Whether the amount equivalent to gift certificates provided as free gifts is excluded from the tax base.

Gift certificates paid to a game room user are free gifts provided for the promotion of the sale of services such as the use of a game machine and not deducted from the tax base.

Article 1 of the Value-Added Tax Act

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of value-added tax of KRW 33,843,890 on March 5, 2007 against the Plaintiff on March 5, 2007 is revoked.

1. Details of the disposition;

A. From January 2006 to June 2006, the Plaintiff operated an adult amusement room (hereinafter “instant game room”) with the trade name of ○○○○○○○○○○○○○○○○○○○○○, ○○○○○○.

B. The game of this case was operated in the form that the Plaintiff purchased merchandise coupons from a merchandise coupon supplier and stored them in the game machine, and the game user inputs certain cash in the game machine, but if the game results requirements are met, merchandise coupons were paid as free gifts according to the winning requirements.

C. In filing the final return on value-added tax for the first period portion related to the operation of the game room of this case in 2006, the Plaintiff calculated and reported 31,050,000 won remaining after deducting the Plaintiff’s gift certificates paid to users from the amount of input in the game machine.

D. The Defendant considered the total amount of cash input in the game of this case as the sales amount of the game of this case. However, when sales related evidence related to sales, such as the amount input by the game of this case or the purchase amount of merchandise coupons, cannot be calculated immediately as the user of the game of this case did not keep, following a tax investigation, the Defendant calculated the purchase amount of merchandise coupons in the game of this case as 209,700 (the sales amount of merchandise coupons issued company), 5,000 won at the face value of merchandise coupons, and average winning rate of the game of this case (the payment rate of merchandise coupons to the amount input by the customer) at 105%, and calculated the total purchase amount of merchandise coupons by multiplying the purchase amount of merchandise coupons by the face value of merchandise coupons. The Defendant calculated the purchase amount by dividing the total input amount by 105%, which is the average winning rate of the game of this case, and calculated the value-added tax base for calculating the value-added tax by the sales amount by 1.1 for the year 2006.38.

E. On May 10, 2007, the Plaintiff filed an appeal with the National Tax Tribunal as the District Tribunal No. 2007Da1630 on the instant disposition, but the National Tax Tribunal dismissed the said appeal on June 29, 2007.

[Reasons for Recognition] Facts without dispute, Gap 1, 2, 3 evidence, Eul 1, 2, and 3 evidence, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) The Plaintiff supplied the instant game room users with goods called merchandise coupons together with the service of using the game machine, and received the game expenses from the users in return for the above two places. Among them, merchandise coupons can not be imposed value-added tax on the supply of merchandise coupons by nature as cash substitute securities. Accordingly, the Plaintiff’s imposition of value-added tax is limited to the supply of the service of using the game machine.

(2) On the other hand, if the value-added tax base is calculated based on the amount paid by the game user of the game of this case as the game of this case, it would result in the Plaintiff’s payment of more amount than the gross income derived from the operation of the game of this case as value-added tax, which goes against the principle of property rights

(3) Therefore, in calculating the value-added tax base on the operation of the game of this case, the face value of gift certificates supplied to the user from the amount received from the user's game cost should be deducted, but the disposition of this case, which calculated the tax base based on the whole amount

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) The game room user of this case paid cash to the Plaintiff and received a certain gift gift amount based on the result of the game. The Plaintiff’s provision of the game room user of this case is a short-term service of using a game machine indicating an unspecified result for individual users, and the user also pays the game cost for using the game machine with an opportunity to obtain more merchandise coupons than their inputs (the game room of this case is set in advance for the long-term users to achieve a certain percentage of the average, but it is not certain result for individual users. Since the game result does not have a certain degree, it is expected that the user can receive merchandise couponss more than their inputs or pre-determined rates, it is not related to the user’s actual game share price, and it is not related to the game of this case’s use of merchandise coupons.

Therefore, the Plaintiff’s supply of gift certificates to the instant game room users is merely a service of using the game machine (including the offer of gift certificates based on the incidental results to stimulate the interest of the game). Thus, the Plaintiff’s assertion that the value of gift certificates should be deducted from the value of supply to calculate the value of value-added tax, on the premise that the Plaintiff’s supply differently includes goods such as gift certificates having equivalent value or status in addition to the use of the game machine.

(2) Furthermore, ① Article 32 subparag. 3 of the former Act on Sound Records, Video Products and Game Products (amended by Act No. 7943 of Apr. 28, 2006) provides that the standard for handling premiums at the game providing business (amended by Presidential Decree No. 2006-24 of Nov. 1, 2006) is strictly limited to the types of gift offered by the game providing business operators, as well as all the information recorded in the game except for the use fees input by the users are deleted, and no one shall trade or purchase the gift certificates. 6) provides that the value-added tax base of the game providing services should not be deducted for the purpose of calculating the value-added tax without deducting the value-added tax base of the gift certificates. 6) The above provision provides that the value-added tax base of the game providing business shall not be imposed separately from the value-added tax base of the gift certificates provided by the game providing business operators for the purpose of calculating the value-added tax without deducting the value-added tax base of the gift certificates.

