Seoul High Court 2009Nu2278 (Law No. 208, 209)

The provision on the calculation method of common input tax is applied by analogy to the concurrent operation of taxable business and non-taxable business.

The provision on the method of calculating common input tax shall apply by analogy to the concurrent operation of the value-added taxable business and the non-taxable business, and the provision of broadcasting services constitutes a non-taxable business as a provision of services without compensation, and the amount of receiving fees, etc. shall not be calculated by calculating the common input tax according to the ratio of the value of supply of the non-taxable business because it is a case where there is no value

Article 61 (1) and (4) of the Enforcement Decree of the Value-Added Tax Act

209du16268 Disposition of revocation of refusal to correct value-added tax

XX Broadcasting Corporation

O Head of tax office

Seoul High Court Decision 2009Nu2278 Decided August 20, 2009

September 8, 2011

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Article 61 (1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 17827, Dec. 30, 2002; hereinafter referred to as the "Enforcement Decree") provides that where an entrepreneur concurrently operates a taxable business and a tax-free business, the input tax amount related to the tax-free business shall be calculated according to the actual attribution, but the common input tax amount which is commonly used for the taxable business and the tax-free business and is not distinguishable from the actual attribution shall be calculated according to the ratio of the tax-free supply price to the total supply price. In applying the provisions of paragraph (1), if there is no supply price for the taxable business and the tax-free business during the pertinent taxable period or there is no supply price for any one business, the calculated tax amount shall be calculated in the order of the purchase price (excluding the common purchase price) related to the tax-free business for the total expected supply price, the estimated supply price related to the tax-free business for the total expected use area (Article 3).

In light of the content and purport of Article 61(1) and (4) of the Enforcement Decree, and the fact that the input tax amount related to the non-taxable business cannot be deducted from the output tax amount of the taxable business, as well as the input tax amount related to the non-taxable business, it is reasonable to view each of the above provisions as applicable by analogy even where the same entrepreneur concurrently operates the value-added tax taxable business and the non-taxable business (see Supreme Court Decision 2004Du13288, Oct.

2. The court below, based on its adopted evidence, found the following facts: ① The plaintiff was established on March 12, 200 in accordance with the XX Broadcast Corporation Act and operated television education, radio education, satellite education, installation, operation and management of broadcasting facilities, program production and supply, etc. ② The plaintiff reported value-added tax from 2001 to 2002, on the ground that the plaintiff's receiving fees, broadcasting development fund, national subsidy (hereinafter referred to as "receiving fees, etc.") received by the plaintiff constitute the supply value of the tax-free business as the price for the broadcast service provided by the plaintiff, and the input tax amount, which is commonly used for other business and can not be classified into actual accounts (hereinafter referred to as "common input tax amount of this case"), should be calculated in accordance with Article 61 (1) of the Enforcement Decree, and the portion corresponding to the tax-free business should not be deducted from the output tax amount; ③ The plaintiff rejected the defendant's claim for rejection from the total supply value of the broadcasting business as well as the total supply value of the non-taxable business of this case.

Based on these facts, the lower court rejected the Plaintiff’s assertion that the instant disposition of refusal is lawful on the ground that the Plaintiff’s initial content of the input tax return is identical to that of the input tax amount on the instant tax-free business, since the Plaintiff’s provision of the broadcast service cannot be seen as the price for the broadcast service provided by the Plaintiff, and that the provision of the said broadcast service constitutes a non-taxable business as a free supply, and that the input tax amount for such non-taxable business is not deducted from the output tax amount, and there is no difference between the input tax amount and the input tax amount on the instant tax-free business.

3. Examining the above provisions, legal principles, and records, the part of the court below's rejection of the plaintiff's assertion that the whole amount of the common input tax of this case should be deducted from the output tax amount on the ground that the amount of the common input tax of this case should be calculated by calculating the amount of the tax amount in advance and not deducted from the output tax amount, is without merit.

However, the part of the court below's decision that Article 61 (1) of the Enforcement Decree can be inferredly applied to the calculation method of common input tax amount of this case is difficult to accept for the following reasons

As the court below decided, the Plaintiff’s broadcasting service (excluding oil advertising service) constitutes a non-taxable business as a gratuitous provision of service, and the receiving fees, etc. are not the price for the non-taxable business, and thus, there is no price for the non-taxable business, and thus, Article 61(1) of the Enforcement Decree which provides for the method of calculating the common input tax amount of this case, which is common to the non-taxable business and the taxable business, cannot be applied by analogy to the calculation of the common input tax amount according to the ratio of the supply price of the taxable business and the taxable business (see, e.g., Supreme Court Decision 9

Therefore, the court below found that the method of calculating the common input tax amount in this case is appropriate among the methods of calculating the reasonable methods under the subparagraphs of Article 61(4) of the Enforcement Decree, and judged the propriety of the rejection disposition in this case by comparing the application result and the Plaintiff’s original contents of the return of the value-added tax. However, the court below determined that the method of calculating the common input tax amount in this case can be applied to the calculation method under Article 61(1) of the Enforcement Decree, and that the disposition in this case is legitimate. In so doing, the court below erred by misapprehending the legal principles on the method of calculating the common input tax amount

4. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.