2006Guhap4226 Disposition of revocation of Disposition of Value-Added Tax

Is 00(660117-Woo)

Sugpo-si Calculation Dong

Attorney Kang Dong-dong, Counsel for the defendant-appellant

Head of tax office

Litigation performer Park Ho-ho

January 25, 2007

January 25, 2007

1. The part exceeding 4,477,00 won of value-added tax for the year 205, which the Defendant imposed on the Plaintiff on October 13, 2006, and the part exceeding 8,930,780 won of value-added tax for the year 2006 and the part exceeding 408,543,340 won of value-added tax for the year 2006 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. One-fifth of the costs of lawsuit shall be borne by the plaintiff and the remainder by the defendant.

The Defendant’s disposition of imposition of value-added tax of KRW 221,227,60 for the year 205 against the Plaintiff on October 13, 2006 and value-added tax of KRW 408,543,340 for the year 2006 shall be revoked.

1. Details of the disposition;

A. On October 25, 2005, the Plaintiff is a person who operates an adult amusement game room (hereinafter “instant game room”) with the trade name of “00”, setting up 73 adult amusement game rooms at the top-dong, Sinpo-si, Sinpo-si.

B. In 2005, the Plaintiff reported the value-added tax base of KRW 18,893,00 in 200 and KRW 30,541,00 in 206 to the Defendant, and paid the value-added tax thereon.

C. On October 13, 2006, after conducting a tax investigation on the instant game room, the Defendant calculated the total input amount for the game machine as follows by applying 97% to the purchase amount of merchandise coupon receipts and supplementary cultural products kept in custody by the Plaintiff for the instant game room. The Defendant issued the instant disposition after correcting the value-added tax for the second period of 2005, with the difference between the tax base reported by the Plaintiff and the tax base (the second period of 1,878,950,000, KRW 3,637,639,000) for the second period of 2005, value-added tax for 221,227,60, and value-added tax for the first period of 1,206, KRW 408,543,340 for value-added tax for the first year of 206.

A person shall be appointed.

A person shall be appointed.

[Grounds for Recognition: Evidence No. 1-2, Evidence No. 1-2, Evidence No. 1-2, Evidence No. 3-4, and the purport of the body before oral argument]

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

First, in order to calculate the tax base of value-added tax, it is necessary to reasonably estimate the amount invested in the actual game by referring to the gift certificate purchase ledger, daily settlement statement, winning rate, use record, daily amount of gift certificates, daily amount of refund, daily amount of refund, daily income details, etc. However, since the defendant determined the value-added tax taxation standard of this case only with the plaintiff's statement that the gift purchase account book and the game machine are 97%, it is contrary to the principle of base taxation.

Second, the game of this case is a certain amount of contribution (97%) gift certificates when a game machine user inputs cash. It is illegal that the game of this case was not deducted from the tax base.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the first argument

The value-added tax shall be based on the tax invoice, account book, and other evidence, but if there is no such evidence or lack of important part, the amount of input money for the game may be estimated by applying the ratio of sales amount, etc. for a certain period under Article 69 of the Enforcement Decree of the Value-Added Tax Act (Article 21 of the Value-Added Tax Act). In addition to the purport of the body prior to the pleading in the statement in subparagraph 4, the plaintiff did not destroy and keep all the computerized data on which the defendant can confirm the input amount at the time of the investigation into the game of this case, and in relation to this, he only keeps the merchandise coupon purchase amount, and the defendant stated that the input rate of the game in this case is 97%. Accordingly, the defendant can recognize the fact that the purchase amount on the merchandise coupon receipt book (the merchandise coupon purchased by the plaintiff from the merchandise coupon dealer) stored in the game of this case is estimated by applying the input rate of 97% to the purchase amount on the game of this case. Thus, the plaintiff's assertion that did not refer to other data is unlawful.

(2) As to the second argument

(A) If the purport of the entire pleadings is added to the statements in the Evidence Nos. 3 and 4 above, the game of this case can be acknowledged the fact that the game of this case purchased the gift right of KRW 5,00 won at a face value of KRW 4,820 through KRW 4,833 from the original selling business entity of high-priced cultural products and stored in the game machine. The game machine users input 0,000 won in the game machine and play the game. If the requirements prescribed in the game are met, the above cultural product right is operated in the form of payment to the game user, and the winning rate of the game of the game of this case corresponds to 97%.

