207Guhap24920 Revocation of Disposition of Imposition of Value-Added Tax

00

head of Dongjak-gu Tax Office

Attorney Go Young-deok, Counsel for the defendant-appellant

October 11, 2007

November 1, 2007

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

2. The costs of lawsuit are assessed against the Plaintiff.

The Defendant’s imposition of value-added tax of KRW 124, 777, 100 on January 8, 2007 against the Plaintiff on January 8, 200 and KRW 120, 374, and 70 on January 1, 2006, respectively, shall be revoked.

1. Details of the disposition;

A. The Plaintiff is operating the game of this case in the Dongjak-gu Seoul Metropolitan Government XX Dong - XX.

B. On January 8, 2007, the Defendant deemed the total amount of cash input by customers in the game of this case as sales in the game of the game of this case, and calculated the value-added tax base for the second term portion of 205 as KRW 1,043,062, 200, and the first term portion of value-added tax base for the year 2006 as KRW 1,107, 655, and 500, respectively. The Defendant imposed value-added tax for the second term portion of 205 as KRW 124,77, 100 and KRW 120,374,700 for the first term portion of 205 as well as KRW 120 for the first term portion of 2006 (hereinafter each disposition of this case).

(No. 1 evidence, No. 1 evidence, and the purport of the whole pleadings)

2. The legality of the disposition.

A. The plaintiff's assertion

(1) Failure to create a value added

Value-added tax is imposed on the added value created by the transaction, and the money invested in the game machine is not added value-added for gambling or speculative activities, so it cannot be subject to value-added tax.

(2) Deduction of face value of gift certificates

Value-added tax may not be imposed on the transaction of money or currency substitute securities by means of money substitute securities paid by the Plaintiff to game users. Therefore, value-added tax and tax transaction subject to tax is limited to the provision of service, such as the use of game machine, among goods of merchandise coupons provided by the Plaintiff to game users and services of use of game machine.

Therefore, the portion corresponding to the face value of merchandise coupons out of the amount input in the game machine does not constitute a taxable transaction, and thus, the value of supply (total sales) relating to each disposition of this case is calculated.

In this case, the value of gift certificates supplied to the game machine users shall be deducted.

(b) Relevant statutes;

As shown in the attached Form.

C. Facts of recognition

(1) A user of a game machine using the game of this case may input certain cash into the game machine.

As a result, the game will continue to perform the winning points with credit, it can be said that the game will continue to exist without relation to time and frequency until the winning points are extinguished.

(2) In the event a game user completes a game, the Plaintiff provided gift certificates purchased from a merchandise coupon supplier as free gifts.

(3) In the instant game room, the rate of the amount of merchandise coupons paid by the customer (the rate of winning) to the amount invested by the customer is 95%.

(4) The Defendant calculated the payment amount of gift certificates by multiplying the payment amount of the gift certificates of this case by the amount of KRW 5,000 per gift certificate per gift certificate, and calculated the value by dividing that amount by the dividend rate, and by calculating the value of supply.

(No. 1, No. 2, No. 1 to No. 4, and the purport of the whole pleadings)

(d)boards;

(1) As to the assertion that value added has not been created

In full view of the following circumstances, money inputs in a game machine is clearly subject to value-added tax as consideration for the supply of goods and services, and it cannot be said that the money is for gambling or gambling games, or is subject to value-added tax. Therefore, the Plaintiff’s assertion on this part is without merit.

(A) In light of the circumstances in which the Plaintiff had registered the game room business in accordance with the procedures prescribed by the former Sound Records, Video Products and Game Software Act (amended by Act No. 7943 of Apr. 28, 2006), “The game room business” cannot be deemed as gambling or speculative acts by using the game machine of customers, which is achieved at the aforementioned legitimate game room, in light of the circumstances of operating the game of this case legally and legally.

