Appellate Court 2014west 1140 ( October 15, 2014)

Cash cupon equivalent to points accumulated in customers shall not be deemed to constitute a discount under the Value-Added Tax Act.

In order to promote sales, a discount coupon used in secondary transactions has the character of a bounty or a similar amount paid after the time of supply for the goods is supplied in accordance with a prior agreement, and the value of supply at the time of the issuance of the coupon is not directly deducted, so it cannot be viewed as a discount.

Article 13 of the Value-Added Tax Act

2015Guhap50979 Disposition rejecting the rectification of value-added tax

AAA Corporation

Head of the District Tax Office

on 17 July 2015

on January 28, 2015

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s rejection of correction against the Plaintiff on October 30, 2013, the second value-added tax for 2010, the first value-added tax for 201, the second value-added tax for 201, the second value-added tax for 201, the first value-added tax for 2012, the first value-added tax OO for 201, and the second value-added tax OO for 2012 is revoked.

1. Details of the disposition;

A. The plaintiff's status

The plaintiff is a corporation that runs the business of developing and operating stores in BB market.

(b) Point and coophone system of the Plaintiff;

1) In the event that the Plaintiff purchased goods in a store or purchased goods in an online shopping mall (hereinafter referred to as “first transaction”) from the members who subscribed to the AACC card (hereinafter referred to as “CC card”), the Plaintiff set aside points equivalent to 5 points per 1,000 won (hereinafter referred to as “instant points”) and sent cash coophones (hereinafter referred to as “coophones in this case”) converted the number of members who set up points more than 2,000 points into one won.

2) The customers receiving the instant coophones may use the instant coophones when purchasing goods (hereinafter referred to as “second transaction”) from a store or online shopping mall operated by the Plaintiff, and settle the remainder after subtracting the amount equivalent to the face value of the instant coophones from the price of the goods by cash or means of card, etc.

(c) Return and payment of value-added taxes;

The Plaintiff reported and paid the value-added tax for 2010 to 2012, which included the amount equivalent to the face value of the coophone in the tax base when customers purchase goods using the coophone in the Plaintiff’s store or online shopping mall.

D. Plaintiff’s request for correction and Defendant’s rejection

1) On July 25, 2013, the Plaintiff asserted that the face value equivalent to the coophone of this case used for the second transaction on July 25, 2013 constituted “value-added tax base” and filed an application for rectification for refund of value-added tax reported and paid during the second period from 2010 to 2012 as indicated below.

"2) On October 30, 2013, the defendant notified the plaintiff of his rejection of the plaintiff's request for correction on the ground that the cash coophone does not fall under the amount of discount under Article 13 (2) of the Value-Added Tax Act and Article 52 of the Enforcement Decree of the same Act" (hereinafter "the rejection disposition of this case"), and (e) implementation of the pre-trial procedure.

On January 28, 2014, the Plaintiff appealed and requested a trial on January 28, 2014, and the Tax Tribunal dismissed the request on October 15, 2014.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 4, purport of the whole pleadings

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

For the following reasons, the instant rejection disposition is unlawful.

1) The amount equivalent to the coophone of this case falls under a discount for the following reasons, and should be excluded from the tax base.

A) If the Plaintiff’s customer uses the oophone in the second transaction, only the amount calculated by subtracting the amount equivalent to the oophone amount from the ordinary supply value of the goods in accordance with the terms and conditions of the second transaction agreed in advance (the payment of the price can be substituted by the oophone) is actually paid. This conforms with the definition of “influence amount” under Article 52(2) of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 28, 2013; hereinafter the same).

B) If an entrepreneur provides customers with a discount coupon or a discounted gift certificate and sells goods to the customer and discount a certain amount of the value of the supply in accordance with the receipt of the discount coupon or gift certificate, the discount amount falls under “the discount amount.” However, even if the coupon in this case is issued after subtracting the points of theCC card, there is no difference from the above discount coupon or gift certificate in that it gives a reduction of a certain amount from the ordinary price. Since the value-added tax is a transaction tax, the handling of the discounted amount in the secondary transaction using the discount coupon under the Value-Added Tax Act as to the discount amount should not be changed depending on the process of acquisition of the discount coupon.

2) The oophone does not constitute a sales incentive for the following reasons.

