early 2010 Mine3979 ( October 26, 2011)

The bad debt tax amount related to the relevant bad debt amount cannot be added to the input tax amount because the bad debt amount was converted into investment.

The bad debt tax related to bad debt amount cannot be added to the input tax amount on the sole ground that the bad debt amount is converted into equity investment in the reorganization company and the liquidation company is scheduled to pay the remaining amount in installments, because the bad debt amount is repaid by the business operator who was deducted from the input tax amount, as the bad debt amount is added to the input tax amount.

Article 17-2 of the Value-Added Tax Act

2011Guhap1211 Revocation of Disposition of Imposition of Value-Added Tax

the receiver of the liquidation company, YY

Head of the Tax Office

September 6, 2011

October 4, 2011

1. The plaintiff's claim is dismissed.

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

The disposition of imposition of value-added tax of KRW 18,919,270 for the first term portion of 2009 against the Reorganization Company, Inc. (hereinafter referred to as "Adjustment Company") on September 9, 2010 shall be revoked.

1. Details of the disposition;

A. The liquidation company is supplied with raw materials equivalent to KRW 208,112,000 from around September 2008 to October 20 of the same year from the non-party limited liability company (hereinafter referred to as the "non-party limited liability company"), which is the customer, and issued and delivered a promissory note in the name of the liquidation company for KRW 84,890,000 out of the payment, but did not pay the remainder of KRW 123,22,00.

B. Upon filing a return of value-added tax for the second period of two years in 2008 with the Defendant, the reorganization company deducted the input tax amount equivalent to KRW 208,112,000 from the output tax amount to the amount equivalent to KRW 18,919,272.

C. However, the reorganization company was insolvent on November 13, 2008, and the plaintiff was appointed as the administrator on the same day after the decision was rendered by the Jeonju District Court on November 28, 2008, and on February 4, 2010, the rehabilitation plan approval decision (the Jeonju District Court 2008 Mahap8, hereinafter referred to as the "decision to authorize the rehabilitation plan of this case").

D. Meanwhile, the non-party company was not paid KRW 208,112,00 in total the price of the above raw materials (hereinafter referred to as the "sub-party claim") with the lapse of six months from the date of the bankruptcy of the reorganization company. The non-party company received a bad debt tax deduction by reporting a bad debt tax credit to the head of the competent tax office pursuant to Article 17-2(1) of the Value-Added Tax

E. The Defendant, the head of the tax office having jurisdiction over the head office and branch office of the reorganization company, did not file a value-added tax return that is calculated by subtracting the amount equivalent to the bad debt tax amount from the input tax amount. On September 9, 2010, the Plaintiff, pursuant to the proviso of Article 17-2(3) of the Value-Added Tax Act, corrected and notified the amount equivalent to the bad debt tax amount from the input tax amount of the reorganization company in the relevant taxable period (the first half of January 2009), to which the date when the bad debt amount is determined, (hereinafter “instant disposition”).

F. On December 3, 2010, the Plaintiff dissatisfied with the instant disposition, filed an appeal with the Tax Tribunal on December 3, 2010, but the appeal was dismissed on January 31, 201.

[Ground of recognition] Facts without dispute, Gap evidence 2-1, 2-2, Gap evidence 3, Eul evidence 1-4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons, and thus should be revoked.

1) The assertion that the bad debt tax cannot be deducted

The legislative intent of Article 17-2 (1) of the Value-Added Tax Act is to return the value-added tax to the supplier where the supplier becomes unable to recover the value-added tax from the other party. Thus, the head of the competent tax office can make a bad debt tax deduction only for the value of supply which the non-party company is unable to receive from the reorganization company in accordance with the rehabilitation plan approval plan of this case. However, the non-party company is entitled to receive the whole of the claim in the future according to the rehabilitation plan of this case. Thus, it cannot be said that it suffered losses in relation to the claim in question. Therefore, the disposition of this case where the defendant imposed value-added tax on the plaintiff after subtracting the amount equivalent

2) The assertion that the forfeiture of rights has become extinct

The defendant did not report the value-added tax claim of this case as a rehabilitation claim during the rehabilitation procedure for the liquidation company. The value-added tax claim of this case was extinguished by forfeiture according to the rehabilitation plan approval plan.

