The disposition agency (hereinafter “Client”) considered that the company of this case (hereinafter “Company A”)’s tax invoice issued for importing components, which were either omitted or incorrectly specified (hereinafter “components in question”) for free constitutes a misrepresented tax invoice. Accordingly, Client imposed VAT on company A without deducting the input tax amount thereof. As a legal counsel of Client, DR & AJU successfully argued before the Tax Tribunal, leading to a decision that the Client’s disposition was lawful since Company A did not fall under the actual importer of the components in question and the subsequent VAT taxpayer.
Company A is a corporation that provides sales support services for semiconductor manufacturing equipment sold by another company (hereinafter “Company B”), which has no place of business in Korea, to Korean customers. Company A imported the components in question free of charge from Company B, and the input tax amount was deducted upon issuance of the import tax invoice provided by the Customs director. According to an integrated corporate investigation results conducted on Company A, Client determined that the aforementioned tax invoice was misrepresented and imposed VAT on Company A without deducting the input tax amount accordingly. In response, Company A lodged an objection and filed a claim for judgment with the Tax Tribunal.
As the Client's agent, DR & AJU presented the following argumentations: (i) the requirements for taxpayers and the input tax deduction for VAT are separate under the Customs Act; (ii) the tax invoice, where the importer is an import declaration holder on paper and the effect of import does not actually belong to the importer, constitutes a misrepresented tax invoice; and (iii) the import declaration holder on paper cannot pay customs duties or import VAT, nor be deducted from the input tax amount. As a result, the Tax Tribunal ruled that the disposition agency was not a fault for imposing VAT on Company A.
This case is noteworthy in that DR & AJU resolved confusion and obtained a reasonable conclusion based on a clear understanding of the Customs Act and Value-Added Tax Act concerning the input VAT deduction problem that has persisted due to structural difficulties in customs and import VAT.
