Where an entrepreneur pays a certain percentage of the price of the object of acquisition to a third person as value-added tax while taking over a business from a third person, whether it constitutes subject to refund under Article 24(1) of the Value-Added Tax

According to the provisions of Articles 1(1)1, 6(6), and 17(1) of the Value-Added Tax Act, an input tax amount exceeding the output tax amount, which the Government shall refund to an entrepreneur under Article 24(1) of the same Act, refers to the input tax amount on the supply of goods or services subject to the assessment of value-added tax, and thus, even if the proprietor, while taking over a business from another person, paid from another person the amount of money in proportion to the price of the object of transfer as value-added tax, in such case, the amount equivalent to the value-added tax amount per value-added tax cannot be deemed as the input tax amount or refundable tax amount under Article 17(1)1 of the same Act, since the supply of goods or services subject to the assessment of value-added tax is not paid for the supply of goods or services subject to the assessment of value-added tax.

Articles 1(1), 6(6), 17(1), and 24(1) of the Value-Added Tax Act

Plaintiff

Head of Suwon Tax Office

Seoul High Court Decision 86Gu82 delivered on November 12, 1987

The judgment below is reversed and the case is remanded to Seoul High Court.

We examine the grounds of appeal.

According to Article 17 (1) of the Value-Added Tax Act, the amount of value-added tax payable by an entrepreneur (hereinafter referred to as the “paid tax amount”) shall be the amount computed by deducting the tax amount under each of the following subparagraphs (hereinafter referred to as the “in-house tax amount”) from the tax amount on

However, Article 1(1)1 of the same Act provides that an input tax amount exceeding the output tax amount shall be refundable (hereinafter “tax amount refundable”) as one of the input tax amount for the supply of goods or services used or to be used for one’s own business, and Article 6(6) of the same Act provides that the supply of goods shall not be deemed the supply of goods, and the transfer of business shall not be deemed the supply of goods. Article 24(1) of the same Act provides that an input tax amount exceeding the output tax amount shall be refunded to an entrepreneur under the conditions as prescribed by the Presidential Decree. According to each of the above provisions, an input tax amount exceeding the output tax amount under Article 24(1)1 of the same Act refers to an input tax amount for the supply of goods or services subject to the imposition of value-added tax, and even if the proprietor paid from the other person a certain portion of the input tax amount under the pretext of value-added tax for the supply of goods or services subject to the imposition of value-added tax, the amount equivalent to the value-added tax amount shall not be considered the refund tax amount under Article 17(1)4.

However, according to the reasoning of the judgment below, the court below confirmed that the plaintiff's amount of 84,158,910 won in this case was equivalent to the value-added tax amount paid to the non-party company while taking over the business from the non-party company of the non-party company, but determined this amount as the input tax amount and refundable tax amount under Article 17 (1) 1 of the Value-Added Tax Act, and determined that it constitutes the subject of refund under Article 24 (1) of the same Act. The court below erred by misapprehending the legal principles as to the refund of value-added tax, which affected the conclusion of the judgment

Therefore, the judgment of the court below is reversed and remanded, and it is so decided as per Disposition by the assent of all participating judges.

Justices Yoon Il-young (Presiding Justice)