Review-department -2013-0154 ( October 11, 2013)

Whether an input tax amount, such as oil expenses, by a business operator operating an advertisement media industry and passenger transport business, constitutes a common input tax amount.

Purchase goods, such as oil expenses and components, constitute an input tax amount related only to passenger transportation business, which is a tax-free business, and thus, it may not be deducted from the output tax amount.

Article 61 of the Enforcement Decree of the Value-Added Tax Act

2013Guhap62329

○ Transport Co., Ltd.

○ Head of tax office

2014.026

2014.028

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 of filing an application for rectification of value-added tax of KRW 3,456,950 for the Plaintiff on February 15, 2013, KRW 209 for the second period 3,178,787 for the year 2010, KRW 4,223,111 for the second period 4,223,11 for the year 201, KRW 4,224,594 for the first period 4,519,923 for the second period 2, 2011, KRW 4,434,042 for the first period 1,201 for the year 201.

1. Details of the disposition;

A. The Plaintiff is a corporation that concurrently operates the urban bus passenger transport business exempt from value-added tax (hereinafter referred to as the “passenger transport business in this case”) and the advertising media business, which is a taxable business (the advertising media service business, which requires the Plaintiff to display advertisements inside and outside of the city bus and receives user fees from the provision of advertising media; hereinafter referred to as the “advertising business in this case”).

B. In 209 to 2012, the Plaintiff reported and paid the value-added tax without deducting the input tax amount from the input tax amount related to the passenger transport business of this case (hereinafter “the instant input tax amount”) on the following grounds: “The Plaintiff: (a) on January 23, 2013, on the grounds that the instant input tax amount is common input tax for the taxable business and the tax-free business; (b) on the grounds that “the instant input tax amount is a total of 24,037,407, which is divided in proportion to the value of supply, is the input tax amount deducted from the output tax amount for the instant advertising business; (c) on the grounds that the instant input tax amount is deducted from the output tax amount for the instant passenger transport business of this case; and (d) on the grounds that “the instant input tax amount is a total of 24,037,400 won, 950 won, 13,178, 2010 won, 24, 2314, 21414 won.

D. On February 15, 2013, the Defendant rendered a disposition of refusal of correction (hereinafter “instant disposition”) to the Plaintiff on the ground that “the instant input tax amount is all the input tax amount for the passenger transport business of this case,” and “E. The Plaintiff dissatisfied with the instant disposition and filed a request for examination on August 23, 2013, but was dismissed by the National Tax Service on October 11, 2013.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, 4, Eul evidence 1 to 3 (including provisional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The advertising that is conducted by attaching advertisements to the inside and outside of the city bus can be effective only by using the urban bus "operation" as a medium, and the △△△ newspaper company (hereinafter referred to as the "△△ newspaper company") also pays the advertising media user fee to the Plaintiff on the premise of this. Therefore, the instant input tax amount is the common purchase tax amount for the passenger transport business and the advertising business. Therefore, the instant disposition based on a different premise is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) The Seoul Metropolitan Government Transport Business Association, which represented the bus transport business entity in Seoul, including the Plaintiff, concluded an agency contract for urban bus advertising business with the Seoul Metropolitan Government newspaper company. The main contents are as follows (No. 4).

Article 2 (Definition of Terms) The terms used in this Agreement shall be defined as follows:

2-1. The bus transport business association (hereinafter referred to as the "association") shall be deemed to have entered into a contract on behalf of the company which delegates the matters concerning the use of the media for advertising business to the Association and shall be jointly and severally liable.

2-2. The term "acting for the advertisement business" means that △△ newspaper companies obtain authorization and permission necessary for the advertisement business of their Seoul Metropolitan City bus service, and design, manufacture, installation and management of advertisements, and attracting sponsors, etc. on behalf of △△ newspaper companies under the delegation by the association;

2-3. The term "media use fee" means the amount specified in this contract by △ newspaper companies to be paid by the associations or those designated by the associations in return for the payment of advertising business by proxy;

Article 5 (Scope of Business Agency)

5-1. The △△ newspaper company shall obtain all authorization and permission necessary for advertising business under this contract on the △△'s responsibility and account.

5-2. The △△ newspaper company shall take charge of attracting advertisements, manufacturing, installing, and maintaining advertising facilities at the expense of the △△ newspaper company.

VI.(Specifications, location of installation, installation, display and management of advertisements)

6-2. The association shall provide convenience in attaching advertisements by △△ newspaper companies to the relevant bus companies, fulfill the duties of a good manager in maintaining and managing the advertisements by the cooperatives and △△ newspaper companies, and shall be fully responsible for any violation of such duties.

Article 7 (Payment, etc. of Fees for Use of Media and for Use of Media)

7-1. The head of △△ newspaper company shall have the right to vicariously run the advertising business of the Seoul Metropolitan City Urban bus company for the period of the contract specified in this Agreement, and the user fee for media that is paid in return therefor shall be paid 218,690,000 won per month to a union or a person designated by the union

(2) In accordance with the above contract, the Plaintiff had a △△ newspaper company affix the advertisements produced by it to the inside and outside of the city bus, and received the media user fee in return for the operation of the bus with the advertisements affixed by △△ newspaper company.

D. Determination

(1) Where an entrepreneur concurrently runs a taxable business and a tax-free business, the input tax amount related to the taxable business and the tax-free business should be calculated based on the actual attribution (see, e.g., Supreme Court Decision 2007Du10389, Jul. 9, 2009). If the input tax amount is solely related to the tax-free business, it shall not be deducted from the output tax amount. Even if the advertising business of this case is premised on the operation of buses, it is naturally necessary to cover expenses incurred in the passenger transport business, which is the duty-free business, for the Plaintiff’s failure to run the advertising business of this case. The expenses incurred in designing, manufacturing, installing, and managing advertisements are entirely borne by △△ newspaper, and thus, the input tax amount of this case cannot be deducted from the output tax amount at the time of the declaration of tax-free goods (see, e.g., Supreme Court Decision 2007Du10389, Dec. 26, 2013; 2013Du13736, etc.).

(2) The following circumstances acknowledged by the legal principles as seen earlier and the above facts are as follows: ① oil expenses, bus purchase expenses, parts expenses, etc. are naturally required for passenger transport business, which is a duty-free passenger transport business, even if the Plaintiff does not run the advertising business of this case; ② the expenses for designing, manufacturing, installing, and managing advertisements are fully borne by △△ newspaper, and the Plaintiff does not additionally require the cost for bus purchase, oil expenses, and parts expenses, etc. for repair depending on the attachment of advertisements; ③ the input tax amount deducted from the output tax amount refers to the tax amount collected when the Plaintiff is supplied with the goods and services used or used for his own business; thus, the determination at the time of the actual reversion cannot be classified into the circumstances at the time of the purchase. In full view of the purpose of the purchase, purchase, and the actual condition of the advertising business of this case, such as oil expenses, parts purchase expenses, etc., which appears to be just for the purpose of the passenger transport business of this case, and thus, the Defendant’s disposal of the input tax amount cannot be seen as legitimate from the input tax amount.

(3) On the contrary, the Plaintiff asserts that the value arising from the instant advertising business does not constitute value added, but constitutes a contribution act or a violation of the value-added tax doctrine with which the method of tax credit was adopted. However, since the input tax credit is planned to be deducted from the field of actual attribution for the purchase related to the business, the Plaintiff’s overall view does not lead to the occurrence of the outcome that the input tax amount to be deducted from the instant advertising business, which is a taxable business, was not recognized, by recognizing the actual reversion for the passenger transport business, which is a tax-free business.

3. Conclusion

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

(c)