the name, they shall not be deducted from the tax base of value-added tax. In other words, sales unit costs incurred by a company in relation to the sale pursuant to the transaction conditions may constitute a discount, and may constitute a similar amount, such as incentives. In relation to the imposition of value-added tax, only the amount directly deducted from the sales amount may constitute a discount, and only the amount that is deducted from the value-added tax base

C) In full view of the aforementioned legal doctrine and the evidence duly admitted together with the purport of the entire pleadings, the instant coophone used in the secondary transaction shall be deemed to have a monetary value and have the character of a bounty or a similar amount, and it shall not be deemed to constitute a discount amount under the former Value-Added Tax Act. Therefore, the face value of the instant coophone should be included in the secondary tax base.

(1) The oophone in this case cannot be deemed as having economic value such as money by itself to the customer or the Plaintiff. The payment that the customer pays when he purchases merchandise coupons, etc. is the company’s advance. The purchase of merchandise coupons, etc. is not value-added tax transaction, but is a transaction only when the goods or services are supplied in exchange for merchandise coupons, etc.

In other words, where merchandise coupons, etc. are sold in cash or on credit and the relevant merchandise coupons, etc. are exchanged in kind, the time of supply for goods is when goods are actually delivered.

(2) The customer may decide on how to use the coophone in the subsequent transaction after obtaining the instant coophone from the purchase amount with the point accumulated in the primary transaction, and how to use it. The Plaintiff is obligated to deduct the amount equivalent to the coophone from the price when the customer uses the coophone in the secondary transaction. Ultimately, the coophone used in the secondary transaction is set according to the terms and conditions of the supply of the coophone, and cannot be said to be set according to the quality, quantity and delivery of the coophone, and the terms and conditions of the payment for the coophone, which are the premise of the coophone or its issuance. Moreover, in the secondary transaction, the customer cannot be deemed to have settled with the coophone or its terms and conditions of the coophone, and thus, it does not constitute a discount amount as stipulated in the coogram.

(3) The points in this case are set aside only for those who purchased more than 2,00 points from the Plaintiff, not all of the Plaintiff’s buyers, but for those who purchased more than 2,00 points from the Plaintiff, and there are restrictions on the application and scope of application.

(4) The purport of Article 1(1) of the former Value-Added Tax Act, Article 1(1) of the former Value-Added Tax Act, and Article 13(1) of the former Value-Added Tax Act provides that an entrepreneur shall collect value-added tax on the value of supply when the goods, etc. are supplied by the supplier under Article 15, thereby adopting the former Value-Added Tax Act. As such, Korea’s value-added tax adopting the pre-stage tax credit system, unlike income tax and corporate tax, has the form of transaction tax that imposes on the external appearance of transaction that is not a substantial income, and thus, it is imposed regardless of whether the entrepreneur’s profit or loss has no concept of cost deduction. Accordingly, it is necessary to consider whether the instant coophone constitutes an amount of discount that is excluded from the value of supply that is the tax base under the Value-Added Tax Act. From

(5) Unlike the oophone in this case, the discount oophones not premised on the accumulation of mileage and the gift certificates sold at discount are different from the oophones in the nature of the instant oophones.

(A) The gift certificates are identical to cash in the bearer securities sold in advance, and when the gift certificates sold at discount are sold at discount, the part deducted at discount is not the amount equivalent to the discount amount from the discount sale of the gift certificates, nor the price of the gift certificates, and thus the gift certificates sold at discount of the oophone are different from each other.

The price paid by the customer when he purchases merchandise coupons, etc. is the advance of the company, the purchase of merchandise coupons, etc. is not a transaction of value-added tax, and only when the goods or services are supplied in exchange for merchandise coupons.

(B) Meanwhile, if a company pays gift certificates or discount coupons that can be used in the primary transaction to customers in connection with the primary transaction, and receives only the amount obtained by subtracting gift certificates or discount coupons from the amount of sales of the primary transaction, the amount equivalent to gift certificates or discount coupons shall be an discount directly deducted from the amount of sales of the primary transaction. However, in cases where gift certificates or discount coupons are provided after the primary transaction, the value-added tax on the primary transaction is not different because they are not related to the tax base of the primary transaction. This is only sales incidental expenses, not only directly deducted from the secondary transaction base.

