In a case where Gap corporation, which is a telecommunications business operator, supplied mobile phone terminals to its agencies and reported and paid the value-added tax, did not deduct subsidies from the value-added tax base, and thereafter filed a claim for correction for the reduction and refund of value-added tax on the grounds that such subsidies fall under the discount under Article 13 (2) 1 of the former Value-Added Tax Act, the case holding that the above disposition of rejection was lawful,

In a case where Gap corporation, which is a telecommunications business operator, entered into a contract on entrustment of business with an agency and provided mobile phone devices to the agency, did not deduct the value-added tax base when it reported and paid the mobile phone purchase subsidies from the agency, and subsequently filed a request for correction for reduction and refund of value-added tax on the ground that such subsidies fall under the discount under Article 13 (2) 1 of the former Value-Added Tax Act (amended by Act No. 9915 of Jan. 1, 2010), but the tax authority rejected the request, the case holding that, in a case where Gap corporation and its agent met the requirements for subsidies, it is difficult to conclude that there was an agreement between Gap corporation and its agent to sell the mobile phone purchase subsidies at a discounted rate, and it is related to the mobile phone supply transaction between Gap corporation and its subscribers, and the agent of Gap corporation and its agent are related to the mobile phone supply transaction, on the premise that the agent had the agreed subsidy claims as stipulated in the terms and conditions of use against Gap corporation's agent, and thus, it cannot be viewed as legitimate in the above amount of the agency supply.

Article 13(2) of the former Value-Added Tax Act (Amended by Act No. 915, Jan. 1, 2010; see current Article 29(5)1); Article 52(2) of the former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 23595, Feb. 2, 2012); Article 36-4 of the former Telecommunications Business Act (Amended by Act No. 10166, Mar. 22, 2010; see current Article 50)

KT Co., Ltd. (Bae, Kim & Lee LLC, Attorneys Han-soo et al., Counsel for the defendant-appellant)

The head of the Song-Pacific District Tax Office and 12 others (Attorneys Kim Su-soo et al., Counsel for the plaintiff-appellant)

Seoul Police Agency Decision 2011Guhap5612 decided September 13, 2012

July 24, 2013

1. Revocation of the first instance judgment.

2. The plaintiff's claims against the defendants are all dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

[Attachment] The date of refusal disposition" in the list of the Defendants shall be revoked the refusal disposition as to each request for correction stated in the list "total amount of reduction claim (amount of refund claim)" in the corresponding date of each Defendants.

2. Purport of appeal

The judgment of the first instance is revoked. All of the Plaintiff’s claims against the Defendants are dismissed.

1. Details of the disposition;

The court's reasoning for this part is the same as the corresponding part of the reasoning of the judgment of the court of first instance. Thus, this part of the judgment is cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Whether the disposition is lawful;

A. Summary of the parties' assertion

(1) Plaintiff

(A) The provisions of the former Telecommunications Business Act (amended by Act No. 7916, Mar. 24, 2006; hereinafter the same) were amended so that a telecommunications business operator may subsidize the purchase cost of a device to a user meeting certain requirements, and were enforced from March 27, 2006. The Plaintiff, around that time, determined that a subscriber, who met the requirements for subsidies for purchasing a device, sells a device at a discount equivalent to the amount of subsidies (hereinafter “subsidies support requirements”) by implementing sales policies for selling the device at a discounted rate in accordance with the sales policies, agreed to sell the device at a discounted rate for the amount of subsidies between the agency and the agency, and posted sales policies for the agency’s place of business.

(B) The Plaintiff supplied a device to an agency as the arm’s length price in accordance with the above sales policy, and had the agency sell the device at a discount equivalent to the amount of the subsidy, and only received the remainder from the agency after deducting the amount of the subsidy from the arm’s length price of the device. Thus, the instant subsidy constitutes “amount of discount” under Article 13(2) of the former Value-Added Tax Act (amended by Act No. 19915, Jan. 1, 2010; hereinafter the same shall apply) and Article 52(2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 23595, Feb. 2, 2012; hereinafter the same shall apply) and is not included in the tax base of value-added tax.

(C) Therefore, the instant refusal disposition on a different premise is unlawful.

