[1] Whether the receiving fee collected by the Korea Broadcasting System constitutes the price for broadcasting services (negative), and the subject of non-taxation of value-added tax among broadcastings by the Korea Broadcasting System (=general broadcasting by import of receiving fees) and subject of value-added tax (=advertising by import of advertising

[2] In calculating the input tax amount to be deducted from the value-added tax amount, whether the Korean Broadcasting System can be calculated by applying or applying the main sentence of Article 61(1) of the former Enforcement Decree to the total input tax amount by applying or applying mutatis mutandis the main sentence of Article 61(1) of the former Enforcement Decree to both advertising fees and receiving fees to

[3] Whether the Korea Broadcasting System is liable to pay corporate tax on the income of advertising fees, the income of radio wave fees, and the income of the Korea Broadcasting System (affirmative)

[1] Receiving fees shall be collected from persons holding television receivers for the purpose of receiving television broadcasts [Article 35 of the former Korea Broadcasting System Act (amended by Act No. 4264 of Aug. 1, 1990)] The amount of receiving fees shall be deliberated and decided by the board of directors of the Korea Broadcasting System, and the Korea Broadcasting System shall impose and collect them with approval from the Minister of Information (Article 36 of the current Korean Broadcasting System) (Article 36 of the same Act). The Korea Broadcasting System shall collect additional charges or additional charges from persons who have failed to register television or have failed to pay TV fees in arrears (Article 37 of the same Act). In light of the above provisions, receiving fees shall be deemed as special charges imposed on a specific group holding TV set to cover expenses for a specific public service business, which is a public broadcasting business, and therefore, it shall not be deemed as fees paid for services by the Korea Broadcasting System, which shall be deemed as non-taxable in relation to broadcasting services, which shall not be deemed as being related to broadcasting services under Article 29(1) of the former Value-Added Tax Act.

[2] The main text of Article 61(1) of the former Enforcement Decree of the Korea Broadcasting System (amended by Presidential Decree No. 14863 of Dec. 30, 195) is not applicable to the case where the Korea Broadcasting System calculates the input tax amount to be deducted from the value-added tax amount of the Korea Broadcasting System because it does not fall under the value-added tax taxable business and the tax-free business. Thus, in calculating the input tax amount to be deducted from the value-added tax amount of the Korea Broadcasting System, where it is used in common for broadcasting business and advertising business and the tax-free business, the main text of Article 61(1) of the former Enforcement Decree of the Korea Broadcasting System (amended by Presidential Decree No. 14863 of Dec. 30, 195) is not applicable to the case where it concurrently operates a taxable business and the tax-free business. The supply of broadcasting services by the revenue from the Korea Broadcasting System cannot be determined as the supply of free services, and thus, it cannot be applied by analogy the formula of Article 61(1).

[3] The proviso of Article 1 (1) of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994) provides that a non-profit domestic corporation shall impose corporate tax only on the income accrued from profit-making business or income specified in the following subparagraphs, notwithstanding its articles of incorporation or the purpose of its rule. Since profit-making business or income generated from profit-making business falling under subparagraphs 1 through 7 of the above proviso includes profit-making business or income-making business which is subject to corporate tax, income generated from such business shall be subject to corporate tax regardless of whether it is intended to achieve the proper purpose of the non-profit corporation, and since broadcasting business operated by the Korea Broadcasting System is services free of charge, it shall not be deemed as profit-making business. Thus, Article 1 (1) 1 of the former Corporate Tax Act provides that a non-profit domestic corporation subject to corporate tax shall be subject to corporate tax under Article 1 (1) 3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 1961 of the Enforcement Decree of the Income Tax Act). 13200, Jan. 14, 197, etc.

[1] Article 35 (see Article 64 of the current Broadcasting Act), Article 36 (see Article 65 of the current Broadcasting Act), Article 37 (see Article 66 of the current Broadcasting Act) and Article 7 (3) and Article 12 (1) 7 of the former Value-Added Tax Act (Amended by Act No. 5032, Dec. 29, 1995); Article 17 (1) and (2) of the former Value-Added Tax Act (Amended by Act No. 5032, Dec. 29, 1995); Article 61 (1) of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 14863, Dec. 30, 195) / [2] Article 17 (1) and (4) of the former Value-Added Tax Act (Amended by Act No. 14863, Apr. 16, 1994>

Korea Broadcasting System (Law Firm Vindication, Attorneys Gyeong-soo et al., Counsel for defendant-appellant)

Republic of Korea and one other (Attorney Go Young-deok, Counsel for the defendant-appellant)

Seoul High Court Decision 97Na43552 delivered on August 21, 1998

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined (to the extent of supplement in case of the supplemental appellate brief written after the lapse of the submission period).