(B) However, even if the operating form of the game of this case is different by the number of persons who input cash in the game machine and who use it are likely to be provided with the right of cultural products due to the winning of games, if the winning rate per game itself is 97% SN, 97% of the input amount of the game machine cannot be paid to the game users at all times as the right of cultural products, the Plaintiff, a game room business entity, along with the service of using the game machine (3% of the input amount) and the goods of the right of cultural products (97% of the input amount), can be deemed as receiving cash in return for the provision of goods to the game machine users.

The subject of value-added tax is added value created in all stages where goods or services are produced, supplied, or distributed. Korea's value-added tax system adopted the pre-stage tax credit method and indirectly leads to the supply of goods or services without directly stipulating the value-added. Therefore, the law defines the subject of taxation as the supply of goods or services, which is an abstract transaction, instead of stipulating the value-added tax as the subject of taxation. Therefore, the supply of goods and services is only the subject of taxation, not itself, but is not subject to taxation. Furthermore, the supply of goods is premised on the transfer of the right to dispose of goods in fact and in law so that the goods can be used and consumed. The instant cultural property right does not constitute the supply of goods subject to value-added tax, such as direct permission for use or consumption, even if it is delivered or transferred with a monetary substitute bond that can be used in the same way as the currency. Accordingly, even if it is supplied, it cannot be deemed that the supply of goods constitutes the supply of goods subject to value-added tax (in general provisions 1-0-4 of the Value-Added Tax Act, purchase tax amount of checks, etc.).

In light of such legal principles, the "tax transaction" which is subject to value-added tax among cultural goods and services for the use of a game machine supplied by the Plaintiff to the game of this case should be limited to the part of the provision of the game of this usage. Of the total input amount, the part equivalent to the face value of cultural products rights should be deducted from the tax base (the Defendant asserts that the supply of cultural products rights in the game of this case is not deducted from the tax base because the supply of goods or services under Article 13(3) of the Act falls under the amount of incentives or similar amounts, after the supply of goods or services. However, the above provision argues that the incentive amount is not deducted from the tax base because the business operator pays a certain rate according to the sales performance of the transaction partner for the promotion of his own goods (the basic rule of the Value-Added Tax Act 6-16-3). In other words, if the total input amount should be viewed as the tax base of value-added tax, it cannot be deemed that the gift amount paid in the game of this case can be more than the total input amount of the supply of the game of this case.

(C) Therefore, the base of value-added tax for the second period of 2005 at the Plaintiff’s place of business is 56,918,181 won (the input amount of KRW 2,087,00,000: 1.1%). The base of value-added tax for the first period of 2006 is 110,060,000 won (the input amount of KRW 4,035,000 x 3: 1.1%). Accordingly, the value-added tax payable by the Plaintiff is as follows. Accordingly, the part of value-added tax for the second period of 221,227,60 won of value-added tax for the year 205 (the fraction of less than KRW 4,47,00 among the input amount of KRW 4,60 of value-added tax for the year 205 (the same shall apply to the fraction of less than 10 won under Article 48(1) of the Management of the National Funds Act), and the part of value-added tax shall be revoked more than 3084,384,384.

Value-added tax for 2005

(unit: Won)

A person shall be appointed.

Value-added tax for the first period of 2006

(unit: Won)

A person shall be appointed.

3. Conclusion

Therefore, the plaintiff's claim is justified within the above scope of recognition, and the remainder is dismissed as it is not reasonable. It is so decided as per Disposition.

Preliminaryity (Presiding Judge)

New Signals

Bo Young-young

Related Acts and subordinate statutes

Value-Added Tax Act

Article 1 (Objects of Taxation)

(1) The value-added tax shall be imposed on the following transactions:

1. Supply of goods or services; and

2. Import of goods.

(2) The term “goods” in paragraph (1) means all tangible things and intangible things which have property value.