(B) The Plaintiff not returned cash to customers who completed the use of the game room, but paid gift certificates that are a kind of gift in accordance with the former standards for dealing with gift at a store (which was changed on November 1, 2006 by Article 2006 - 24 of the Public Notice of the Ministry of Culture and Tourism; hereinafter the “former standards for dealing with gift”). The fact that the former standards for dealing with gift strongly regulates the fluorization of gift as seen earlier.

(C) Although the Plaintiff’s instant game room business falls under gambling or speculative acts, there is no provision that the value-added tax shall be exempted or non-taxation for gambling or speculative acts under the Value-Added Tax Act, etc., and the Plaintiff’s instant game room business cannot be subject to value-added tax solely on the above circumstances.

(D) The value added pursuant to the Value-Added Tax Act is a simple concept of transaction cost, and there is no ground for the Plaintiff’s game room business not to create value added unlike the provision of other services.

(2) As to the assertion of deduction of the face value of gift certificates

In full view of the following circumstances, since the Plaintiff’s transaction of gift rights paid to the game machine users does not seem to be subject to value-added tax, the part corresponding to the face value of gift certificates out of the amount input in the game machine should be deducted from the value of supply. The Plaintiff’s assertion is without merit.

(A) The game user paid cash to the Plaintiff and provided a game without any limit to the number of times using the game machine and received a given gift according to the result of the game. As such, the Plaintiff’s provision to the game machine users is goods such as the use of the game machine and merchandise coupons, and the game machine users pay cash to the Plaintiff as a consideration for this. Therefore, the cash payment made by the game machine users to the Plaintiff is not a separate payment for each part of the provision of goods such as the provision of goods and merchandise coupons, which are the use of the game machine, and the provision of goods such as merchandise coupons, which are the use of the game machine, and the use of the game machine, are not a separate payment for each part.

(B) The former standards for dealing with free gifts are strictly limited to the types of premiums which a game business operator may provide. At the same time, all matters recorded in the originals except for user fees input by the game business operator are deleted, points obtained as a result of the game shall not be sold or sold, and no one shall trade or arrange for exchange or exchange, or repurchase free gifts, and the game business operator shall not strictly limit the payment of cash or the facilitation of free gifts in lieu of free gifts. Therefore, it is not a kind of cash that a game business operator receives from a game business operator, and thus, it cannot be deducted from the supply price of the game business owner because the game business operator paid free gifts that are not the same as cash to the game business operator. However, even if the purchase price of the goods was paid in the course of purchasing the goods, the Plaintiff cannot deduct the input tax amount (the Plaintiff cannot actually submit the input tax invoice, etc.).

(C) Gift certificates are goods, securities, or money substitute securities that hold a claim for the delivery of goods together with a bill of lading, bill of lading, warehouse receipt, etc., and are different in their intrinsic nature from a bill of lading, bill of lading, and check, and thus, the payment of gift certificates cannot be deemed to have been made in cash as in the payment of bills, check, etc. which are monetary claim securities.

(D) The payment of gift certificates cannot be said to be the same as the payment of cash on the ground that the gift certificates paid in the game room can be easily commercialized at a nearby money exchange. This is because, even if the exchangeability is guaranteed, they are only goods until they are exchanged, they cannot be viewed as cash. This is because, in the home game room, goods such as phrases and sys, etc., other than gift certificates, are paid as free gifts and exchanged in cash at the nearby money exchange center, they cannot be viewed as cash because they cannot be viewed as cash.

(E) A game room business operator may arbitrarily select and provide as a gift gift based on the result of a game according to the standard for dealing with gift certificates in addition to the merchandise coupons, i.e., completes, phrases, characters, cultural products, tourist souvenirs, and liquid books, etc. In a case where the gift certificates are offered as the goods of completes, etc., other than merchandise coupons, the value-added tax paid for the purchase of the goods of completes, etc. can be deducted as the input tax amount. The purchase amount of the goods cannot be deducted from the value-added tax base, which is the value-added tax base. The mere fact that the game room business operator paid merchandise coupons as gift certificates, there is no ground to view that the face value of the gift certificates can be deducted from the value of supply.