3. Conclusion

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

Relevant statutes

[Valued Tax]

Article 1 (Objects of Taxation)

(1) Value-added tax shall be imposed on the following transactions:

1. Supply of goods or services; and

(3) The term "services" in paragraph (1) means all services and activities other than goods, which have property value.

Article 7 (Supply of Services)

(1) The supply of services shall be either the supply of services or having others use the goods, facilities or rights, pursuant to all contractual and legal grounds.

Article 13 (Tax Base)

(1) The tax base for value-added taxes on the supply of goods or services shall be the aggregate of the following values (hereinafter referred to as "value of supply"): Provided, That value-added taxes shall not be included:

1. Where payments are given in money, the payments;

2. Where payments other than money are given, the current market price of goods or services supplied by the supplier;

(2) The following amounts shall not be included in the tax base:

1. The amount of discount;

2. The value of returned goods;

3. The value of goods which are damaged, damaged, or destroyed before they reach the person receiving the supply;

4. National subsidies and public subsidies;

5. Overdue interests as prescribed by the Presidential Decree among those paid due to delay in the payment of supply proceeds.

6. Amount discounted from the value of supply after the goods or services are supplied, which is prescribed by the Presidential Decree.

(3) No bad debt, bounty, and other amounts similar thereto on the value of supply after the goods or services are supplied shall be deducted from the tax base.

Article 21 (Settlement and Correction)

(2) Where the head of a district tax office having jurisdiction over a place of business, the Commissioner of the competent Regional Tax Office or the Commissioner of the National Tax Service determines or revises the tax base and amount of tax payable or refundable for each taxable period pursuant to paragraph (1), he/she shall do so on the basis of tax invoices, account books and other evidence:

1. Where tax invoices, account books, and other evidence necessary for calculating the tax base do not exist or important parts are incomplete;

[Enforcement Decree of the Value-Added Tax]

Article 48 (Calculation of Tax Base)

(1) The tax base as provided for in Article 13 (1) of the Act shall include any money, charge, fees, and all other monetary values in a quid pro quo relationship, regardless of the pretext thereof, received from a trader.

[former Sound Records, Video Products and Game Products Act (amended by Act No. 7943 of April 28, 2006)]

Article 2 (Definitions)

The definitions of terms used in this Act shall be as follows:

3. The term "game products" means video products and apparatuses produced so that one can play a game by making use of data processing technology, such as computer programs, or a mechanical device for making good use of leisure time, raising the effect of learning and physical exercise incidental thereto: Provided, That those falling under any of the following items shall be excluded:

(a) Those subject to discipline pursuant to other Acts and subordinate statutes;

(b) Game products mixed with those other than game products and those publicly notified by the Minister of Culture and Tourism as deemed unnecessary to be regulated as game products.

Article 32 (Matters to be Observed by Distribution-Related Businessman)

A person who runs the business (limited to the business including the business falling under subparagraphs 8 through 11 in the case of a combined distribution and provision business) referred to in subparagraphs 8 through 12 of Article 2 (hereinafter referred to as the "distribution-related businessman") shall observe the matters falling under each of the following subparagraphs:

3. No business operator of a game providing business shall provide free gifts falling under any of the following items, which may encourage speculation or have a harmful effect on juveniles:

(a) Acts to offer free gifts other than those determined and publicly announced by the Minister of Culture and Tourism;

(b) Providing free gifts without using such a method as determined and publicly announced by the Minister of Culture and Tourism;

【Standard for Donation Handling of Gu Game Establishments (Before the change by the Ministry of Culture and Tourism No. 2006-24 on November 1, 2006)】

2. Types of premiums:

Types of free gifts which may be provided as a result of the game are as follows:

(1) Toys, phrases and character products, cultural products, tourist souvenirs, liquid saces

(2) Articles, such as clothes and daily necessities, which are generally distributed in daily lives: Provided, That media materials harmful to juveniles, harmful drugs and articles prescribed by the Juvenile Protection Act shall be excluded.

(3) Plots for free exchange (limited to game products permitted to be used as a whole)

4. Methods of providing premiums:

(b)at the same time as the grant is provided, all matters recorded in any originals except for the user fee created by the user must be deleted;

(c) No points obtained as a result of a game shall be kept, and no person shall trade or have another person trade or trade such points;

5. Matters to be observed in publishing free gifts;

(a) No person shall exchange or arrange for exchange of premiums, or repurchase premiums offered;