(iii) the assertion that deferment or exemption should be granted.

Even if the disposition in this case is lawful, since it is difficult for the reorganization company to implement the rehabilitation plan authorized due to the defendant's disposition in this case, the value-added tax in this case should be deferred or reduced for at least three years pursuant to Article 140 (2) or (3) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter "Rehabilitation Act").

(b) Related statutes;

As shown in the attached Table related Acts and subordinate statutes

C. Determination

1) As to the assertion that the bad debt tax cannot be deducted

A) Under the principle of no taxation without law, the elements for taxation, non-taxation, or tax reduction and exemption shall be avoided, and the interpretation of tax laws and regulations shall not be extensively interpreted or analogically interpreted without reasonable grounds (see Supreme Court Decision 2008Du11372, Aug. 20, 2009).

B) Article 17-2(1) of the Value-Added Tax Act provides that "where an entrepreneur supplies goods or services subject to the imposition of value-added tax, and all or part of credit sales or other sales claims (referring to those including value-added tax) relating to the supply of such goods or services cannot be recovered due to the bankruptcy of the supplier or compulsory execution or other causes prescribed by Presidential Decree, the bad debt amount may be deducted from the output tax amount in the taxable period to which the date when the bad debt becomes final and conclusive belongs by 10/110." Article 63-2 of the Enforcement Decree of the Value-Added Tax Act provides that "The main sentence of Article 17-2(1) of the Act provides that "any other cause prescribed by Presidential Decree, such as bankruptcy or compulsory execution, means any cause recognized as bad debt pursuant to Article 55(2) of the Enforcement Decree of the Income Tax Act and Article 19-2(1)9 of the Enforcement Decree of the Corporate Tax Act shall be one of the causes acknowledged as bad debt amounts."

On the other hand, Article 17-2(3) of the Value-Added Tax Act provides that "where an entrepreneur supplied with goods or services deducts all or part of bad debt tax amount as an input tax amount under Article 17 in applying the deduction of bad debt tax amount under paragraph (1) of the same Article, and where a bad debt of a supplier becomes definite before the supplier closes his/her business, the amount equivalent to the bad debt tax amount shall be subtracted from the input tax amount in the taxable period to which the date when the bad debt becomes definite belongs: Provided, That where the relevant entrepreneur fails to deduct the bad

C) On November 13, 2008, when six months have elapsed since the date of the bankruptcy of the liquidation company, the director of the North Korean tax office having jurisdiction over the non-party company: (a) made a deduction of bad debt tax amount by deeming that the amount equivalent to the key claim was determined as bad debt of the non-party company; and (b) pursuant to the provisions of Article 17-2(1) of the Value-Added Tax Act; Article 63-2 of the Enforcement Decree of the Value-Added Tax Act; and Article 19-2 of the Enforcement Decree of the Corporate Tax Act, it is lawful for the plaintiff to report the amount equivalent to bad debt tax to the input tax amount of the non-party company; and (c) the defendant should report the deduction of the amount equivalent to the bad debt tax amount from the input tax amount of the non-party company by deducting the amount equivalent to the bad debt tax amount of the non-party company from the input tax amount of the non-party company for January 14, 2009.

D) Meanwhile, in full view of the purport of the entire pleadings in the statement of evidence No. 3, as asserted by the Plaintiff, 155,811,240 won, which is part of the claim included in the rehabilitation claim of the rehabilitation plan of the instant case, is converted into equity investment in the reorganization company, and the remaining 52,300,760 won is recognized as scheduled for the liquidation company to pay off to the non-party company from the year 2010 to the year 2018.

