Incheon District Court-2014-Gu -32633 (Law No. 24, 2015.09)

Whether the claim of this case can be deducted from bad debt

(1)In order to obtain a refund of the value-added tax by filing an application for deduction of the amount of bad debts, there is an assertion and burden of proof that the taxpayer has a bad debts tax amount.

Article 17-2 of the Value-Added Tax Act

Seoul High Court 2015Nu61931 Revocation of Disposition of Refunding Value-Added Tax

AA

BB Director of the Tax Office

August 27, 2015

2016.99.24

The plaintiff's claim is dismissed.

Litigation costs shall be borne by the plaintiff.

1. Details of the disposition;

A. The Plaintiff, a corporation that runs a construction business, provided construction services toCC Co., Ltd. (hereinafter referred to as “Non-Party Co., Ltd.”), and issued a tax invoice. However, the amount of the outstanding construction payment as of 2009 was KRW 11,025,00,000 on the ground that it did not receive service costs from the non-party company

B. On September 2010, the non-party company was subject to a disposition on deficits with respect to the amount of national taxes in arrears, and on October 23, 2013, the Plaintiff deemed that the amount of the above credit against the non-party company has become final and conclusive, and filed a claim for rectification with the Defendant for reduction of KRW 1,002,313,637 of value-added tax for the second period of No. 2

C. However, on November 14, 2013, the Defendant rendered a disposition rejecting the Plaintiff’s claim for rectification on the ground that the extinctive prescription of the claim for the construction amount receivable in the year 2009 was not completed as of the second taxable period in 2010, and the period of bad debt has not yet arrived.

D. On December 9, 2013, the Plaintiff corrected the amount of a claim for correction to be reduced to KRW 954,545,780, and thereafter filed an objection against the above disposition by the Defendant. The Defendant reviewed the above objection and decided to re-examine on December 26, 2013.

E. After re-investigation, the Defendant recovered KRW 3,560,00,000 among the claim for the payment of construction cost as a check or a promissory note (hereinafter “the Promissory note, etc.”) issued by E-E by the representative director of the non-party company, and thus, 3,296,00,000 remaining after excluding the outstanding amount of KRW 264,00,000,000 among them, did not accept the application for a bad debt tax credit, and thus, on February 10, 2014, the Defendant notified the non-party company that the amount of KRW 605,17,363 among the claim for a rectification of the reduction of value-added tax amounting to KRW 954,545,78,417 should be refunded, and the remaining amount of KRW 349,368,417 should be refused (hereinafter “the instant refusal disposition”).

F. On April 24, 2014, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service, but was dismissed on July 11, 2014.

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

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

Despite the fact that the Plaintiff paid the construction price to the subcontractor by borrowing promissory notes, etc. issued by EE from EE with the trade name of “D”, the non-party company's rejection of the application for the deduction of bad debt tax amount of KRW 3,296,000,000, excluding the unpaid 264,000,000, out of the face value of promissory notes, etc. issued by EE, is illegal, even though the non-party company did not pay the construction price to the Plaintiff by borrowing promissory notes, etc. to E., the non-party company is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

The value-added tax that adopts the pre-stage tax credit system, unlike income tax and corporate tax, has the form of transaction tax imposed on the external appearance of transaction, which is not a substantial income, and thus, the tax base of value-added tax is the total value of the supply of goods, etc. In addition, if the entrepreneur fails to receive the price for the reason of bankruptcy, bankruptcy, etc. after the entrepreneur supplied goods, etc. on credit, the entrepreneur suffers economic losses as well as the value-added tax paid by the State. Article 17-2 of the Value-Added Tax Act provides for a bad debt tax credit system that is imposed by deducting the amount equivalent to the value-added tax that the entrepreneur has not received from the other party in order

In addition, since the bad debt tax deduction system is an exceptional system to prevent economic loss of value-added tax taxpayers, there is a claim and burden of proof about the taxpayer's bad debt tax in order to get the refund of value-added tax by applying for a deduction of bad debt tax amount. Whether the value of supply of goods, etc. is impossible to be recovered or not should be determined objectively according to social norms by comprehensively taking into account the specific details of transactions and the circumstances after it

However, the evidence submitted by the Plaintiff alone is insufficient to recognize that the Plaintiff borrowed the Promissory Notes, etc. from the EE individual rather than paying the construction cost of the amount equivalent to the Promissory Notes, etc. of this case. This is also true even when comprehensively considering the following: (a) evidence Nos. 14-1 through 9, evidence No. 15-1 through 14, evidence No. 16-1 through 16, evidence No. 17, evidence No. 18-1 through 9, evidence No. 18-1 through 19, evidence No. 19-3, and evidence No. 20.

Rather, each of the above evidence, Gap evidence Nos. 5-1, 2, 7, 8-1 through 56, 10-1, 2, Eul evidence Nos. 1 through 15, 11-1, 11-2, and Eul evidence Nos. 1-1 through 3, 2-1 through 9, 3-5, and all of the pleadings can be seen as having paid the plaintiff the construction price equivalent to the amount of the promissory note, etc. of this case, according to the following circumstances, the non-party company can be deemed as having paid the plaintiff the construction price. Thus, the construction price for this portion shall not be subject to a deduction of the bad debt tax amount.

① In the event that the non-party company is liable for the construction cost of approximately KRW 11.2 billion against the Plaintiff, it appears that the representative director of the non-party company lent to the Plaintiff the instant promissory note, etc. equivalent to KRW 3.5 billion. The Plaintiff also borrowed the instant promissory note, etc. from the representative director of the non-party company to the non-party company and borrowed the amount equivalent to its face

It is difficult to expect repayment.

② The non-party company entered into accounts with the instant promissory note, etc. as the repayment of the credit purchase amount to the Plaintiff, and accordingly, the Plaintiff also entered into accounts as the collection of the outstanding amount of construction work against the non-party company with the instant promissory note, etc. In response, it may be deemed that there was an error if the accounting was made only on one side of the non-party company or the Plaintiff. However, insofar as the non-party company and the Plaintiff entered into accounts as the payment of the Plaintiff’s construction work price with the instant promissory note

③ The Plaintiff asserted that the Plaintiff’s representative director or Kim Jong-hwan deposited money into the EE account and repaid the amount equivalent to the promissory note, etc., but it is difficult to conclude that the statement of subparagraphs 8-3, 11-1 and 2 of the evidence No. 8-2 is a repayment of the amount of the bill of exchange with the money deposited into the EE account. As long as the Plaintiff and the individual Kim Jong-hwan should be deemed a separate independent business entity, the Plaintiff

It cannot be deemed that the amount deposited by the representative director Kim Jong-hwan individual in the EE account has repaid the borrowed money by the Plaintiff.

④ In addition, it does not coincide with the amount equivalent to the face value of the instant Promissory Notes, etc. deposited by the Plaintiff or the Plaintiff’s representative director in the account of EE.

⑤ Although the Plaintiff asserted that the Nonparty Company is only a formal executor, there is no evidence to acknowledge this.

3. Conclusion

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