A) The oophone in this case is not intended to encourage the sales of the other party to sell his own goods, but the oophone paid in advance to the consumers who purchase their goods.

B) The point of this case is not a good that is paid ex post according to the sales performance of the other party, but is set aside simultaneously with the primary transaction.

C) Since the coophone of this case is premised on the direct connection between the secondary transaction and the price therefor, there is no circulation such as cash.

D) The actual payment for the goods received by the Plaintiff using the coophone in question is the amount deducted from the usual supply price in the face value of the coophone in the face value of the coophone. Thus, the coophone in question directly affects the actual sale price.

E) A customer who has been issued the instant coophone is entitled to use the instant coophone in a transaction with the Plaintiff, and there is no limitation or discrimination in the scope of application.

3) Article 48(14) of the former Enforcement Decree of the Value-Added Tax Act (hereinafter “Enforcement Decree of the instant case”) which provides the grounds for the instant refusal disposition is unlawful for the following reasons.

A) The Enforcement Decree of this case goes against the principle of clarification of taxation requirements in light of the following: ① There is no definition provision on the “the mileage” as stipulated in the Enforcement Decree of this case’s Act, ② the prior meaning of the terms “the mileage” or the practical examples different from those of the service transaction, and the Enforcement Decree of this case’s application only to the supply of goods.

B) Despite the fact that the oophones of this case fall under the category of ‘the discount amount' under the Value-Added Tax Act, the Value-Added Tax Act introduced the provisions of the Enforcement Decree of this case without revising the provisions of the Value-Added Tax Act and imposed the oophones of this case on the amount equivalent to the oophones of this case goes against the legal principle of taxation requirements

C) The tax base of value-added tax cannot be paid in excess of the price actually paid by the final consumer. Since the instant provision is included in the tax base as the amount equivalent to the mileage that is not the price actually paid, it goes against the principle of final consumer taxation.

D) The instant enforcement decree permits double taxation of value-added tax by stipulating that the portion of mileage use is included in the tax base.

E) Comparing with the case where a business operator sells a given product immediately, and where (i) sets aside part of the selling price to consumers at the time of selling the primary product, and (ii) makes consumers settle the price with the mileage when the primary product is sold, the value-added tax to be borne by the business operator is different even if the same quantity is sold. Even though a business operator uses a means of sales promotion having the same economic value, tax neutrality is destroyed as a result of a discrimination in taxation even though it has

"4) Since the coophone in this case constitutes a "closed mileage" where an entrepreneur exchanging goods with points and points is the same, the use of the coophone in this case is nothing more than the recovery of the points in this case, i.e., the extinguishment of the existing obligation. In addition, the coophone in this case does not have any economic value for any third parties other than the Plaintiff and the customer. Therefore, the Plaintiff’s receipt of the coophone in this case cannot be deemed to have received the payment for the supply of goods, and thus, it cannot be applied to the second transaction because it does not constitute a "case where the price for the supply of goods is settled with mileage."

It is as shown in the attached Form.

(c) Fact of recognition;

1) The main contents of the terms and conditions of membership are as follows.

Article 2 (Definitions)

2. The term "AACC card" (hereinafter referred to as "CC card") member means theCC card service.

The card approved by the company for normal use shall be issued by the company or an affiliated company.

(3) "CC card member" means a person authorized to useCC cards normally.

(5) The term "responding points" (hereinafter referred to as "responding points") means that a member has acquired to use a sponding card service, which describes the detailed matters concerning the acquisition, use, etc. thereof.

(6) The term "cupphone" means a sign issued so that it may use theCC card points in accordance with the methods and procedures set by the company.

Article 3 (Flostry Card Services)

(1) Point accumulation services

(2) Services to provide coophones

3. Services for discounting additional goods and accumulating points exclusively for members of theCC card.

Article 8 ( Point Accumulation)

(2) Points shall, in principle, be accumulated at the time of the purchase of goods or use of services by members, but may be accumulated within 30 days from the date of the purchase of goods or use of services by the members, provided that, at the time of accumulation, the cards and effective receipts shall be presented to the relevant affiliated or affiliated member shops.

(3) Points shall be accumulated in the O,000 won per O, and the O shall be converted into the O, and the rate of accumulation of points shall be modified, and where the company changes the rate of accumulation of points, it shall notify the customer of the relevant details not later than 30 days prior to the scheduled date of application.

