early 209Gu4106 (Law No. 24, 2010)

Bad debt tax can be deducted from the output tax amount in the taxable period to which the bad debt becomes final and conclusive.

The bad debt tax credit can be deducted from the output tax amount in the taxable period to which the date when the bad debt becomes final and conclusive belongs, and in case where the entrepreneur closes his/her business, the taxable period until the date when the bad debt becomes final and conclusive is the taxable period, it is reasonable to deem that the bad debt tax credit is impossible.

1. The plaintiff's claim is dismissed.

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

The defendant's disposition rejecting an application for rectification of value-added tax against the plaintiff on September 11, 2009 is revoked.

1. Details of the disposition;

A. The Plaintiff had a total of KRW 361,520,512 promissory notes and outstanding bonds at △ Business Co., Ltd., a customer. However, on December 12, 2008, △△△ Co., Ltd. was unable to repay the balance of KRW 63,99,496.

B. On July 23, 2009, the Plaintiff filed a claim for rectification against the Defendant for refund of KRW 36,152,050,00,00,000,00 for the bad debt tax amount of KRW 361,520,512, which was incurred due to the bankruptcy of △ business Co., Ltd., 361,520,512. However, on September 11, 2009, the Defendant notified the Plaintiff on September 11, 2009 that the bad debt tax credit and the claim for rectification against the bills, etc., for which the bad debt became final and conclusive (as of June 12, 2009, hereinafter the “instant disposition”).

C. The Plaintiff appealed and filed an appeal with the Tax Tribunal on November 18, 2009, but the Plaintiff’s claim was dismissed on May 24, 2010.

D. Meanwhile, the Plaintiff closed his business on March 2009.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 4, Eul evidence 1 to 5 (including branch numbers) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The legislative intent of Article 17-2(1) of the Value-Added Tax Act is to return the value-added tax to the supplier when the supplier becomes unable to recover the value-added tax from the other party, and it is not to determine whether to return it according to whether the business is discontinued or whether the business is returned at the time when the bad debt becomes final and conclusive. Therefore, if an entrepreneur has already discontinued his/her business at the time of the confirmation of bad debt, it cannot be

(2) On the contrary, Article 17-2(1) of the Value-Added Tax Act should be interpreted as binding on the phrase "business operator" or "the output amount for a taxable period", which goes against the principle of substantial taxation under the Framework Act on National Taxes, the principle of proportionality and the principle of equity, and is also in violation of the principle of property right security and the principle of no taxation

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the Plaintiff’s first argument

Under the principle of no taxation without law, the requirements for taxation, non-taxation, or tax reduction or exemption shall be avoided, and the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law unless there are special circumstances, and it shall not be permissible to interpret it accurately or analogically without reasonable grounds (see Supreme Court Decision 2008Du11372, Aug. 20, 2009).

Article 17-2(1) of the former Value-Added Tax Act (amended by Act No. 915, Jan. 1, 2010; hereinafter referred to as the "former Value-Added Tax Act") provides that where an entrepreneur supplies goods or services subject to the imposition of value-added tax, all or part of credit sales and other sales claims (referring to those including value-added tax) related to the supply of such goods or services may be deducted from the output tax amount for the taxable period whereto belongs the date when the bad debt becomes final and conclusive, by 10/110 of the bad debt amount, shall be deducted from the output tax amount for the taxable period whereto belongs the date when the bad debt becomes final and conclusive. Since Article 17-2(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22043, Feb. 18, 2010; hereinafter referred to as the "former Value-Added Tax Act") provides that if an entrepreneur closes the taxable period and closes the taxable period, it shall not constitute bad debt tax amount under Article 219(2).

(2) As to the second argument of the Plaintiff

The bad debt tax credit system at issue in this case gives a kind of tax benefits to taxpayers by causing them to deduct bad debt tax from the output tax amount in the taxable period to which the date when the loss is determined belongs, in cases where an entrepreneur is wholly or partly bad debt of all or part of the credit sales or other sales claims related to the supply of goods or services, and it is impossible to recover. As such, the broad legislative discretion should be recognized with respect to the formation of the specific contents, such as the scope allowed to deduct, the limit of deduction, and the method of deduction, so long as the contents are not clearly unreasonable or unfair, the decision

The purpose of Article 17-2 of the Value-Added Tax Act is to relieve the financial burden of an enterprise by allowing an entrepreneur to deduct the value-added tax not collected from the output tax amount of the relevant entrepreneur in cases where a bad debt is disposed of because the entrepreneur is unable to receive credit account sales and related value-added tax due to his/her insolvency and bankruptcy, etc. In addition, only the entrepreneur who runs a business at the time of the confirmation of bad debt becomes final and conclusive, to deduct the bad debt tax amount from the output tax amount in the taxable period to which the date when the bad debt becomes final and conclusive belongs, and thus, the legislative decision

In addition, as alleged by the plaintiff, if the bad debt becomes final and conclusive, and if the cash refund is recognized on the ground that there is no taxable period, the administrative power will be wasted due to excessive business occurrence, and the purpose of legislation to alleviate the financial burden of the operator continuing the business is likely to disappear. Thus, if bad debt becomes final and conclusive after the closure of the business, there is a reasonable reason for the decision of the legislator that does not include in the subject of the deduction.

Therefore, Article 17-2 (1) of the Value-Added Tax Act cannot be deemed to have exceeded the limit of the legislative formation right of the legislator, and it is reasonable to treat different persons who already discontinued business with those who already discontinued business as mentioned above. Thus, it cannot be deemed to have violated the principle of no taxation without the law, or to have infringed the plaintiff's property right, and it does not violate the principle

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.