Cho Jae- 2017-Mining-186 (O2, 2017.06.02)

common purchase tax amount of slaughter operators who engage in a concurrent business with tax exemption shall be calculated in accordance with the ratio of the value of supply.

Since the common input tax amount of slaughter business operators engaged in concurrent business (tax exemption for self-Slaughter, and tax exemption for entrusted livestock) cannot be classified into actual attribution depending on the number of slaughters, the common input tax amount shall be calculated in proportion to the ratio of the value of supply.

Article 81 of the former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 26983, Feb. 17, 2016)

Jeonju District Court 2017Guhap2001

AA Corporation

BB Director of the Tax Office

on October 02, 2018

on October 30, 2018

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The defendant's rejection disposition against the plaintiff on November 22, 2016 shall be revoked.

1. Details of the disposition;

(a) The Plaintiff’s concurrent business of taxation and tax exemption;

1) The Plaintiff is a company established on November 19, 1984 for slaughter business, etc.

2) The Plaintiff concurrently operates value-added tax exemption business, such as slaughter, processing, and meat sales business of raw and raw milk purchased for sales purposes (hereinafter referred to as “self-Slaughtering business”) and value-added tax taxable (hereinafter referred to as “entrusted slaughter”) that provides slaughter and processing services on commission from others.

3) From 1st to 2nd 2015, the Plaintiff’s number of raw milk and raw milk slaughtered is as follows:

(Omission of Table)

B. Plaintiff’s value-added tax return

1) From 1st to 2nd 2015, the Plaintiff’s taxation supply value, and the tax exemption supply value are as listed below.

(Omission of Table)

2) When the Plaintiff reported value-added tax for the period from the first half to the second half of 2015 (hereinafter “instant taxable period”), the Plaintiff calculated the input tax amount related to the tax-free business subject to non-deduction in accordance with Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 26983, Feb. 17, 2016) regarding fixed assets, welfare expenses, repair expenses, consumption expenses, fuel disposal expenses, waste disposal expenses, electricity charges, etc. corresponding to the common purchase tax amount, which cannot be separated from the actual reversion.

C. Plaintiff’s request for correction and Defendant’s rejection disposition

1) On October 26, 2016, the Plaintiff filed an application for the reduction or correction of KRW 258,617,901 in total, on the grounds that the method of calculating the value-added tax for the instant taxable period based on the ratio of the supply value of the instant input tax amount initially reported to the Plaintiff on October 26, 2016, ought not be reasonable, and that the amount ought to be calculated proportionally based on the number of slaughters

(Omission of Table)

2) On November 25, 2016, the Defendant rejected the Plaintiff’s correction of reduction on the ground that Article 54(1) of the Enforcement Rule of the Value-Added Tax Act, which provides that the common input tax amount may be calculated proportionally based on the number of slaughters related to the taxable business and the tax-free business, shall be applied from the first taxable period of March 9, 2016, and that the provision regarding proportional distribution based on the number of slaughters cannot be applied in the instant taxable period (hereinafter “instant disposition”).

(d) Procedures of the previous trial; and

On February 15, 2017, the Plaintiff appealed to the Tax Tribunal, and the Tax Tribunal dismissed the Plaintiff’s appeal on June 2, 2017.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 and 5, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition, which is calculated in proportion to the supply value of taxable businesses and tax-free businesses pursuant to Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act, is unlawful on the following grounds against the standards for tax interpretation, the basic principles for the scope of deduction of the input tax of value-added tax, and

① Article 18(1) of the Framework Act on National Taxes provides that “In interpreting and applying tax-related Acts, property rights of taxpayers shall not be unduly infringed upon in light of the equity of taxation and the basic purpose of the pertinent provision.” Thus, if it is deemed that following the method of calculated calculation under Article 81(1) of the Enforcement Decree of the Value-Added Tax Act is remarkably unreasonable, the method of calculated calculation under the aforementioned provision need not be followed.

② The Plaintiff’s entrepreneur concurrently operating self-employed cattle and commission-free cattle business, and the commission-free cattle and self-employed cattle are slaughtered and processed at the same facility through the same expense, time, and process. As such, it is reasonable to view that the amount of goods and services jointly purchased is proportional to the number of each slaughter respectively. In light of the purport of the method of calculating the amount of common input tax on the input tax of value-added tax, it accords with the economic substance to calculate the input tax amount in proportion to the number of each slaughter.

