Daegu District Court 2014Guhap23590 ( November 25, 2015)

Whether the disposition calculated in accordance with the ratio of the amount of income is legitimate for the common input tax of the entrepreneurs concurrently operating the non-taxable business.

Article 61 (1) of the Enforcement Decree of the Value-Added Tax Act shall not apply to the case where a business operator concurrently operates a tax and non-taxable business distributes the common purchase tax amount, since the national subsidy income cannot be considered as the

Article 13 of the Value-Added Tax Act

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

2015Nu7426. Revocation of a disposition of rectification of value-added tax

AA

O Head of tax office

D District Court Decision 2014Guhap23590 Decided June 10, 2016

May 13, 2016

June 10, 2016

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition disposition of KRW 101,032,820 for the first term of February 6, 2012 against the Plaintiff, KRW 160,808,160 for the second term of February 2007, KRW 76,552,370 for the first term of year 2008, KRW 33,35,940 for the second term of year 2008, KRW 83,916,290 for the first term of year 209, KRW 21,295,740 for the second term of year 209, KRW 29,570 for the first term of year 2010, KRW 25,585, value-added tax for the second term of year 25,490 for the second term of year 207, KRW 2010 for the second term of year 200, KRW 136,291 for the second term of year 2015.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a corporation established in accordance with Article 32 of the Civil Code of August 1, 1996 and the Rules on the Establishment and Supervision of Non-Profit Corporations under the jurisdiction of the Minister of Knowledge Economy and the head of its affiliated agency for the purpose of promoting the textile industry by promoting research and study on textile export competition countries and overseas textile markets and the production and export structure improvement projects of DD andCC Textiles-related areas.

B. The plaintiff, while carrying out the proper purpose business under the Value-Added Tax Act, filed a report on the commencement of profit-making business on September 18, 2002 and completed the business registration (business type: service type, export intermediation and display) on September 25, 2002, has carried out the DDR business (hereinafter referred to as the "TPP business") and DDR domestic markets development business (hereinafter referred to as the "DMF business"). The plaintiff issued and issued sales tax invoices for the 10-year input tax invoice for the 20-year input tax invoice for the 10-year input tax invoice for the 20-year input tax invoice for the 20-year input tax invoice for the 10-year tax invoice for the 20-year tax invoice for the 20-year tax invoice for the 10-year tax invoice for the 20-year subsidy (hereinafter referred to as the "tax invoice for the 20-year tax invoice"), and the 10-year tax invoice for the 20-year subsidy under the former Value-Added Tax Act.

D. From the first half to the second half of 2007, the Plaintiff’s business revenue consists of the pertinent tax revenue amount and the instant subsidy. The details are as shown below [Attachment 1]. During the pertinent taxable period, the Plaintiff reported the input tax amount as indicated below, on the ground that the remainder of the input tax amount, other than the instant input tax amount, cannot be deducted.

E. From November 18, 201 to December 16, 2011, the Defendant conducted a tax investigation on the Plaintiff’s return of value-added tax, and thereafter, the instant business constitutes a non-taxable business where value-added tax is not imposed because most of the subsidies were operated as a proper purpose business, but the sales tax invoice is included in the profit-making business that issued the sales tax invoice. Since the instant input tax amount is commonly used for both taxable and non-taxable businesses, and it is a common input tax amount that cannot be separated from the actual reversion, the Defendant, by applying Article 61(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24359, Feb. 15, 2013; hereinafter the same) by applying mutatis mutandis Article 61(1).

F. According to the above findings, the Defendant calculated the input tax amount to be deducted as indicated in the following [Attachment 1], and deducted the remaining input tax amount, excluding the input tax amount to be deducted from the output tax amount for the instant taxable income amount, from the output tax amount for the instant taxable income amount, and notified the Plaintiff of the rectification and correction of the value-added tax from the first half to the second half of 2011 as indicated in the [Attachment 2] below (hereinafter “instant disposition”).

G. The Plaintiff dissatisfied with the instant disposition and filed an objection with the competent regional tax office on April 30, 2012, but was dismissed on May 16, 2012, and filed an appeal with the Tax Tribunal on May 30, 2012, but was dismissed on October 2, 2014.

[Reasons for Recognition] Evidence A 1 to 7, Evidence A 14 and Evidence A 15, Evidence B 1 to 3 and 7 (each)

Each entry and the purport of the whole pleading

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Unlike the proper purpose business, the instant project aims to create profits by having the Plaintiff play an intermediary role that connects regional textile enterprises to the merchants, etc. in the East capital market, and the subject is limited to the company that filed an application for participation in the instant project, and is operating with some national subsidies, which gradually reduces the ratio and, in principle, is a single value-added tax taxable with the amount borne by the participants as a revenue for the project. A single project may not be deducted from input tax by dividing it into taxable business and non-taxable business.