(3) The term “services” in paragraph (1) means all services and activities other than goods, which have property value.

(4) The supply of goods or services naturally annexed to the supply of goods which is the main transaction shall be deemed to be included in such supply of goods, and the supply of goods or services inevitably annexed to the supply of services which is the main transaction shall be deemed to be included in such supply of services.

Article 6 (Supply of Goods)

(1) The supply of goods shall be the delivery or transfer of goods pursuant to all contractual and legal grounds.

Article 13 (Tax Base)

(1) The tax base of value-added taxes on the supply of goods or services shall be the aggregate of values under each of the following subparagraphs (hereinafter referred to as "value of supply"):

1. Where payments are given in money, the payments;

(3) Amount of discount, bad debts, bounty, and other similar amounts of money on the value of supply after goods or services are supplied, shall not be deducted from the tax base.

Article 21 (Settlement and Correction)

(2) Where the head of a regional tax office having jurisdiction over the place of business or the Commissioner of the National Tax Service determines or correctss the tax base and amount of tax payable or amount of tax refundable for each taxable period pursuant to paragraph (1), he/she shall do so on the basis of tax accounting books, account books, and other evidence: Provided, That in cases falling under any of the following subparagraphs, he/she

1. Where there is no tax invoice, account books or other evidence necessary for calculating the tax base, or parts of it are incomplete;

Enforcement Decree

Article 1 (Scope of Goods)

(1) The corporeal articles referred to in Article 1 (2) of the Value-Added Tax Act (hereinafter referred to as the "Act") shall include raw materials of commodities, machinery, buildings, and all other tangible articles.

(2) Intangible goods under Article 1 (2) of the Act shall include all tangible things other than tangible things having property value as others such as power, heat, and other natural forces and rights which can be managed.

Article 3 (Scope of Incidental Goods or Services) Any goods or services deemed included in the supply of goods or services which are the main transaction, pursuant to Article 1 (4) of the Act, shall be those as provided in the following subparagraphs:

1. Goods or services that are ordinarily included in the proceeds from supply of goods or services, the price of which is the main transaction; and

2. Goods or services deemed to be incidental to the supply of goods or services which are the main transaction in terms of transaction practices; and

3. Goods or services supplied contingent or temporarily in connection with the main business.

4. Goods produced naturally incidental to the production of the main goods in connection with the main business;

Article 69 (Methods of Determination and Revision by Estimation)

(1) Estimated amounts under the proviso of Article 21 (2) of the Act shall be as follows:

1. The method of calculating by way of a type of sphere with other partners in the same business, whose book keeping is deemed to be justifiable and whose report has not been corrected under the provisions of Article 21 (1) of the Act in good faith;

2. Where there exists any production ratio surveyed by the Commissioner of the National Tax Service on input raw materials by business type, the method of calculating the market price of the quantity supplied during the relevant taxation period to the production amount computed by applying such

3. When there is a business efficiency in which the Commissioner of the National Tax Service determines the relationship between the quantity and value of human and material facilities (employee guest rooms, business heads, vehicles, water supply, electricity, etc.) related to the business and the sales, the method of calculating by applying such business;

4. Calculation method by any of the following criteria determined by the Commissioner of the National Tax Service by type of business and by region:

(a) A unit input amount which determines the relationship between the partial or whole quantity, from among the raw or secondary materials input for production, and the quantity of production;

(b) A cost-related ratio which determines the relationship between the whole or part of expenses and sales among personnel expenses, personnel expenses, material expenses, waterworks, mining, heat, and other operating expenses;

(c) A commodities turnover rate which determines the relationship between the average stored amount during a fixed period and the sales amount or the sales price;

(d) A sales profit rate which determines the ratio of the sales to the gross sales profit during a fixed period;

(e) The value-added rate determined by the sales amount and value-added amount during a fixed period.

5. Where the ratio referred to in subparagraphs 2 through 4 may be computed on a businessman subject to the determination and revision of estimation, the method of calculation by applying this subparagraph;

6. For food, accommodation and service business, which are mainly traded for end-consumers, the method of calculating according to the membership inspection criteria determined by the Commissioner of the National Tax Service.