Article 9 (Use of Points - Use of Cash Cukphones)

(1) Points shall be used only by cash coophones issued by the company, and shall be sent to the address on the application form only after deducting points from regular coophones or those who have accumulated more than OOO points.

3. The oophone may be used at a place designated by the company within the effective period from the date of issuance: Provided, That points corresponding to the oophone amount at the time of purchase through the oophone shall not be accumulated.

(5) Kuphones shall not be used in par value and shall not be used below par value.

6. The coophone is not used within the effective period after the issuance, but the point is extinguished. In addition, the coophones sent once are not re-paid.

2) The instant provision was newly established by Presidential Decree No. 22043 on February 18, 2010. The legislative intent at the time of the amendment and the authoritative interpretation of the instant provision on the Enforcement Decree are as follows.

- The theory of the relevant revised tax law

(2) Grounds for amendment

It is clear that the mileage is included in the value-added tax base as the case where the mileage is accumulated and the whole amount of the price of the goods is settled through the mileage has increased recently.

(3) Time of application

Application from the first supply or supply after the enforcement date;

- The authoritative interpretation (the consumption taxation of non-refluence and the consumption taxation of non-fluence, March 29, 2006),

The amount equivalent to the mileage shall be included in the value-added tax base if the business operator who sells goods online sets aside the mileage equivalent to the percentage of sales to the purchasing customer and the customer makes payment by the mileage accumulated in whole or in part at the time of the purchase of goods, and this interpretation shall apply from the portion of goods supplied after the enforcement date.

D. Determination

1) Whether the coophone of this case constitutes “cood amount”

A) Article 13(2) of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) provides that "the following amounts shall not be included in the tax base." Article 52(2) of the former Enforcement Decree of the Value-Added Tax Act provides that "the amount of overcharge under Article 13(2)1 of the former Enforcement Decree shall be the amount of direct deduction from the ordinary supply price at the time of the supply of goods or services in accordance with the terms and conditions of the quality, quantity, and payment of the cost of delivery and supply, and other terms and conditions of the supply." Exclusion of overcharge from the tax base is the purport of excluding from the tax base of value-added tax because it is not the amount of money deducted or deducted from the supply price due to the conditions of the supply on the quality, quantity, delivery, etc. of the goods or services, and thus, 'the amount of overcharge from the supply price of goods or services' (see Supreme Court Decision 2011Du1782, Apr. 11, 2013).

B) Meanwhile, Article 13(3) of the former Value-Added Tax Act provides that "the bad debts, incentives, and other amounts similar thereto for the supply value after the supply of goods or services shall not be deducted from the tax base, regardless of the name thereof, shall not be deducted from the tax base of value-added tax." In other words, the sales unit costs incurred by a company in relation to sales pursuant to the terms and conditions of transaction may constitute a discount amount and may constitute a similar amount, such as incentives. In relation to the imposition of value-added tax, only the amount directly deducted from the sales amount shall be excluded from the value-added tax base, and the amount not directly deducted shall be recognized as only the amount not deducted from the value-added tax base

C) In full view of the following circumstances acknowledged by the aforementioned legal doctrine and the overall purport of the arguments revealed earlier, the instant coophone used in the secondary transaction is deemed to have the character of a bounty or a similar amount, and it cannot be deemed to constitute a discount amount under the former Value-Added Tax Act. Therefore, the face value of the instant coophone should be included in the secondary tax base.

(1) The issuance itself cannot be deemed as having the same economic value as the money for customers or the Plaintiff. In other words, at the time of issuance, only the “right that the customers can use and make payments by using it in the second transaction was provided, and there was no actual use and no amount to be deducted, nor the Plaintiff is obligated to pay any obligation confirmed under the tax law. Moreover, the instant oophone can be used only at the place designated by the Plaintiff, and the instant oophone cannot be used after the lapse of a certain period after the instant oophone was issued. Although the points should be accumulated more than 2,00 points, it cannot be said that there are various restrictions, such as the issuance of the instant oophone and the establishment of the instant oophone based on the accumulation of the said points in the first transaction and the issuance of the instant oophone cannot be said to have a value similar to the money.

However, the instant oophone used in the secondary transaction has a monetary value different from the primary transaction. In other words, customers may pay the price by using the instant oophone, which is issued based on the points accumulated in the previous primary transaction, after being supplied with goods, etc. in the secondary transaction. As such, the instant oophone used in the secondary transaction is deemed to have a monetary value as a means of payment.

