[2] Where a resident with global income files a false return on classification and amount of global income in filing a return with the head of the tax office having jurisdiction over the global income tax base within the statutory due date of return, whether a non-reported additional tax may be levied on the premise that no return was filed

[3] The case holding that in a case where Party A, the head of the hospital under an agreement with Party B, who is the actual owner of the hospital, filed a global income tax return with the tax authority as global income tax on business income after completing the business registration of the hospital, and the tax authority issued a disposition to correct and notify Party A of the global income tax, including non-reported additional taxes and non-paid additional taxes, under the global income tax on wage and salary income, the imposition of non-reported additional taxes and the imposition of non-reported additional taxes on Party A’s delinquent tax amount on the premise that Party A filed a global income tax

[2] Article 4(1) of the former Income Tax Act (amended by Act No. 11146, Jan. 1, 2012) separates a resident’s income into global income, retirement income, and capital gains. Of them, global income is defined as “the total income of interest income, dividend income, business income, labor income, annuity income, and other income” (Article 70(1)). A resident having global income in the pertinent year should file a report on global income tax base with the head of the tax office having jurisdiction over the place of tax payment according to the prescribed method from May 1 to May 31 of the following year (Article 70(1) of the former Income Tax

Meanwhile, Article 47-2(1) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011) provides that a taxpayer shall impose an additional tax without filing a tax return if the taxpayer fails to file a tax return within the statutory due date of return.

In light of the structure and text of the relevant provision, in cases where a resident with global income files a return on the global income tax base with the head of the competent tax office within the statutory due date of return, even if the resident files a false return on the classification and amount of global income, it cannot be deemed a non-reported return. Therefore, it is reasonable to deem that a non-reported additional tax may not be imposed on

[3] The case holding that, in a case where Gap filed a final return on global income tax base and its payment statement within the statutory due date of return as it is deemed that Gap filed a return on global income tax base including business income, on the ground that it is illegal to impose an additional tax without filing a return on global income tax on the ground that it is deemed that Gap filed a return on global income tax base based on the premise that Gap filed a return on global income tax base, and that such defect is significant and objective in light of the purpose, significance, function, etc. of the laws and regulations on the grounds of taxation, and thus, the imposition without filing a return on global income tax is null and void per se, and the legal effect of the tax payment without filing a return on global income is attributed to Gap and the tax payment without filing a return on global income under the pretext of global income tax on wage and salary income, and even if Gap filed a return on the final return on global income and the payment statement within the statutory due date of return as if he obtained business income from Gap directly under the name of the actual business operator Gap, and thus, it cannot be deemed that Gap's tax payment without any additional tax payment obligation.

1. Case summary

A. The Nonparty is the actual owner of each dental hospital affiliated with the ○○○○ Department and the network, and the Plaintiff is the head of the △○○ dental hospital (hereinafter “instant hospital”) among themselves, who received approximately 20% of the monthly sales and provided labor in accordance with an agreement with the Nonparty.

B. After completing the business registration of the instant hospital in its own name, the Plaintiff submitted to the Defendant, on May 31, 201, a return and payment of KRW 255,759,660, global income tax for the year 2010, global income tax for the year 201, and KRW 260,227,350, global income tax for the year 201 (hereinafter collectively referred to as “the Plaintiff’s already paid tax”) and the final return on tax base of global income and a statement of payment (hereinafter referred to as “instant return”).

C. The Seoul Regional Tax Office, after conducting a tax investigation on the Nonparty, corrected the amount of income reflecting the omission in sales of each dental hospital affiliated with the instant hospital, including the Nonparty, as the actual business income of the Nonparty, the actual business operator, and then deducted out-of-the-counter benefits to the nominal business operator including the Plaintiff from the necessary expenses, and notified the competent tax office including the Defendant of the earned income data of the nominal business operator including the Plaintiff

D. Accordingly, on January 11, 2016, the Defendant issued the instant disposition that revised and notified the Plaintiff’s global income tax amounting to KRW 313,746,970 (including KRW 36,84,222 of the global income tax on non-declaration, KRW 92,681,642 of the additional tax on non-declaration, and KRW 272,348,870 of the global income tax for the year 2011 (including KRW 34,108,179 of the non-declaration, KRW 67,69,799 of the additional tax on non-declaration, and KRW 34,179 of the additional tax on non-declaration, and KRW 67,69,799 of the additional tax on non-declaration, collectively, referred to as “instant disposition for non-declaration of the additional tax on non-declaration,” and “disposition for non-payment of the additional tax on wrong payment”).

E. Meanwhile, the Defendant denied all business income for the year 2010 and year 2011 that the Nonparty reported by the Plaintiff on the ground that it was an actual business operator, and deemed the Plaintiff’s paid tax amount as the Nonparty’s paid tax amount and appropriated it to the Nonparty’s delinquent tax amount.