③ On February 15, 2017, the Plaintiff filed a petition for a trial with the Tax Tribunal on the instant disposition, but the Tax Tribunal dismissed the Plaintiff’s petition for a trial on June 2, 2017. However, on August 24, 2017, the Tax Tribunal rendered a decision that the amount of common input tax in the same case as the instant case is reasonable to be calculated in proportion to the number of slaughters in proportion to the number of slaughters. If the instant disposition is not revoked, the amount of common input tax in the instant case is contrary to

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

According to Article 40 of the former Value-Added Tax Act (Amended by Act No. 15223, Dec. 19, 2017) and the main sentence of Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act, an entrepreneur’s taxable business and tax

Where concurrent operation of business, etc., an input tax amount related to the taxable business, tax-free business, etc. shall be calculated according to the actual attribution, but where there is an input tax amount which cannot be separated from the actual attribution (hereinafter referred to as "common input tax amount"), the input tax amount related to the tax-free business, etc. shall, in principle, be calculated proportionally according to the ratio of

Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act, which provides for the method of calculating the amount of input tax not deducted from the amount of output tax pursuant to delegation under Article 39(2) of the former Value-Added Tax Act, provides for the method of calculating the amount of common input tax, shall be the legislative order issued by the President pursuant to Article 75 of the Constitution with respect to the matters delegated by the Act. Meanwhile, in light of the content and legislative intent of Article 81(1) of the Enforcement Decree, the above provision cannot be deemed to be merely an example provision that makes it possible to distribute the amount of common input tax in any other way at any time without recourse to the method of calculating the calculated amount of tax prescribed by the above provision, and thus, the amount of common input tax that cannot be separated from the actual input tax amount shall be calculated in accordance with the above provision, unless there are special circumstances to deem that it would be remarkably unreasonable (see, e.g

The instant input tax amount falls under the common input tax amount that is commonly used for both taxable businesses and tax-free businesses, and thus, is not subject to dispute between the Plaintiff and the Defendant. Since the Plaintiff had certain sales while running both taxable businesses and tax-free businesses in the instant taxable period, the input tax amount not deducted out of the common input tax amount should be calculated in accordance with the main sentence of Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act. However, in full view of the following circumstances, it cannot be deemed that there are extenuating circumstances to deem that calculating the instant input tax amount in proportion to the supply value of taxable businesses and tax-free business according to the method prescribed in Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act is considerably unreasonable, and thus, the instant input tax amount should be calculated in proportion to the amount calculated in accordance with the ratio of supply value of the taxable business

(1) The sales business of cattle and pigs purchased through slaughter is value-added tax-free business, and the sales business of cattle and pigs is the sales business of cattle and pigs, and the sales business of cattle and pigs entrusted with the collection of commission fees is value-added tax-free business. If the input tax amount of this case is calculated proportionally according to the ratio of the value of supply of the taxable business and the tax-free business, the value of supply generated from the portion of the tax-free business is the value of the Plaintiff purchased, slaughtered, processed, and sold after slaughter ( approximately KRW 4.2 million per 1 raw milk, KRW 5.5 million per 1 raw milk). The supply price generated from the portion of the taxable business is the fee for slaughter of cattle and pigs entrusted by another person ( KRW 1.3 million per 1 raw milk, KRW 88,00 per 1 raw milk, and KRW 80 per 1 raw milk). As a result, the supply price of the portion of the tax-free business and the portion of the tax-free business can be seen as an unreasonable supply price of cattle and pigs included in the taxable business.

