Cho-2016-China-4159 ( October 26, 2017),

Bad debt tax deduction due to the expiration of extinctive prescription;

The Plaintiff’s sales claim against the instant trading company was completely interrupted due to partial repayment, and thus, the Plaintiff’s report on the deduction of bad debt tax on the ground of the expiration of the extinctive prescription is groundless.

Article 45 of the former Value-Added Tax Act

2017Guhap51604 Disposition to revoke the imposition of value-added tax

[Plaintiff-O]

O Head of tax office

August 24, 2017

October 19, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of value-added tax of KRW 12,841,130 on March 14, 2016 against the Plaintiff shall be revoked in excess of KRW 2,160,283 of the imposition of value-added tax of KRW 12,841,130 in 2014.

1. Details of the disposition;

A. The Plaintiff is an individual entrepreneur who has performed the construction business of water distribution teams under the mutual name of "O weight" at OO-O's O-dong O-O's O-O.

B. On January 25, 2015, the Plaintiff: (a) provided services, such as the installation of a water distribution team, to OOelectrics Co., Ltd. (hereinafter “the instant transaction”); and (b) deducted the sales claims that have not been recovered from the output tax amount to the bad debt tax amount; and (c) filed a final tax return and a bad debt tax credit for the second period of 2014, by deducting the sales claims (115,49,700 won x 10/110) from the bad debt tax amount.

Table (Unit: Won)

Supply value of goods on the date of supply

On January 2, 2011,OO,O, O Central Intersection 5,200,000 520,000

On January 20, 2011, OO and 10,700,000 1,070,000

On April 30, 2011O 3,900,000 390,000

May 30, 2011 O 2 other than 1,300,000 1,130,000

June 30, 201 O Textbooks 4,800,000 480,000

May 25, 2012 28,800,000 2,880,000

The installation cost of a water distribution team on September 28, 2012 32,585,000 3,258,500

November 26, 2012 320,200,0200,000

Total 17,485,00 11,748,500

C. On March 14, 2016, the Defendant: (a) deemed that the Plaintiff’s report on bad debt tax deduction did not meet the requirements for bad debt tax deduction; and (b) did not deduct bad debt tax deduction under the relevant statutes; (c) revised and notified the amount of value-added tax of KRW 12,841,130 (i.e., value-added tax of KRW 10,49,700 + penalty KRW 2,341,433) (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an objection on June 20, 2016 with the Tax Tribunal on October 28, 2016, but the said claim was dismissed on January 26, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1 to 6, Eul evidence 1 to 7, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

The Plaintiff’s sales claim amounting to KRW 115,496,700 for the instant trading company was completed at the time of the final return of value-added tax for the second period of 2014, as well as the short-term extinctive prescription for three years has already been completed at the time of the instant transaction company’s final return of value-added tax for the second period of 2014, and there was no possibility of recovery due to the instant transaction company’s de facto discontinuance of business and Kim

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Whether the extinctive prescription has expired

Article 45 (1) of the Value-Added Tax Act provides that "any goods or services on which value-added tax is levied".

Article 19-2(1) of the Enforcement Decree of the Value-Added Tax Act provides that, in cases where all or part of credit sales or other sales claims (referring to those which include value-added tax) are bad debt due to bankruptcy or compulsory execution of a person who receives the supply or other causes prescribed by Presidential Decree, an amount calculated according to the following formula may be subtracted from the output tax amount in the taxable period to which the date when the bad debt becomes final and conclusive belongs, and Article 87(1) of the Enforcement Decree of the Value-Added Tax Act delegated shall apply mutatis mutandis to bad debt under Article 19-2(1) of the Enforcement Decree of the Corporate Tax Act, and Article 19-2(1)1 and 4 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 28211, Jul. 26, 2017; hereinafter the same shall apply) provides that, if several monetary liabilities exist due to continuous monetary transactions between the same parties, the whole amount of such debt shall be deemed as effective as a partial repayment, and if several debts are deemed to be repaid within 197.