2. Judgment on the grounds of appeal

A. Criteria for determining the invalidity of taxation as a matter of course

In order for a taxation disposition to be null and void as a matter of course, the mere fact that there is an illegal ground for the disposition is insufficient. The defect must be objectively obvious as it seriously violates the important part of the law. In determining the significant and apparent defect, the purpose, significance, function, etc. of the laws and regulations, which serve as the basis for the taxation disposition, should be examined from a teleological perspective as well as reasonable consideration on the specificity of the specific case itself. In addition, in a case where a taxation disposition is conducted by applying a certain provision of an Act and subordinate statutes to a certain legal relationship or factual relationship, there is no room for dispute over the interpretation because the legal doctrine clearly stated that the provision of the Act and subordinate statutes cannot be applied to the legal relation or factual relationship, and thus, if there is room for dispute over the interpretation because the legal principle that the provision of the Act and subordinate statutes cannot be applied to the legal relation or factual relationship is clearly revealed, it cannot be said that the defect is obviously erroneous in the fact that the taxation disposition was made by erroneously interpreting it (see Supreme Court en banc Decision 2017Da242409, Jul. 19, 2018).

B. As to the Plaintiff’s ground of appeal

1) Article 4(1) of the former Income Tax Act (amended by Act No. 11146, Jan. 1, 2012; hereinafter the same) separates a resident’s income into global income, retirement income, and capital gains. Of them, global income is defined as “income calculated by adding up interest income, dividend income, business income, labor income, annuity income, and other income” (Article 70(1)). A resident having global income in the pertinent year shall report the global income tax base to the head of the tax office having jurisdiction over the place of tax payment according to the method prescribed from May 1 through 31 of the following year (Article 70(1) of the former Income Tax Act).

Meanwhile, Article 47-2(1) of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011) provides that a taxpayer shall impose an additional tax without filing a tax return if the taxpayer fails to file a tax return within the statutory due date of return.

2) In light of the structure and text of the foregoing relevant provision, if a resident with global income files a return on the global income tax base with the head of the competent tax office within the statutory due date of return, even if the resident files a false return on the global income tax base within the statutory due date of return, it cannot be deemed a non-reported return, and thus, it is reasonable to deem that an additional tax may not be levied on

3) In light of the aforementioned legal principles, even if the Plaintiff submitted the instant return within the statutory due date of return as if he received business income by directly operating the instant hospital while working as an employee at the instant hospital, this may be deemed as having reported the global income tax base based on his earned income, and thus, the instant imposition of non-declaration penalty tax on the premise that the Plaintiff filed a non-declaration of global income tax base is unlawful. In addition, such defect is significant and objective when considering the purpose, significance, function, etc. of the laws and regulations, which serve as the basis for the taxation disposition, and thus, it is reasonable to deem that the instant imposition of non-declaration penalty tax is void as a matter of course.

4) Nevertheless, the lower court determined otherwise on the erroneous premise that the submission of the instant report cannot be deemed a lawful return of global income tax base on the Plaintiff’s earned income, and thus, it ought to be deemed as a non-reported report, thereby lawful the imposition of the instant non-reported additional tax. In so determining, the lower court erred by misapprehending the legal doctrine on non-reported additional tax, thereby adversely affecting the conclusion of the judgment. The

C. As to the Defendant’s ground of appeal

The lower court determined that the Plaintiff’s imposition of the Plaintiff’s additional tax on the ground that: (a) as an administrative sanction is deemed to have received financial benefits for the unpaid amount by the due date for payment by inducing a person liable for tax payment to faithfully pay the tax amount; and (b) the actual business operator committed a direct payment under the name of a business title holder; (c) the legal effect of payment is merely attributable to a business title holder, who is the other party to the tax disposition; and (d) the actual business operator’s legal relationship between the tax authority and the actual business operator, cannot be deemed to have the effect of paying the tax amount (Supreme Court Decision 2013Da212639 Decided August 27, 2015), on the premise of the legal doctrine, the legal effect of the Plaintiff’s payment of the tax amount cannot be deemed to vary on the ground that the Nonparty, the actual business operator, has paid the tax amount directly under the name of the Plaintiff; and (d) as long as the Plaintiff’s payment amount exceeds the Plaintiff’s delinquent tax amount, it cannot be deemed that the Plaintiff’s additional tax payment obligation is a significant and objective disposition.

Examining the reasoning of the lower judgment in light of the relevant legal principles and the record, the lower court’s aforementioned determination is justifiable, and contrary to what is alleged in the grounds of appeal, there were no errors by misapprehending the legal doctrine on the invalidity

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal by the Plaintiff, the part against the Plaintiff is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The Defendant’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kwon Soon-il (Presiding Justice)