The instant subsidy is only excluded from the tax base pursuant to Article 13(2)4 of the former Value-Added Tax Act, and the taxable business cannot be deemed non-taxable business on the ground that the Plaintiff received the instant subsidy, and so long as the instant project is not a non-taxable business, the input tax amount of the instant case must be deducted from the output tax amount. The relevant input tax amount cannot be deducted solely on the ground that the instant subsidy is excluded from the value-added tax base

2) Even if the Plaintiff concurrently operates a taxable business and a non-taxable business through the instant business, the instant subsidy cannot be deemed the value of supply of non-taxable business, as it is not the price for the supply of goods or services, and thus, it is unlawful for the Defendant to include the instant subsidy in the value of supply of non-taxable business in calculating the common input tax amount by applying Article 61(1) of the former Enforcement Decree

3) The instant subsidy contains a number of subsidies unrelated to the instant project, such as “design Industry Promotion” and “Subsidy for the Holding of New Bridges”. Nevertheless, the Defendant’s calculation of the common purchase tax based on the total amount of the instant subsidy is unlawful.

4) In light of the following: (a) the Plaintiff’s arbitrary interpretation of the tax-related law with unfair intent does not constitute a deduction of input tax amount by arbitrarily interpreting the tax-related law; (b) the Defendant refunded the value-added tax for several years without any objection to the Plaintiff’s input tax return; and (c) the tax authority did not have a clear view on the interpretation of the tax-related law related to the instant case; and (d) lost several times in the relevant administrative litigation, there was a justifiable reason for the Plaintiff’s nonperformance of the obligation to report and pay value-added

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

(c) Fact of recognition;

In full view of each of the above evidence, Gap evidence Nos. 16 through 18, Eul evidence Nos. 4, 5, and Eul evidence Nos. 8 through 12, the following facts can be acknowledged.

1) The main contents of the Plaintiff’s articles of incorporation regarding the execution business and financial resources are as follows, since the Plaintiff completed business registration as a taxable entity of value-added tax on September 25, 2002.

2) PID projects are organized by DD,CC, the Korea Textiles Industry Federation, and are supervised by the Plaintiff, and were implemented as a sponsor by the Ministry of Trade, Industry and Energy, the Korea Customs Service, and the Korea Chamber of Commerce, Industry and Energy. PID projects are exhibitions projects that provide the above enterprises with marketing opportunities for domestic and foreign users upon receiving applications for participation from local textile enterprises for the promotion of regional textile industry, and enable them to share information on the latest textile materials, textile cover through presentation, fashion show, etc., and DMF projects are projects that seek to develop new products, plan, and obtain information on domestic markets, etc. from the textile production enterprises located in DD and to strengthen their competitiveness by linking them with the brand enterprises and the store merchants located in Seoul.

3) The Plaintiff calculated expenses incurred in relation to the use of subsidies in relation to the PED project by dividing the details of subsidies into exhibition halls, exhibition hall development expenses, exhibition hall operation expenses, publicity expenses, expenses for the maintenance and guidance of exhibition enterprises, loan inducement and support expenses, general operation expenses (such as book printing expenses, personnel expenses, travel expenses, etc.) and applied for subsidies to Do Do Do Do Do Do Do Do Do. The Plaintiff calculated expenses incurred in dividing the details of subsidies into personnel expenses, direct (e.g., exhibition expenses, website operation, promotion support, information support, personnel NAC establishment support, publicity expenses, and expenses for transportation, committee operation, and miscellaneous) and indirect (n.g., the Plaintiff applied for subsidies to Do Do Da 2 and CC 41, which was also amended by the former Ordinance No. 2146, Mar. 21, 2008; Article 25(2) and (2) of the Local Finance Act (amended by Presidential Decree No. 13614, Apr. 1, 2019, 2019). 208).

D. Determination

1) As to the assertion that the instant project constitutes a single taxable business

In full view of the following circumstances revealed by the aforementioned facts and each of the above evidence, it is difficult to view the instant project as a single value-added tax taxable, and thus, the Plaintiff’s assertion on this part cannot be accepted.

A) In principle, the Plaintiff is a non-profit corporation established to conduct non-taxable projects, such as promoting the textile industry by promoting research and study on the textile export competition countries and overseas textile markets, and DD andCC also promoting the production and export structure of textile areas for the public interest purposes.

B) As seen earlier, the instant project is a project aimed at developing new products, planning, internal markets, etc. and strengthening regional textile producers by receiving applications for participation from regional textile companies for the promotion of regional textile industry and providing them with marketing opportunities for domestic and overseas sunbs, other visitors, etc., through briefing sessions, fashion show, etc., allowing the sharing of information on the latest textile materials, fiber trans, or by receiving applications for participation from textile production companies located in DD and providing them with information on new products development, planning, internal markets, etc., and linking the brand companies and dong gate merchants, etc. located in Seoul. This constitutes "business for developing overseas markets and creating demand", "business for domestic and overseas promotion and publicity of D Textiles," and "business necessary for the promotion of other textile industry."

C) Most of the project costs of the instant project are D. Subsidies granted from CC. The Plaintiff does not collect entrance fees separately from general spectators except the participating enterprises of the instant project, other textile enterprises participating in the EXPO, and foreign and foreign booms, and in particular, provide accommodation and transportation services free of charge so that they may participate in the EXPO.