Ultimately, the coophone issued based on the point that the Plaintiff accumulated in the primary transaction is a so-called coophone system to induce the customers to purchase goods, etc. later by giving the incentive to the customer who made the primary transaction, and there is financial value only when used at the time of the secondary transaction, etc. (However, only when the coophone is used in the secondary transaction, the coophone has a nature of a bounty or a similar amount which is provided after the primary transaction (However, only when it is used in the secondary transaction, the coophone has a nature of a bounty or a similar amount.).

(2) The customer may determine whether to use the instant coophone as the point accumulated in accordance with the purchase amount at the time of the first transaction and then to use it at the time of the second transaction. The Plaintiff is obligated to determine to use the instant coophone in the second transaction and, if using it, to deduct the amount equivalent thereto from the price. Ultimately, the instant coophone used in the second transaction is determined according to the supply terms and conditions of the first transaction, and cannot be said to have been determined according to the supply terms and conditions of the second transaction. Therefore, even if the price discount is actually made in the second transaction, it cannot be deemed to constitute the discount amount as stipulated in the former Value-Added Tax Act.

(3) The points in this case are set aside only for the customers who are not all the buyers of the Plaintiff, but also for the customers who have joined theCC card service, and more than OOO0, i.e., OO00 won (OO or OO00 xOO) among the above customers, and only those who have purchased more than O or OO00 won from the Plaintiff can use the oophone in this case issued based on the points in this case. Thus, there is a limitation on the scope of application

(4) Articles 1(1) and 13(1) and (3) of the former Value-Added Tax Act stipulate that the value-added tax on the value of supply when an entrepreneur supplies goods, etc. under Article 15 of the former Value-Added Tax Act shall be collected from the person who receives the supply of the goods, etc., and Article 17(1) of the former Value-Added Tax Act provides that the value-added tax payable by an entrepreneur shall be the amount obtained by deducting the value-added tax (purchase tax) collected when the entrepreneur is supplied with the goods, etc. from the output tax amount and that the input tax exceeding the output tax amount shall be refunded. As such, our country’s value-added tax, which adopts the pre-stage tax credit system, takes the form of transaction tax that imposes on the "type of transaction, other than the income tax and corporate tax," which is imposed on the "type of transaction, other than the actual income," and regardless of the entrepreneur’s profit and loss (see Constitutional Court en banc Decision 2009HunBa11, 2010 (Consolidated).).

(5) Unlike the oophone in this case, the gift certificates sold at discount without premised on the accumulation of mileage are different from the oophone in nature of the instant oophone.

(A) Gift certificates are the same as cash in bearer securities sold in advance, and when the discounted gift certificates were sold in exchange for payment, the part deducted at discount is not the amount equivalent to the discount amount for the sale of gift certificates, but the price for the gift certificates. In other words, when a customer purchases gift certificates, it is not the transaction of value-added tax, and the purchase of gift certificates is not the transaction of value-added tax, and only when the goods or services are supplied in exchange for actual gift certificates (where the gift certificates, etc. are sold in cash or on credit, and the gift certificates, etc. are thereafter exchanged with the goods, the time of supply for the goods is at the time of actual delivery (Article 21(1)1-2 of the former Value-Added Tax Act). For example, where the customer pays KRW 80,000,000 to the gift certificates, this is not a transaction of taxation, but it is the amount directly deducted from the sales of the gift certificates in question, and it is only the amount of 100,000 won directly deducted from the sales of the gift certificates.

(B) Meanwhile, if a company pays gift certificates or discount coupons that can be used in the primary transaction to customers in connection with the sales of the primary transaction and receives only the amount obtained by subtracting gift certificates or discount coupons from the sales of the primary transaction, the amount equivalent to the gift certificates or discount coupons shall be deducted directly from the sales of the primary transaction. However, in cases where gift certificates or discount coupons are provided after the primary transaction, the value-added tax on the primary transaction is not different because they are not related to the tax base of the primary transaction. This is only sales expenses, but is not a discount that is directly deducted from the secondary tax base. The sales of the secondary transaction is the value of the secondary transaction goods, including gift certificates or discount coupons used in the secondary transaction, and is imposed on the basis of value-added tax, and there is no difference between the use of the instant discount.