(2) The Defendants

(A) The Plaintiff and the agency’s subscriber, who meets the requirements for subsidies, has sold the device supplied by the Plaintiff at a discount in the amount of the subsidy at the arm’s length price, and the Plaintiff also did not agree to discount the amount of the subsidy from the value of the terminal supply to the agency

(B) The instant subsidy is paid directly by the Plaintiff to support the purchase cost of a device necessary for the use of the mobile phone service for the purpose of attracting subscribers to the mobile phone service. It is only related to the mobile phone service supply transaction between the Plaintiff and the Plaintiff and the agency, and is not related to the mobile phone supply transaction between the Plaintiff and the agency, and thus, it cannot be deducted from the supply value of the device between the Plaintiff and the agency. Therefore, it is not included in the tax base

(C) Therefore, the instant refusal disposition is lawful on the same premise.

B. Relevant statutes

[Attachment] The entry in the relevant statutes is as follows.

C. Facts of recognition

(1) The Plaintiff entered into a consignment agency contract with an agent to commission the agent to operate the mobile communications business, etc., and to pay a fixed fee when the agent performs the entrusted business. Some of the terms of the consignment agency contract are as follows.

(2) The payment of the following fees to the agency may be changed to an agreement between the parties regardless of the term of the contract under this Agreement:

(2) Article 36-4 of the former Telecommunications Business Act prohibits, in principle, a telecommunications business operator from subsidizing purchase costs of a device necessary for the use of key telecommunications services provided by him/her, and exceptionally permits users meeting certain requirements to provide support for purchase costs of a device, but allows a telecommunications business operator to specify the support standards, etc. in the terms of the terms of use and to post them on the agency’s own and the agency’s place of business.

(3) Accordingly, the Plaintiff specified the criteria, etc. for subsidizing the purchase cost of a mobile phone service provider that it provides, in the terms and conditions of mobile telephone service (W-SMA service). The main contents of the criteria are as follows.

Article 34 (Establishment of Subsidies for Mandatory Agreement) ① Company may set the period of compulsory use on condition of subsidizing expenses for purchasing a device at the time of new subscription of a user or change of equipment (hereinafter referred to as “subsidies”). ① Where a company provides a subsidy under paragraph (1) of this Article, it shall pay the subsidy only to a new device that is not able to sell it at the place of business which has entered into an entrustment contract with the company. ② Company may change the amount of the subsidy at the risk of individual agreement between the customer and the company. ③ Company may confirm the amount of the subsidy in accordance with the needs for business policies. ③ Customer is provided with the terms and conditions of the contract before the expiration of the period of compulsory use (including transfer of the contract by payment of charges, terminal damage, etc.). ② The amount of penalty for breach under paragraph (1) of this Article shall be provided separately from the amount of penalty for breach of contract under paragraph (3) of this Article:

[Reasons for Recognition] Evidence No. 4-1, 2, Evidence No. 7-1, 7-6, the purport of the whole pleadings

D. Determination

(1) Article 13(2) of the former Value-Added Tax Act provides that "the amount falling under any of the following subparagraphs shall not be included in the tax base of value-added tax." Article 52(2) of the former Enforcement Decree of the Value-Added Tax Act provides that "the overcharge amount under Article 13(2)1 of the Act shall be the amount which deducts a certain amount from the ordinary supply value at the time of supply of the goods or services in accordance with the terms of quality, quantity, and payment of the cost of delivery and supply, and other terms and conditions of supply in the supply of the goods or services." As alleged by the Plaintiff, in order to fall under the "overcharge amount" under the former Value-Added Tax Act and the Enforcement Decree of the same Act, the overcharge amount under Article 13(2)1 of the former Value-Added Tax Act shall be the amount directly deducted from the supply value of the device.

(2) In light of the above legal principles, comprehensively taking account of the following circumstances, the facts acknowledged earlier and the purport of the entire argument in each of the statements Nos. 7 through 15 (including paper numbers), the instant subsidies cannot be viewed as the amount that the Plaintiff directly deducted from the value at the time of supply under certain conditions while supplying the device to the agency, and thus, are not included in the amount of discount under the former Value-Added Tax Act, and thus, they are included in the tax base of value-added tax. Accordingly, the instant rejection disposition prior to such premise is lawful.