D) The Plaintiff, like the Plaintiff, operated some taxable businesses by receiving some revenues such as participation fees and incidental rents from participating enterprises in the course of the implementation of the business, etc. (In addition, the said taxable businesses are likely to be implemented by taking measures to reduce the budget when the Plaintiff applies for the budget that the total amount of the project cost would be appropriated from the national subsidy without any profit-making business in the implementation of the instant business (Article 3-1-4 of the No. 3)) by deeming the whole business as a single taxable business and deducting the total input tax amount as a single taxable business, in principle, cannot be allowed as contrary to the basic principles of the VAT system that deducts only the input tax amount related to the taxable business.

E) In light of the Plaintiff’s establishment purpose, articles of incorporation, nature and content of the instant project, and the method of financing project costs, it is reasonable to deem that the Plaintiff concurrently operated a taxable business and non-taxable business through the instant project.

2) As to the Defendant’s assertion that the method of calculating the common input tax amount is unlawful

A) In principle, an input tax amount related to a taxable business and a non-taxable business shall be calculated based on the actual attribution. If an input tax amount is related only to a non-taxable business, it shall not be deducted from the output tax amount. If an input tax amount cannot be separated from the actual attribution due to a common use for a taxable business and a non-taxable business, in principle, the provisions on the proportional distribution of the common input tax amount shall apply mutatis mutandis to the provision of the Enforcement Decree of the Value-Added Tax Act on the proportional distribution of the common input tax amount. However, if an entrepreneur receives an input tax amount subject to non-taxation from the State or a local government, not to the case where the entrepreneur receives the consideration for supply for the services belonging to a non-taxable business, but to the State or a local government, it shall not be deemed a consideration for the supply of services that fall under a non-taxable business, and thus, Article 61(1) of the former Enforcement Decree of the Value-Added Tax Act, which provides that the common input tax amount shall be calculated based on the ratio of the supply value of the non-taxable business and a taxable business, should not be applied (see, etc.

B) As seen earlier, the Plaintiff concurrently operates a taxable business and a non-taxable business through the instant business. The instant input tax amount cannot be divided into actual reversion as it is used not only for a taxable business but also for the Plaintiff’s proper business, which is a non-taxable business. Furthermore, as seen earlier, the instant subsidy is granted pursuant to the relevant Acts and subordinate statutes, such as the former Act on the Construction of Trade Foundation, and the Ordinance on the Management of Subsidies forCC. ② The instant project is organized as an item of a non-taxable business subsidy, which is the cost of which the local government grants to encourage the implementation of the instant business. ③ The instant subsidy is not a sales amount generated after the Plaintiff’s implementation of the instant business, but for the supply of services corresponding to the non-taxable business, and thus, it cannot be deemed that it is unlawful to apply the former Enforcement Decree of the Value-Added Tax Act to the extent that it is not reasonable to directly calculate the amount of the instant subsidy by submitting the report on the performance of the instant business and to request the Plaintiff to return the amount of the subsidy to the Plaintiff’s reasonable calculation method of the input tax amount of the instant subsidy.

On the other hand, the defendant asserts that it is the most realistic and reasonable method to calculate the input tax amount of this case by determining the ratio of taxable business and non-taxable business based on the financial resources used for the business of this case. However, as seen earlier, the method of applying Article 61 (1) of the former Enforcement Decree of the Value-Added Tax Act, which is not allowed in calculating the common input tax in the case of receiving the national subsidy for the provision of services falling under the non-taxable business, can be calculated based on the formula of applying Article 61 (1) of the former Enforcement Decree of the Value-Added Tax Act as the "common input tax amount x the total input tax amount x the total input tax amount x the total input tax amount / the total input tax amount."

C) Meanwhile, in the administrative litigation seeking the revocation of a taxation disposition on the ground of its illegality, the burden of proving the legality of the taxation disposition and the existence of the facts requiring taxation is, in principle, on the tax authority (see, e.g., Supreme Court Decisions 2010Du4599, Oct. 31, 2013). The determination of the legality of the disposition in the litigation seeking the revocation of the taxation disposition is based on whether it exceeds a reasonable tax amount. The parties concerned may submit arguments and materials supporting the objective tax base and tax amount until the closing of argument at the trial court. If the legitimate tax amount to be imposed lawfully is calculated based on such materials, only the portion exceeding the reasonable tax amount must be revoked. However, if not, the entire taxation disposition must be revoked, and in such a case, the court does not have the duty to actively calculate the legitimate tax amount to be imposed by its authority (see, e.g., Supreme Court Decisions 94Nu13527, Apr. 28, 1995; 2015Du6222, Sept.

D) In the instant case, it is impossible to calculate the legitimate amount of tax to be imposed lawfully because the data submitted by the time the party’s argument is closed. As such, the instant disposition ought to be revoked in entirety without further review as to the remainder of the Plaintiff’s assertion.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted on the grounds of its reasoning, and the judgment of the court of first instance shall be unfair on the grounds of its conclusion, so the plaintiff's appeal shall be accepted and the judgment of the court of first instance shall be revoked, and it is so decided as per Disposition by the defendant.