② Under the main sentence of Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act, the allocation of a common input tax amount in proportion to the value of supply is limited to cases where the common input tax amount is related to the business part in which the common input tax amount has occurred and the business part in which the value of supply has been generated. If each business part is separated or independent, the common input tax amount shall not be divided based on the value of supply. In such cases, whether each business part is related to each other shall be determined by comprehensively taking into account relevant circumstances, such as the details and purpose of the provision of goods, etc., which are the grounds for the common input tax amount, type of business operation, common input tax amount, and the place relation between the place of business where the common input tax amount and the value of supply have occurred

The input tax of this case, as seen earlier, includes fixed assets, welfare expenses, repair expenses, expendable goods expenses, fuel expenses, waste disposal expenses, and electricity charges. The Plaintiff purchased cattle and pigs and sells meat after processing, and the supply price of the tax-free business portion includes the purchase price, slaughter and processing costs, and profits. Examining the details of the Plaintiff’s tax-free business, it seems that the instant input tax amount was used not only for the tax-free business but also for the process of slaughter and processing, and for the process of purchasing and selling cattle and pigs. The degree of contribution to the instant input tax amount is difficult to view that the instant input tax amount is accurately proportional to the number of cattle and pigs. Moreover, it appears that the input tax amount is related to the entire portion of the tax-free business portion that purchased cattle and pigs and sold meat after processing.

③ The Enforcement Decree of the Value-Added Tax Act amended by Presidential Decree No. 26983, Feb. 17, 2016; Article 81(1) provides that, where a person concurrently operates a taxable business and a tax-free business, if any common purchase tax exists, the input tax amount related to the tax-free business shall be calculated pro rataly according to the ratio of the supply price to the total supply price, excluding cases prescribed by Ordinance of the Ministry of Strategy and Finance, such as following the number of persons, etc.; Article 5 of the Addenda provides that Article 81(1) of the Enforcement Decree of the Value-Added Tax Act shall apply from the portion of the supply of goods or services for the taxable period that begins after January 1, 2016. Accordingly, the Enforcement Rule of the Value-Added Tax Act amended by Ordinance of the Ministry of Strategy and Finance No. 546, Mar. 9, 2016; Article 4 of the Addenda provides that the common purchase tax amount shall be calculated pro rataly in accordance with both taxable business and slaughter business.

In this case where Article 54(1) of the Enforcement Rule of the Value-Added Tax Act is newly established and enforced, the input tax amount of this case shall be calculated pro rataly according to the ratio of the value of supply of taxable businesses and tax-free businesses pursuant to Article 81(1) of the former Enforcement Decree of the Value-Added Tax Act solely on the ground that the Plaintiff asserts.

3. Conclusion

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

Relevant statutes

former Value-Added Tax Act (Amended by Act No. 15223, Dec. 19, 2017)

Article 38 (Mutual Aid Purchase Tax Amount)

An input tax amount deducted from the output tax amount refers to the following amounts:

1. Goods or services which an entrepreneur has used or received for the purpose of use for his own business;

Value-added tax on the value-added tax (including the value-added tax paid under Article 52 (4))

Article 39 (Non-Deduction of Purchase Tax Amount)

Notwithstanding Article 38, the following input tax amounts shall not be deducted from the output tax amount:

7. The input tax amount related to the tax-free business, etc. (including the input tax amount related to the investment for the tax-free business); and

An input tax amount related to land prescribed by Presidential Decree;

Matters necessary for the scope of input tax amounts not deducted pursuant to paragraph (1) shall be prescribed by Presidential Decree.

The determination shall be determined.

Article 40 (Proportional Distribution of Common Purchase Tax Amounts)

Where an entrepreneur concurrently operates a taxable business, tax-free business, etc., every kind related to the taxable business, tax-free business, etc.

The entry tax amount shall be calculated according to the actual attribution, and an input tax amount, the actual attribution of which is not distinguishable (hereinafter referred to as "in-depth attribution").

Common purchase tax amount) shall be prescribed by Presidential Decree, such as the ratio of the tax-free supply price to the total supply price.

In accordance with Presidential Decree, the standard (hereinafter referred to as "standard for distribution of common input tax amount") shall apply;

Acquisition tax shall be calculated by dividing it.

former Enforcement Decree of the Value-Added Tax Act (Amended by Presidential Decree No. 26983, Feb. 17, 2016)

§ 81. (Calculation of Proportional Distribution of Common Input Tax Amounts)

Where any taxable business, tax-free business, etc. is concurrently operated pursuant to Article 40 of the Act, an actual reversion is made.