앞서 든 증거들과 변론 전체의 취지에 의하여 인정할 수 있는 다음과 같은 사정, 즉 ① 원고는 2010년경부터 2012년경까지 사이에 이 사건 거래업체와 수회에 걸쳐 수배전반 설치공사 등에 관한 도급계약을 체결하여 그에 따른 수 개의 공사대금채권을 보유하고 있었던 점(2011, 2012년도에 발행한 매출세금계산서만이 증거로 제출되어 정확한 공사대금을 산정하기는 어렵다), ② 이 사건 거래업체는 2010. 3. 16.부터 2012. 7. 27.까지 원고에게 10회에 걸쳐 157,500,000원을 변제하였는데, 위 변제금은 위 ①항 기재 공사대금 전체에는 미치지 못하는 것으로 보이는 점 �이 사건 거래업체는 원고가 2011년에 발행한 매출세금계산서(합계 39,490,000원)에 상응하는 39,000,000원5)은 변제한 것으로 보이나, 2012년에 발행한 매출세금계산서(합계 89,743,500원)에 대하여는 38,500,000원6)만을 변제한 것으로 보인다 �, ③ 이 사건 거래업체는 2012. 7. 27. 7,000,000원을 변제한 뒤 더는 원고에게 위 ①항 기재 공사대금을 지급하지 않은 것으로 보이는 점 등을 종합하여 보면, 이 사건 거래업체는 계속적인 거래관계로 인하여 원고에게 수 개의 공사대금채무를 부담하고 있는 상태에서 채무전액을 변제하기에 부족한 금액을 채무의 일부로 변제하였다고 할 것이므로, 특별한 사정이 없는 한 기존의 수개의 공사대금채무 전부에 대하여 승인을 하였다고 봄이 상당하다.

Therefore, this part of the Plaintiff’s assertion on the premise that the period of extinctive prescription (three years) of the above claim for construction payment has expired in July 27, 2012 is not acceptable, since the above claim for construction payment was effective on July 27, 2012.

(2) Whether it is impossible to recover claims due to business discontinuation, etc.

According to Article 45(1) of the Value-Added Tax Act, Article 87(1) of the Enforcement Decree of the Value-Added Tax Act, and Article 19-2(1)8 of the former Enforcement Decree of the Corporate Tax Act, "bonds which cannot be recovered due to the debtor's bankruptcy, compulsory execution, execution of a punishment, discontinuance of business, death, disappearance, or missing," a bad debt tax deduction under the Value-Added Tax Act is granted. Since the bad debt tax deduction system is an exceptional system for preventing the economic loss of the taxpayer of the value-added tax, the taxpayer is liable to assert and prove that the taxpayer has bad debt tax in order to obtain a refund of value-added tax by applying for a deduction of bad debt tax, and on the other hand, "bonds which cannot be recovered due to the debtor's discontinuance of business" refers to the claims for which the fact that the whole debt is impossible due to the debtor's discontinuance of business in the pertinent taxable period is objectively confirmed (see Supreme Court

According to the purport of the evidence No. 2 and the whole oral argument, the Plaintiff appears to have closed the business of this case on February 1, 2013, and the amount of arrears of the instant transaction enterprise (including the amount of loss) around February 2016, to have exceeded KRW 250 million. However, the Plaintiff submitted a ledger (Evidence No. 5) for each account account for the instant transaction enterprise. However, the Plaintiff appears to have a significant difference between the customer director who submitted the tax appeal stage and its contents. In light of the timing for submission, it is difficult to readily conclude that the Plaintiff was unable to collect the amount of claims, based on its stated reasoning, based on the lack of objective evidence of the Plaintiff’s efforts to confirm that it was impossible to collect the amount of claims from the transaction employee of this case from January 1, 2011 to July 2012, 2017.

Therefore, we cannot accept this part of the plaintiff's assertion.

3. Conclusion

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