(f) Even if a game room proprietor’s payment of gift certificates as gift certificates is not subject to the deduction of its input tax amount, this does not change the supply value due to the result of the supply of goods for which value-added tax is not levied (the same as unprocessed foodstuffs).

(G) According to the Plaintiff’s assertion, in cases where the gift is paid with goods other than merchandise coupons, the value-added tax paid at the time of the purchase of the goods under the Value-Added Tax Act is deducted as the input tax amount, and the purchase price of the goods again causes unreasonable consequences, which would be deducted from the value of supply (see, e.g., Supreme Court Decision 200Do1348, Apr. 1, 200).

(h) The Value-Added Tax Act lists items to be deducted from the tax base exceptionally, and does not stipulate that the Value-Added Tax Act, etc. shall deduct the price for the payment of merchandise coupons from the value of supply.

(i) The face value of gift certificates is 5,000 won and is not the same value as cash of 5,000 won, and the gift certificates of 5,000 won are exchanged in a money exchange in the vicinity of the game room at a lower level than that. Therefore, even if the value of gift certificates can be deducted from the value of supply, it is necessary to deduct the amount that can be recognized as being actually refunded by the game user from the value of supply of gift certificates, so it is not necessary to deduct the face value of gift certificates or the Plaintiff’s purchase value.

3. Conclusion

Therefore, the defendant's each disposition of this case is legitimate, and thus, the plaintiff's claim is sought as per the disposition.

Judges Shin Dong-dong, Judge

Judges Kim Kim-soo

Judges Adjusted or Managed

Site of separate sheet

Related Acts and subordinate statutes

Value-Added Tax Act

Article 1 (Taxable Objects)

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

1. Supply of goods or services; and

2. Import of goods.

(2) omitted.

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

(4) The supply of goods or services naturally annexed to the supply of goods which is the main transaction shall be deemed to be included in such supply of goods, and the supply of goods or services inevitably annexed to the supply of services which is the main transaction shall be deemed to be included in such supply of services.

(5) Matters necessary for the scope of goods and services under paragraph (1) shall be prescribed by Presidential Decree.

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.

(2) Not more than omission

Article 13 (Tax Base)

(1) The tax base of value-added taxes on the supply of goods or services shall be the aggregate of values under each of the following subparagraphs (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 himself/herself;

3, 4 omitted

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

1. The amount of discount;

2. The value of returned goods;

Above 3. up to 6. omitted

(3) Bad debts, incentives, and other amounts similar thereto on the value of supply after goods or services are supplied shall not be deducted from the tax base.

(4) Not more than omission

Enforcement Decree

Article 48 (Calculation of Tax Base)

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

(2) Not more than omission

Gu Sound Records, Video Products and Game Products Act (before repealed by Act No. 7943 of April 28, 2006)

Article 2 (Definitions) The definitions of terms used in this Act shall be as follows:

1, 2. Omitted

3. The term "game products" means video products and apparatuses produced so as to allow a person to play a game by making use of data processing technology, such as computer programs, or similar, or to increase the use of leisure time, learning and physical effects incidental thereto, etc.: Provided, That those falling under any one 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 by the game products.

4. Omission; and

Standard for dealing with free gifts at the Gu game establishment (to be changed on November 1, 2006 by Ordinance of the Ministry of Culture and Tourism pursuant to 2006 - 24)

2. Types of premiums:

The types of premiums which may be provided as a result of the game shall be as follows:

(1) Toys, phrases, characters, cultural products, cultural products, tourist souvenirs, liquid taximents, etc.

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

(3) Plots for free exchange (limited to all-used game products and game products)

(Re) Gift certificates designated by the Korea Game Industry Development Institute (limited to those for 18 years of age or older game products)

4. Methods of offering free gifts:

(a) Omission;

(b)at the same time the free will be provided, all matters recorded in any originals except for the user fee created by the user must be deleted from half the amount of the free will.

(c) No points that have been acquired as a result of a game shall be kept, and no person shall trade them or record them even if they are traded or sold;

5. Matters to be observed when giving free gifts.

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

(b) Omission;