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TITLE Supreme Court Decision 2017Du55329 Decided January 25, 2018【Revocation of Disposition Imposing Value-Added Tax】* First draft [full Text]
Summary
[1] In cases where actual attribution of input tax amount is unclear due to the operation of both a taxable business and nontaxable business, the method of calculated division of input tax related to the nontaxable business
If a business operator has received national subsidies from the government or local government for the provision of nontaxable services, and said subsidy is not deemed a benefit in return for offering of said services, whether Article 61(1) of the former Enforcement Decree of the Value-Added Tax Act may be analogically applicable (negative)
In such case, the method of calculated division of input tax related to the nontaxable business
[2] Meaning of “excluding national subsidies from the tax base for value-added tax” under Article 13(2)4 of the former Value-Added Tax Act
[3] In a case where: (a) Corporation A, a passenger railroad transport service operator, and the Ministry of Land, Transport and Maritime Affairs concluded a contract pertaining to the compensation of public service costs in 2008 pursuant to the former Framework Act on Railroad Industry Development; (b) based on said contract, Corporation A offered public services, such as fare discounts for the elderly: (c) the Ministry subsequently compensated Corporation A for the public services provided; (d) thereafter, Corporation A filed a value-added tax return; and (e) tax authorities, on the ground that the government had shouldered the costs for the public services that Corporation A offered to railway passengers, deemed said compensation amount was nontaxable under the Value-Added Tax Act, and, consequentially, issued the notice of correction on the value-added tax return by reflecting the common input tax amount calculated via the proportionate method, the case holding that: (a) the aforementioned compensation amount constituted national subsidies subject to exclusion from the tax base for value-added tax according to Article 13(2)4 of the former Value-Added Tax Act; and, as such, (b) Article 61(1) of the former Enforcement Decree thereof regarding the calculated division of common input tax was neither applicable nor analogically applicable
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