Fees for HTS use are taxable services.

HTS use fee is a taxation service.

2014Guhap52107 Disposition to revoke the imposition of value-added tax

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Head of Seocho Tax Office

A litigation performer Park Jae-ju

May 14, 2015

June 11, 2015

1. The plaintiff's claim is dismissed.

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

Defendant’s value-added tax amounting to KRW 33,697,420 on March 12, 2012 (additional tax) imposed on Plaintiff on February 2, 2008

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b) Value-added tax for 1 year 2009 38,081,650 (including additional tax) and 2 years 2009.

133,389,620 won (including value-added tax), value-added tax for one year 2010 92,427,320 won (including additional tax);

Each imposition of value-added tax of KRW 48,648,520 (including additional tax) for two years in 2010 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a current or former representative of an online futures trading deposit and account lending business (closed business on February 8, 201).

B. The director of the Seoul Regional Tax Office determined that the plaintiff omitted a report on the receipt of fees from investors as a result of the consolidated investigation of the plaintiff's personal tax investigation, and notified the defendant of the taxation data.

C. On March 12, 2012, the Defendant issued a disposition of imposition of value-added tax of KRW 7,079,820 for the first term portion of value-added tax in 2008, value-added tax of KRW 9,748,130 for the second term portion of value-added tax in 2008, value-added tax of KRW 237.943,250 for the second term portion of value-added tax in 2009, value-added tax of KRW 197,432,320 for the first term portion of value-added tax in 2010, and KRW 11,539,850 for the second term portion of value-added tax in 2010.

D. On June 8, 2012, the Plaintiff filed a request for a trial with the Tax Tribunal to the effect that (i) the services provided by the Plaintiff to the individual investors of Egys constituted tax-free services under the Value-Added Tax Act; (ii) the amount obtained by subtracting payment fees paid to securities companies from the revenue fees received from the individual investors ought to be the value-added tax base; (iii) on November 8, 2013, the Tax Tribunal rendered a decision citing only two issues among the Plaintiff’s claim disputes; and (iv) on February 7, 2014, the Plaintiff appealed and filed the instant lawsuit.

E. Meanwhile, the original disposition that the Defendant initially imposed on the Plaintiff was corrected by reduction as follows (hereinafter “the remaining disposition of reduction”) following the decision of the said Tax Tribunal (hereinafter “instant disposition”).

[Ground for Recognition: Facts without dispute, Gap evidence 1 through 3, Eul evidence 1 and 2, the purport of the whole pleadings]

2. The assertion and judgment

A. The plaintiff's assertion

HTS (HTS) designed to ensure the collection of loans to a customer by HTS that HTS allows HTS to be used by a customer. It is merely an intention to deliver a customer’s order to HTS to the securities company. Therefore, the main service offered by the Plaintiff is not a lending of transaction account and a provision of transaction system, but a lending of money, so this constitutes a service exempt from value-added tax.

(b) Related statutes;

Attached Form is as shown in the attached Form.

(c) Fact of recognition;

1) A. A.I.D. opened a futures and options trading account in its name (hereinafter referred to as the “instant account”) with the securities company, and vicariously performed customers’ futures and options trading through the instant account.

- 4 - 이 사건 수수료 = 선물��옵션 거래대금 × 수수료율(선물 0.0026%, 옵션 0.11%) 에시앙의 고객은 이 사건 계좌가 '고객이 에시앙에 입금한 담보금과 에시앙이 고객에게 대여한 증거금의 합계액' 단위로 나누어진 고객의 가상계좌를 통하여 선물・옵션 거래를 하였다.

2) The process in which futures and options transactions are conducted through Ehyh HTS is as follows:

A) If Ahhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh

B) In the customer’s HTS virtual account, the sum of “the maximum limit of the guarantee money that the customer has deposited in Ehyh and the deposit money that the customer may lend to the customer is indicated as the total amount of deposit, and the customer may engage in futures and options transactions within the limit of the total amount of deposit.

C) The instant HTS is linked to the HTS by the securities company, and if the customer purchases and sells the instant HTS, the securities company’s purchase and sales orders also take place in the HTS.

D) If the purchase and sale transaction was conducted through the instant HTS, from the total deposit amount, the fee to be paid to the securities company A, and the fee to be paid by the customer A to E.I.D. (hereinafter “instant fee”) were deducted from the total deposit amount. The method of calculating the instant fee is as follows. [The grounds for recognition: facts not in dispute, the entries in Gap’s No. 4 through No. 15, and the purport of the entire pleadings]

Article 12 (1) 11 of the former Value-Added Tax Act (amended by Act No. 11129, Dec. 31, 2011) provides that "The supply of financial and insurance services prescribed by Presidential Decree as financial and insurance services shall be exempted from value-added tax" and Article 33 (1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22578, Dec. 30, 201) provides that "the financial and insurance services provided for in Article 12 (1) 11 of the Act shall be services falling under any of the following subparagraphs," and Article 12 (1) 18 of the former Enforcement Decree of the Value-Added Tax Act provides that "the other credit business" shall be "the other credit business.

However, in full view of the following circumstances in light of the purport of the entire arguments and the facts examined earlier, the instant fee ought to be deemed not to be an interest on the deposit borrowed to the customer, but to be the fee for the use of the instant account and the instant HTS. Therefore, the instant disposition was lawful on the premise that Egyh’s business does not constitute monetary credit business.

① It is true that the customer of Egyhian may borrow deposits corresponding to the secured money when he deposits Egyhians, and that customer is admitted to Egyhians as a member of Egyhians to borrow this deposit. However, the instant HTS functions to connect customers to engage in futures and options trading through HTS (i.e., to connect orders made through the instant HTS with the HTS of the securities company) and functions to automatically cut off their losses (loss-stut, law female function) when a certain scale of loss occurs.

(2) If so, examining whether A.I.D. received fees from its customers, i.e., a lending of money, the lender is required to lend the borrower a certain amount of money and receive interest in proportion to that period. However, even if A.I.D.’s customer borrowed the deposit through the instant HTS, no fee is imposed unless he/she directly engages in futures and options transactions. Moreover, fees are imposed not only on the purchase of financial products, but also on the sale of financial products, and fees are imposed on the total amount of deposit.

- It is calculated by multiplying the actual transaction amount by the fee rate, not imposed 6- . Therefore, fee imposed on Egyh’s customers cannot be deemed as the price for the use of the deposit. If so, Egyh’s lending money and receiving the price therefor cannot be deemed as engaging in the credit business.

(3) It is possible to unilaterally collect deposit money through the female function of lawmen.

Therefore, the right to dispose of the deposit money can not be entirely transferred to the customer, and it can be seen that the timing of recovery and the timing of recovery are under the control of E.I.D. rather than the customer's decision-making.

④ Ultimately, the fee that he received from a customer is not a consideration for borrowing deposits, but rather a consideration for the use of the instant HTS, namely, a consideration for the use of securities company’s HTS, and that for the use of the female function as a consideration for the use of the instant HTS.

⑤ If I would like to interpret E.I.D. business as ‘other money credit business', it would result in the conclusion that trade securities companies that broker futures and options trading in accordance with the Financial Investment Services and Capital Markets Act are classified as ‘other money credit business' if IS added only the lending function of deposit money to their HTS, and even if I did not obtain authorization from the Financial Services Commission in accordance with the above Act, it constitutes an object of value-added tax exemption.

Ultimately, the instant disposition is lawful.

3. Conclusion

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