[1] Requirements to deduct the input tax amount of value-added tax by an entrepreneur who trades with a nominal master business operator

[2] In a case where the tax authority imposed value-added tax on Company A on Company A by deeming the actual supplier and the supplier on the tax invoice as a different tax invoice when the Party A received the tax invoice from the customer, the case affirming the judgment below holding that the input tax amount of the above tax invoice should be deducted or refunded from the output tax amount because the Party A did not know that the actual supplier had disguised the name of the business owner, and it was not negligent in not knowing that the actual supplier

[1] Article 17(2)1-2 (see current Article 39(1)2) of the former Value-Added Tax Act (Amended by Act No. 9915, Jan. 1, 2010) / [2] Article 17(2)1-2 (see current Article 39(1)2) of the former Value-Added Tax Act (Amended by Act No. 9915, Jan. 1, 2010)

Gacheon Metal Co., Ltd. (Law Firm Sejong, Attorney Lee Byung-hee, Counsel for the plaintiff-appellant)

Head of Eastern Tax Office

Seoul High Court Decision 2012Nu2247 decided February 7, 2013

Seoul Pedestrian District Court Decision 201Guhap21263 Decided December 21, 2011

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

The grounds of appeal are examined.

The main text of Article 17(2)1-2 of the former Value-Added Tax Act (amended by Act No. 915, Jan. 1, 2010) provides that an input tax amount shall not be deducted or refunded from the output tax amount in cases where a necessary entry item under Article 16(1)1 through 4 is entered differently from the fact on the delivered tax invoice. Thus, in cases where an entrepreneur and an actual supplier under a tax invoice have received a different tax invoice, in principle, the input tax amount shall not be deducted or refunded, but where an entrepreneur and an actual supplier under a tax invoice have received a different tax invoice, the said input tax amount may be deducted or refunded from the output tax amount, if there are special circumstances, such as the entrepreneur’s failure to know the fact of misrepresentation, and

According to the reasoning of the judgment below, the court below determined otherwise on the ground that the tax invoice in this case in the name of the actual supplier and the supplier on the tax invoice in the name of "Masia Resources (Non-Party 1), dlim resources (Non-Party 2)" and scopic metal (non-Party 3) which the plaintiff received from the actual supplier in the first and second stages of 2009, constitutes a different tax invoice. However, in light of the following circumstances, the court below held that the disposition in this case was unlawful on the ground that the plaintiff did not know that the actual supplier of the closed Dong was a disguised business owner, and that the input tax amount of the tax invoice in this case should be deducted or refunded from the output tax amount because it is difficult to view that the actual supplier of the closed Dong was negligent in not only the fact that the actual supplier of the closed Dong was a disguised business owner, but also the actual supplier was negligent in not knowing the fact that it was a disguised business owner, and therefore,

In light of relevant provisions, legal principles, and records, the fact-finding and determination by the court below are just, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the input tax deduction or refund of tax invoices which are different from the facts.

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

Justices Kim So-young (Presiding Justice)