However, Article 17-2 (5) of the Value-Added Tax Act provides that "if the relevant entrepreneur fully or partially pays the bad debt amount after subtracting the bad debt amount from the input tax amount pursuant to paragraph (3) of the same Article (including the case where the head of the competent tax office corrected the bad debt amount), the bad debt tax amount related to the bad debt amount paid by the relevant entrepreneur shall be added to the input tax amount in the taxable period which includes the date of the repayment of the bad debt amount. According to the above provision, where the reorganization company pays the bad debt amount according to the rehabilitation plan, it can only be allowed to deduct the input tax amount from the tax office in addition to the input tax amount in the taxable period of the value-added tax which includes the date of the repayment,

2) As to the assertion that the loss occurred due to forfeiture

A) Article 118 Subparag. 1 of the Debtor Rehabilitation Act provides that "property claim against a debtor arising from the cause prior to the commencement of rehabilitation procedures" as one of rehabilitation claims. Where a tax claim against a rehabilitation company is established after meeting the taxation requirements pursuant to the Act prior to the commencement of rehabilitation procedures, such tax claim shall be a rehabilitation claim even if the disposition is rendered after the commencement of rehabilitation procedures, and a tax claim, which is a rehabilitation claim, shall be a rehabilitation claim and a tax claim shall be reported without delay (where the formulation of the rehabilitation plan is not hindered, i.e., before the completion of the assembly of related persons for the examination of the rehabilitation plan or before the completion of the written resolution in lieu of the above assembly of related persons) pursuant to Article 156 of the Debtor Rehabilitation Act

B) According to the provisions of Article 17-2(1) of the Value-Added Tax Act, Article 63-2 of the Enforcement Decree of the same Act, and Article 19-2(1)9 of the Enforcement Decree of the Corporate Tax Act, if a supplier fails to receive bonds on a bill or credit sales after the lapse of not less than six months from the date on which the person who received the bonds on a bill or credit sales was defaulted, the amount equivalent to the above bonds shall be determined as bad debts of the supplier. Thus, on May 14, 2009, the date following the expiration of six months from November 13, 2008, which is the date on which the reorganization company’s bankruptcy occurred, became final and conclusive as bad debts, and thus it is possible to deduct bad debts from the input tax amount. On the same day, the Plaintiff also established the obligation

However, as seen earlier, the decision to commence the rehabilitation procedure of this case was made on November 28, 2008, and it is apparent that May 14, 2009, the date of the decision to commence the rehabilitation procedure of this case, which is the date on which the taxable requirement of value-added tax claim of this case was established, is the fact that the value-added tax claim of this case was established after the commencement of the rehabilitation procedure, and it does not constitute a rehabilitation claim under Article 118 subparag. 1 of the Debtor Rehabilitation Act, and it is evident that this part of the Plaintiff’s assertion on the premise that the value-added tax claim of this case constitutes a

3) As to the assertion that deferment or exemption should be granted

A) Article 140(2) and (3) of the Debtor Rehabilitation Act provides that “When the rehabilitation plan provides for the deferment of collection or the deferment of realization of any property under a disposition on default with respect to a claim that can be collected pursuant to the National Tax Collection Act for a period not exceeding three years, the opinion of the person with the authority to collect taxes must be heard.” The rehabilitation plan provides that “When the rehabilitation plan provides for the deferment of collection or the deferment of realization of any property under a disposition on default for a period exceeding three years, or provides for the succession of debts, tax reduction or exemption, or other rights that affect the above claims, the consent of the person with the authority to collect taxes must be obtained.”

B) However, it is apparent in the text of the law that the provisions of Article 140(2) and (3) of the Debtor Rehabilitation Act apply only to the taxation claims included in the rehabilitation plan as rehabilitation claims. As such, tax reduction or exemption or deferment of tax collection cannot be made by applying Article 140(2) and (3) of the Debtor Rehabilitation Act to the instant value-added tax claim, which is not a rehabilitation claim under the principle of no taxation without representation. The Plaintiff’

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.