(A) In light of the circumstances cited below, it is difficult to deem that there was an agreement between the Plaintiff and the agency to sell the device at a discounted rate, in a case where the Plaintiff and the agency meet the requirements for subsidization.

① In light of the record, there is no clear evidence to prove that there was an agreement between the Plaintiff and the agency on the sale of a device discount as alleged by the Plaintiff, and the consignment agency contract only stipulates, “The supply price of goods supplied by the Plaintiff to the agency shall be determined on the basis of the ex-factory price determined and notified by the Plaintiff, and the supply price, credit date, volume of transaction, quality, delivery method, and other terms and conditions of transaction shall be changed depending on market conditions.”

② The Plaintiff appears to have cited a notice on the grant of subsidies for mobile phone services, which was posted by the Plaintiff at the agency’s place of business, as alleged in the Plaintiff’s assertion. However, it appears that the Plaintiff’s performance of the duty under Article 36-4(3) of the former Telecommunications Business Act, which allowed the Plaintiff to provide subsidies to subscribers of mobile phones, such as himself/herself, but allowed such subsidies to be posted at the agency’s place of business so that users can know the standards for such subsidies. As such, it is difficult to readily conclude that there was an agreement between the Plaintiff and the agency on the grant of subsidies for mobile phone services solely on the ground that the Plaintiff posted a notice on the grant of subsidies for the agency’s place of business.

(B) In the case of the ordinary mobile phone service, there exists separate distinction between the supply of mobile phone services and the supply of terminal devices between the third parties, such as the Plaintiff, agencies, and subscribers. In light of the relevant provisions of the former Telecommunications Business Act and the Plaintiff’s text and contents of the terms of the Plaintiff’s mobile phone service use agreement, the instant subsidies are paid to support the purchase cost of terminal devices between the Plaintiff and the Plaintiff. It is apparent that the instant subsidies are related to the mobile telephone service supply transaction between the Plaintiff and

① Article 36-4 of the former Telecommunications Business Act prohibits, in principle, a telecommunications business operator from subsidizing purchase costs of a device necessary for the use of key telecommunications services provided by him/her; however, Article 36-4 of the former Telecommunications Business Act provides that users may exceptionally allow such assistance; exceptionally, allowing the relevant Minister to report the relevant standards; and allowing the relevant Minister to specify such standards in the terms and conditions of use; and posting them at the place of business

② Article 34 of the Plaintiff’s Terms and Conditions for Use of Mobile Services provides that a company may set the period of compulsory use on condition that it provides subsidies for the purchase of a device at the time of new subscription of a user or change of a device, but provides for specific matters, such as setting the period of compulsory use, the amount of subsidies, the price of a device, and the calculation method of the amount of subsidies to be returned, in accordance

(C) Under the premise that the Plaintiff and the agent did not settle the cost of the device by directly deducting the instant subsidy from the value of supply of the device supplied to the agent, but the account holder had the contractual subsidy under the terms and conditions of use against the Plaintiff, it seems that the agent settled the amount of the device by offsetting the above claim succeeded from the account holder and the claim against the Plaintiff’s agency against the Plaintiff’s agent.

① The settlement settlement balance sheet is a computer system prepared to manage and settle claims and obligations arising from the consignment agency contract between the Plaintiff and the agency. The details of various claims and obligations between the Plaintiff and the agency are classified in a summary on a given basis according to a certain standard. The details of the settlement settlement balance sheet include the “acting basic type bonds,” “acting-combined bonds,” and “acting-type + bonds”. The above claims are related to the contract subsidies provided by the Plaintiff to the subscribers who purchased the mobile phone services in accordance with the contract terms and conditions for mobile phone services, and are classified into claims against the Plaintiff succeeded by the agency. In this regard, the agency sells the terminal at the supply price at the time of supply to the subscribers who meet the requirements for subsidies, and in fact, the agency appears to substitute the payment of part of the sales proceeds in the manner of receiving the contract subsidies from the subscribers, and in light of the fact that some agencies are receiving the sales proceeds of the terminal in the above manner from the subscribers, it is reasonable to view that there is a balance in the supply price at the time of supply from the agency.