2) The legality of the Enforcement Decree of the instant case

Considering the following circumstances, the provisions of the Enforcement Decree of this case, which served as the basis for the instant refusal disposition, are lawful and effective.

A) Whether a taxpayer goes against the principle of clarity of taxation requirements or not requires a comprehensive judgment in accordance with the criteria, such as what act is expected to be subject to taxation because it falls under the relevant phrase, which is a taxation requirement, and whether whether the relevant phrase is uncertain is granted the possibility of applying the law in a arbitrary and discriminatory manner from the standpoint of an administrative agency, or whether it is expected that a more conclusive phrase may be selected from the legislative technological perspective (see, e.g., Supreme Court Decision 2002Du1588, Sept. 23, 2004). However, even if a variety of elements of taxation requirements are generally classified, abstract, and general provisions, if their meaning can be embodied and clarified through interpretation as a supplementary action of a judge, it cannot be deemed as going against the principle of clarity of taxation requirements due to lack of clarity (see, e.g., Supreme Court Decisions 200Du9076, Apr. 27, 201; 2007Du1681, Jul. 16, 2017).

The term "the mileage" means a business operator's sales promotion program to secure fixed customers, and the points obtained by the customer according to the records of use are used in daily life, so it is difficult to see that the provisions of the Enforcement Decree of this case do not have predictability from the taxpayer's point of view, or that arbitrary application by the tax authorities is possible, and furthermore, it is difficult to expect that the choice of more conclusive words can be easily expected in legislative and technical aspects. In addition, even if there is no definition provision for "the mileage", its meaning can be embodied and clarified through the interpretation as a legal supplement action of the judge." Accordingly, the provisions of the Enforcement Decree of this case do not violate the principle of clarity.

B) As seen earlier, mileages used in the second transaction (this case’s coophones issued based on the point of this case’s points) do not correspond to “the cumulative amount of the second transaction” and should be included in the base of value-added tax for the second transaction. As such, the enforcement decree of this case did not deviate from the scope of delegation under Article 13 of the former Value-Added Tax Act.

Therefore, the enforcement decree of this case does not conflict with the legal requirements and the principle of statutory reservation.

C) Since mileages used in the second transaction have monetary value, they are actual payments. Accordingly, the instant provision of the Enforcement Decree includes the amount equivalent to mileages as tax base does not contravene the final consumer taxation principle.

D) double taxation refers to a double taxation that imposes taxes on the same taxable object. However, in the first transaction, the subject of value-added tax is only goods supplied in the transaction and does not impose value-added tax on mileage accumulated in the first transaction. Therefore, even if the amount equivalent to mileage used in the second transaction is included in the value-added tax base for the second transaction, it cannot be deemed double taxation.

The amount equivalent to mileage used in the second transaction is a means of payment, which has monetary value, and thus does not fall under the amount of incentives or a similar nature, and thus should be added to the amount received by the business operator. Thus, the tax base of the price received by the business operator in the first transaction and the value-added tax is consistent, so the problem of double taxation does not occur.

E) In a case where a business operator enables the settlement of mileages in the second transaction instead of immediately discounting a certain ratio of sales amount, if the mileages used in the second transaction are included in the value-added tax base, any more value-added tax may be levied in comparison with other business operators immediately discounting a certain ratio of sales amount in the first transaction.

① However, this is derived from the choice of ‘the mileage system' rather than ‘the immediate discount system' in order to induce the second transaction by imposing the incentive for the accumulation of mileage that a business operator can later use to a customer who has made the first transaction. ② As seen earlier, our value-added tax has the form of transaction tax imposed on the external appearance of transaction, not the actual income, as seen earlier. In light of the above, it cannot be said that the above alone alone does not impair the tax neutrality.

3) Sub-decisions

As seen earlier, the instant Cukphone does not fall under “the discount amount,” and since it is worth monetary value between the Plaintiff and its customers as a means of settlement, it can be deemed that the Plaintiff paid the price for the supply of goods. The instant Cukphone falls under “the mileage stipulated in the Enforcement Decree of the instant case,” and thus, it is lawful to deny the refusal of the Plaintiff’s request for correction by deeming that the face value equivalent to the face value of the instant Cukphone is included in the value-added tax base from 2010 to 2012.

3. Conclusion

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

The decision shall be rendered as above.