1. Regarding the part related to value-added tax

Receiving fees shall be collected from persons holding a television receiver for the purpose of receiving television broadcasts [Article 35 of the former Korean Broadcasting System Act (amended by Act No. 4264, Aug. 1, 1990); the amount of receiving fees shall be deliberated and determined by the board of directors of the Korean Broadcasting System; the Korean Broadcasting System shall be imposed and collected by the Minister of Information (Article 36 of the current Korean Broadcasting System); and the Korean Broadcasting System shall impose and collect from persons who fail to register a television or have failed to pay a receiving fee (Article 36 of the same Act); and the Korean Broadcasting System shall collect additional charges or additional charges in the same manner as delinquent national taxes are collected from those delinquent (Article 37 of the same Act). In light of each of the above provisions, receiving fees shall be deemed special charges imposed on specific groups holding a TV set in order to meet expenses for specific public service projects, which are public broadcasting business. Accordingly, it shall not be deemed as fees paid for the services of the Korean Broadcasting System.

Therefore, unless there are other special circumstances to recognize a quid pro quo relationship, such as the recognition of a quid pro quo relationship, among the broadcasts offered by the Plaintiff, it constitutes a free supply of services in relation to the general viewers. Thus, it is subject to an exemption of value-added tax under Article 7 (3) of the former Value-Added Tax Act (amended by Act No. 5032 of Dec. 29, 1995; hereinafter the same shall apply). The broadcasting business operating such business cannot be deemed to constitute a taxable business of value-added tax. On the other hand, Article 12 (1) 7 of the same Act of the same Act of the same Act of the same Act of the same Act of the same Act of the broadcast is excluded from value-added tax, as the broadcast is provided as a object of value-added tax exemption, unlike the above broadcast

In addition, as seen above, the broadcasting business actually operated by the plaintiff does not fall under the value-added tax taxable business and the tax-free business, and under the Value-Added Tax Act, the plaintiff only runs the advertisement business which is a taxable business. Thus, in calculating the input tax amount to be deducted from the plaintiff's value-added tax, where calculating the input tax amount to be used for the broadcasting business and the advertising business, where the actual attribution cannot be separated, the main text of Article 61 (1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 14863, Dec. 30, 1995; hereinafter the same shall apply) concerning the concurrent operation of the taxable business and the tax-free business cannot be applied. The supply of broadcasting services by the plaintiff's receiving fee revenue cannot be determined as the supply of free services, and thus, it cannot be inferred to apply the formula provided in the main sentence of Article 61 (1) of the former Value-Added Tax Act.

Therefore, in calculating the input tax amount for advertising broadcast, the Plaintiff’s act of calculating the input tax amount for advertising broadcast in proportion to the ratio of the input tax amount for the gross income (the total income of both advertising fees and receiving fees) from the total input tax amount without distinguishing and confirming the parts recognized as relevant to the advertising business, and of reporting the amount of value-added tax calculated by deducting the amount shall be deemed unlawful in light of the aforementioned legal principles. However, the lower court’s determination that the said reporting act is reasonable on the ground that Article 61(1) of

However, in cases of taxes in the form of tax return such as value-added tax, in principle, the taxpayer's tax obligation is specifically determined by his/her own determination of tax base and amount and the payment thereof is the performance of specific tax obligation confirmed by his/her declaration. Since the State or a local government holds the tax amount paid based on the confirmed tax claim as such, it cannot be deemed as unjust enrichment unless the taxpayer's declaration becomes null and void as a result of a serious and apparent defect. Here, as to whether the defect in the act of return constitutes void as a matter of course due to a significant and apparent defect, the purpose, meaning, function, and legal remedy for the defect in the act of report should be examined as a basis for the act of report, and it should be determined reasonably by examining the specific circumstances that resulted from the act of report individually (see, e.g., Supreme Court Decisions 94Da60363, Dec. 5, 1995; 97Da8427, Nov. 11, 1997).

However, in the records of this case, the plaintiff did not account separately from that belonging to profit-making business in the course of accounting management. As such, there may be room for dispute as to whether the main text of Article 61 (1) of the former Enforcement Decree of the same Act can be applied by analogy in the case where the plaintiff concurrently operates a business that does not fall under a taxable business and a taxable business. In light of the fact that the plaintiff paid the value-added tax without any objection, but he was pointed out that the payment of the plaintiff's corporate tax was unfair at the time of inspection of the National Assembly in 1993, it is difficult to view that the above defect is apparent from external appearance, and therefore, as long as the reported act of this case cannot be recognized as null and void, the court below's error does not affect the conclusion of the judgment, and the plaintiff's ground of appeal pointing this out

2. As to the part related to corporate tax, defense tax, and resident tax to be imposed

On the other hand, the court below stated that the proviso of Article 1 (1) of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994; hereinafter the same) only imposes corporate tax on a non-profit domestic corporation on the income accrued from the following profit-making business or income, notwithstanding its articles of incorporation or rules, and lists profit-making business or income subject to corporate tax under subparagraphs 1 through 7 of the above proviso, regardless of whether the income generated from the profit-making business or income falls under subparagraphs 1 through 7 of the above proviso is subject to corporate tax, since the broadcasting business is deemed to be a free-of-charge business, and thus it cannot be deemed to be a profit-making business of the plaintiff. Since the above proviso of Article 1 (1) 1 of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994; hereinafter the same) provides that the plaintiff is not obligated to pay corporate tax under Article 1 (1) 9 of the former Enforcement Decree No. 13 of the Corporate Tax Act.

3. Therefore, the appeal is dismissed, and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Im-soo (Presiding Justice)