② According to the relevant provisions of the former Value-Added Tax Act and the former Enforcement Decree of the Value-Added Tax Act, where an entrepreneur who supplied goods or services issues a tax invoice and then an amount added or deducted from the value of supply due to termination, etc. of a contract, the revised tax invoice may be issued. If the Plaintiff and the agent agreed to sell a device discount contract as alleged by the Plaintiff, and the agent sold the device at a discounted rate of the subsidy amount after receiving the device from the Plaintiff, then the agent sold the device at a discounted rate of the subsidy amount, this constitutes a case where the amount deducted from the value of supply of the device after issuing the Plaintiff’s tax invoice, and the Plaintiff was unable to issue the revised tax invoice, which reflects the amount deducted from the value of supply at the time of supply as at the end of March 206.

(라) 부가가치세는 모든 거래 단계마다 과세하는 다단계 거래세로서 당사자가 선택한 법률관계를 기초로 하는데, 위 ㈐항에서 살펴본 바와 같이 원고와 대리점은 그들 사이의 단말기 대금을 공급 당시의 공급가액에서 보조금 액수를 직접 공제하는 방식이 아니라 대리점이 단말기를 구입한 가입자로부터 승계받은 원고에 대한 보조금채권으로 상계하는 방식으로 정산하는 법률관계를 선택하였고, 원고는 보조금 지원을 시작한 이래로 현재에 이르기까지 위 법률관계를 기초로 하여 이 사건 보조금을 판매장려금으로 인식하고 그에 맞추어 회계처리를 한 후 회계법인의 감사를 거쳐 법인세를 신고납부하였는바, 원고의 위 회계처리 및 세무신고는 원고와 대리점 사이의 단말기 공급과 관련한 거래의 실질을 잘 반영하고 있을 뿐만 아니라, 이동통신회사가 지급하는 단말기 보조금을 이동통신회사가 가입자 유치를 위하여 지출하는 판매촉진비와 유사한 당기 비용으로 인식하여 회계처리를 하도록 하는 현행 기업회계기준에도 부합한다.

(E) The Plaintiff asserts that the agreement between the Plaintiff and the Plaintiff on the sales of the instant device and the Plaintiff’s sales of the device paid to the Plaintiff is identical to the amount of discount under the Value-Added Tax Act (Supreme Court Decision 2001Du67586, Apr. 25, 2003; hereinafter “new century telecommunications case”). However, in the case of the new century telecommunications service, it is difficult to view that the Plaintiff’s new telecommunications service supplier’s sales of the device was related to the Plaintiff’s sales of the device at the time of the new telecommunications business to provide the Plaintiff’s sales of the device at a discount rate on December 31, 1996, on the other hand, it is difficult to view that the Plaintiff’s new telecommunications service supplier’s sales of the device was related to the Plaintiff’s sales of the device at the time of the new telecommunications service supplier’s offering of the equipment at a discount rate of 17th century with the Plaintiff’s new telecommunications service supplier’s sales of the device.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is unfair in conclusion, and it is so decided as per Disposition by accepting the defendants' appeal.

[Attachment of Related Acts and Subordinate Statutes]

Judges Cho Dong-dong (Presiding Judge)

Note 1) Two copies of the trial records, 706 pages

Note 2) Evidence A 4-1, 2

Note 3) Gap evidence 5 (KTF WMA Clause Subsidies)

1. Where a telecommunications business operator supports users, whose period of use of the common telecommunications services provided by the same telecommunications business operator, is at least 18 consecutive months on the basis of the date of subsidization for purchase costs: Provided, That this shall be limited to one time within two years, counting from the date of subsidization;

Note 5) Eul evidence 13-2

Note 6) Eul evidence 14-1, 2

Note 7) At the time of December 20, 1996, the new century communications requested the Minister of Information and Communication to grant approval for the extension of the term “MMA mobile phone sales period”. However, the Minister of Information and Communication denied the request for extension approval on December 21, 1996 (No. 8-5).