Where an unclassified input tax amount (hereinafter referred to as "common input tax amount") exists, related to the tax-free business, etc.

An input tax amount shall be calculated proportionally in accordance with the following formula: Provided, That a preliminary return is made, if any:

The tax-free supply price (including the tax-free supply price; hereafter in this Article and the same shall apply) for the total supply price during the period.

The proportion of Article 82 shall be calculated in proportion to the ratio of the relevant tax and shall be settled in filing a final tax return.

Except as otherwise expressly provided for in paragraphs (1) through (5), matters necessary for the calculation of proportional distribution of common purchase tax amount shall be made.

The Ordinance of Ministry of Finance and Economy shall be prescribed.

Enforcement Decree of the former Value-Added Tax Act (amended by Presidential Decree No. 26983, Feb. 17, 2016)

§ 81. (Calculation of Proportional Distribution of Common Input Tax Amounts)

Where any taxable business, tax-free business, etc. is concurrently operated pursuant to Article 40 of the Act, an actual reversion is made.

Where an unclassified input tax amount (hereinafter referred to as "common input tax amount") exists, related to the tax-free business, etc.

An input tax amount shall be calculated as follows, except as otherwise provided by Ordinance of the Ministry of Strategy and Finance, such as personnel:

The preliminary return shall be calculated pro rata: Provided, That when a preliminary return is made, the total supply shall be made in the preliminary return period.

The tax-free supply price (including the value of the non-taxable supply; hereafter the same shall apply in this Article and Article 82) to the value

In proportion to the ratio, it shall be calculated in proportion, and the final tax return shall be settled.

Except as otherwise expressly provided for in paragraphs (1) through (5), matters necessary for the calculation of proportional distribution of common purchase tax amount shall be made.

The Ordinance of Ministry of Finance and Economy shall be prescribed.

Presidential Decree No. 26983, February 17, 2016>

Article 5 (Application Cases concerning Calculation of Proportional Distribution of Common Input Tax Amounts)

The amended provisions of Article 81(1) shall be supplied with goods or services in the taxable period that begins on or after January 1, 2016.

this section shall apply from this section to this section.

Enforcement Rule of the former Value-Added Tax Act (Amended by Ordinance of the Ministry of Strategy and Finance No. 546, Mar. 9, 2016)

Article 54 (Calculation of Proportional Distribution of Common Input Tax Amounts)

The total supply price under Article 81 (1) and (2) of the Decree shall be the common purchase tax amount under Article 40 of the Act (hereinafter referred to as "public purchase tax amount").

The value of supply for taxable projects in the relevant taxable period related to the amount of total purchase tax (the amount of total purchase tax) and Article 29 of the Act

The sum of the revenue amount of the tax-free business, etc. under paragraph (8) (hereinafter referred to as "tax-free business, etc.") shall be paid.

the value of the tax-free supply under the same paragraph shall be the tax-free business, etc. in the relevant taxable period related to the common purchase tax.

The revenue amount shall be the revenue amount of the tax.

Enforcement Rule of the former Value-Added Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 546 on March 9, 2016)

Article 54 (Calculation of Proportional Distribution of Common Input Tax Amounts)

1. In cases prescribed by Ordinance of the Ministry of Strategy and Finance, such as following the number of persons referred to in Article 81 (1) of the Decree:

A business operator who runs a business shall refer to cases where the amount of common input tax under Article 40 of the Act (hereinafter referred to as "common input tax amount") is calculated pro rata to the number of slaughters related to a taxable business and a tax-free business.

The total supply price under Article 81 (1) and (2) of the Decree shall be the sum of the supply price for taxable projects in the relevant taxable period related to the common purchase tax and the revenue amount for tax-free projects, etc. under Article 29 (8) of the Act (hereinafter referred to as "tax-free projects, etc."), and the tax-free supply price under the same paragraph shall be the revenue amount for the relevant taxable period related to the common purchase tax.

Addenda No. 546, Mar. 9, 2016>

Article 4 (Application Cases on Calculation of Proportional Distribution of Common Input Tax Amounts)

The amended provisions of Article 54 shall include the division on which the tax base is reported for the taxable period to which the enforcement date of these Rules belongs.

(z) shall apply.