2) Whether the discount amount of the Kulphone issued with the point of this case is a mileage as provided in the Enforcement Decree of this case

A) The Plaintiff, in accordance with the primary terms and conditions of transaction, set aside the instant points to customers pursuant to the primary terms and conditions of transaction, issued the instant coophone with a certain amount of the instant coophone and delivered it as a means of payment to customers, and thus, the Plaintiff appears to have allowed the customer to pay the amount by itself

B) The point in this case does not have monetary value by itself, but is the premise to issue the instant food containers according to the Plaintiff’s primary transaction terms. Since the Plaintiff permitted payment by the coophone, it constitutes a case where the customer makes payment by the coophone pursuant to the first transaction terms and conditions in the second transaction.

3) The legality of the Enforcement Decree of the instant case

Considering the following circumstances, the provisions of the Enforcement Decree of this case, which served as the basis for the instant refusal disposition, are lawful and valid.

(a)whether it is contrary to the principle of clarity of taxation requirements or not requires a comprehensive judgment in accordance with the criteria, such as what act in the taxpayer’s position can be predicted as being subject to taxation because it constitutes the pertinent phrase, which is a taxation requirement, and whether it can be expected to choose more conclusive phrases than legislative and technically. However, since the various elements of taxation requirements are very difficult in the legislative technology to clearly distinguish them from the tax laws and regulations, even if general, abstract, and general provisions are prescribed as a supplementary action of the judge, if their significance can be clearly clarified through the interpretation as a legal supplement, it cannot be deemed as contrary to the principle of clarity of taxation requirements due to lack of clarity.

The term "driedage" means a company's sales promotion program to secure a fixed customer, which is often used in daily life to mean that the points obtained by the customer according to the record of use are performing the function of money. Therefore, it is difficult to see that the enforcement decree of this case is unlikely to anticipate from the taxpayer's standpoint or that the tax authorities' arbitrary application of the law

Therefore, the enforcement decree of this case does not violate the principle of clarity of taxation requirements.

B) As seen earlier, mileage used in the second transaction does not fall under the discount amount of the second transaction, but should be included in the value-added tax base for the second transaction. As such, the enforcement decree of this case did not deviate from the scope of delegation under Article 13 of the former Value-Added Tax Act.

Therefore, the enforcement decree of this case does not go against the legal principle of taxation requirements and the principle of statutory reservation.

C) Since mileages used in the second transaction have monetary value, they are actual payments. Accordingly, the instant provision of the Enforcement Decree includes the amount equivalent to mileages as tax base does not contravene the final consumer taxation principle.

D) The double taxation principle refers to the imposition of taxes on the same taxable object. However, in the first transaction, the object of value-added tax is only the goods supplied in that transaction and the amount equivalent to mileage used in the second transaction is monetary value as a means of payment, and it does not fall under the amount of incentives or any similar nature, and thus, it should be added to the amount received by the entrepreneur. Thus, the tax base of the price received by the entrepreneur and the value-added tax is consistent with the tax base of the first and second transactions, and there is no problem of double taxation asserted by the Plaintiff.

E) If a business entity is able to accumulate a certain percentage of the sales amount in the primary transaction instead of immediately discounting a certain percentage of the sales amount and make the settlement as mileage in the secondary transaction and the amount of mileage used in the secondary transaction are included in the value-added tax base, any more value-added tax may be levied in comparison with other business entities immediately discounting a certain percentage of the sales amount in the primary transaction.

(1) However, in light of the fact that: (a) in order to induce secondary transactions by imposing a incentive for the accumulation of mileage that a business operator can later use to a customer who has made a primary transaction, it takes place as a result of the choice of mileage system instead of an immediate discount system; and (b) as seen earlier, Korea’s value-added tax has the form of transaction tax imposed on formal transactions, not substantial income, as seen earlier, it cannot be deemed that the aforementioned alone alone does not impair tax neutrality.

(iv)Indivates

As seen earlier, since the oophone does not fall under the amount of discount and is not monetary value as a means of settlement between the Plaintiff and the customer, the payment of the oophone to the Plaintiff in purchasing the goods can be deemed to have been made payment for the supply of the goods. The oophone falls under the mileage prescribed in the Enforcement Decree of the instant case, and thus, the amount equivalent to the face value of the oophone is included in the value-added tax base from the second to the second half of 2010, and thus, the refusal disposition of this case is legitimate.

3. Conclusion

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