Article 26-2 of the Framework Act on National Taxes (Period for Excluding Assessment of National Taxes)

2. The plaintiff's remaining claims are dismissed.

3. 9/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

On June 16, 2014, the Defendant’s notification of change in income amount, which is recognized by BBB, is revoked by OO, income earner, and CCC’s recognition of income amount.

A. The Plaintiff is a corporation that operates security service business, facility management service business, and housing management business. BB on the Plaintiff’s corporate register from March 12, 2004 to April 1, 2009, DDR from April 1, 2009 to April 1, 2012, and CCC as its representative director from January 15, 2014. In fact, BB was registered as its representative director. From June 2007 to March 2009, CCC actually performed its duties as the Plaintiff’s representative.

B. On August 8, 2010, the Defendant imposed value-added tax (value-added tax on the omission of sales) on November 8, 2010 if the Plaintiff failed to report the sales amount equivalent to the total amount of management expenses equivalent to the total amount of management expenses from 2004 to 2009 when providing entrusted management services for six buildings, including 'EEEE' and 'FF in OO', located in OO-dong at O-si, and O-si. The Defendant imposed value-added tax on the omission of sales (value-added tax on the omission of sales from 1st to 2nd in 2009), while adding the amount of the omission of sales to the corporation's gross income from 2004 to 2009, after deeming it as the corporation's income and adding the amount of the omission of sales to the corporation's income. Moreover, on the ground that it is clear that the omission of sales was leaked, the Plaintiff's notice of the total amount of income change (attached Form 1).

C. Accordingly, the Plaintiff filed an objection on January 18, 201. On February 17, 2011, the Defendant accepted it and notified the change in the amount of income to be disposed of as a result of the recognition of the representative director of each business year (the actual representative from June 2007 to March 2009) and the disposal of the amount of income for each business year, such as the amount recognized as merely a simple payment of management expenses, was excluded from the omission of sales. On May 16, 2011, the Plaintiff recognized the addition of the amount of OO as deductible expenses, such as daily workers' personnel expenses, electricity charges, and water charges, and notified the Plaintiff of the re-issuance of corporate tax and value-added tax as OO, while it is difficult for the Plaintiff to see the substantial representative of the Plaintiff as CCC.

D. On August 11, 2011, the Plaintiff appealed to the Tax Tribunal, and argued that “the public room management expenses collected in accordance with the terms and conditions of individual management contract, management expenses for the period during which management rights are lost due to the termination of the management contract, deposit management expenses included in the items of general management expenses (unactually non-management expenses), and delinquent management expenses shall be excluded from the sales omission amount.” The Tax Tribunal partially accepted the Plaintiff’s assertion on April 21, 201, and issued a decision to dismiss the remainder of the petition.

E. Accordingly, the defendant must conduct a reinvestigation in accordance with the purport of the judgment of the above tax court and then hold sales over the part thereof.

In addition, the amount of income was reduced or corrected by recognizing the representative director (BB) or the actual representative (CCC) from 2004 to 2007. As a result, the amount of income was reduced or corrected by deducting the amount of income. As a result, the sum of OO won for the year 2004, OO won for the year 2005, OO won for the year 2006, OO won for the year 2007, and OO won for the year 2007, respectively, was recognized and accepted for BB, and the Defendant notified the Plaintiff of the change in income amount on June 16, 2014 (in accordance with the attached Table of notice of change in income amount, only the original disposition is called as the subject matter of lawsuit and the disposition for reduction is clear.

[Reasons for Recognition] Facts without dispute, Gap evidence 5-1, 2, Eul evidence 1 through 4, Eul evidence 5-1, 2, Eul evidence 6-1 through 8, Eul evidence 7-1 through 15, and the purport of the whole pleadings

2. Summary of the plaintiff's assertion

A. The amount determined by the Defendant as an omission in sales includes the sum of deposit received (the sum that cannot be deemed management expenses) except for the contract expenses among the items of "general management expenses", and the deposit received cannot be deemed as the Plaintiff's income, and the following tax base should be calculated again, except for the sales.

B. The amount determined by the Defendant as an omission in sales includes the total amount of OO of the unpaid sales claims (outpaid management fees). Since the Plaintiff did not receive the above default management fees, the Plaintiff is required to exclude the amount equivalent to the above amount from sales or to re-calculated the tax base after recognizing it as losses.

C. The Plaintiff merely omitted the sales report, but did not evade taxes by fraud or other unlawful means. As such, the exclusion period for national tax imposition applicable to the disposition of this case is not ten years but five years. Accordingly, the part corresponding to the business year during which the exclusion period for imposition of national tax already existed shall be revoked.

3. Determination

(a) Related Acts and subordinate statutes;

The relevant Acts and subordinate statutes mentioned in the attached Table (the relevant Acts and subordinate statutes mentioned below are all relevant Acts and subordinate statutes mentioned in the attached Form).

B. Whether the instant disposition is lawful

1) Determination on the Plaintiff’s first argument

A) The Plaintiff is a business operator providing a building management, and thus, the supply of such services shall be subject to value-added tax, and when receiving the price for the provision of the services in cash, it shall be reported as sales (Article 13(1)1 of the former Value-Added Tax Act and Article 48(1) of the Enforcement Decree of the same Act).

B) Of course, money received by the Plaintiff in relation to the building management business is not included in the tax base because a quid pro quo relationship between the Plaintiff’s service and the money received is not formed, and it is natural in view of the nature of the supply of services premised on a quid pro quo relationship.

C) However, in light of the following circumstances, the plaintiff asserts that the remaining amount of "general management expenses" received from the user as the owner of the building management business, excluding "contract expenses", is not related to the supply of his/her service. In light of the following circumstances, it cannot be deemed that only "contract expenses" out of the "general management expenses" collected by the plaintiff contribute to the creation of the plaintiff's profit, and it is reasonable to view that the plaintiff performed all operation and management affairs for the building on its own account and received a lump sum payment equivalent to the expenses incidental to the provision of service, as a consideration for the contract expenses and general management expenses, which are provided by the plaintiff to the building user and the "general management expenses", which are provided by the defendant to the building user, and which are not included in the amount paid by the defendant as a simple sales agency, and thus, it shall be deemed that there is a relationship between the remainder of the "general management expenses" and the "general management expenses already paid by the defendant to the building user.

(1) According to the notice of the payment of management expenses submitted by the Plaintiff at the time of the tax investigation and the statement of the detailed statement of the imposition of management expenses (A evidence 1-1-55) submitted to this court, the Plaintiff received the contract expenses, cleaning goods expenses, expendable goods expenses, communications expenses, depreciation costs, optical heat, fire insurance, repair and maintenance expenses, disinfection expenses, waste disposal expenses, water tank cleaning, special repair appropriation, office supplies and miscellaneous expenses, etc. under the general management expenses. Among them, the Plaintiff received the remainder (hereinafter referred to as the “deposit claim of the Plaintiff”) excluding expenses for supplies, communications, printing expenses, book printing expenses, repair and maintenance expenses, disinfection expenses, purification expenses, and miscellaneous expenses which are not included in the sales, regardless of the actual required expenses.

(2) It is not deemed that the Plaintiff managed the remaining expenses claimed by the Plaintiff, other than the contract cost on the accounting books, separately from his own revenue or cost so as not to be mixed.

(3) The Plaintiff appears to have received tax invoices with the same content as the contract fees and the total expenses claimed by the Plaintiff including value-added tax.

(4) There is no evidence suggesting that the Plaintiff separately collected and paid the amount equivalent to the Plaintiff’s claimed expenses according to the actual usage.

D) Therefore, the Plaintiff’s assertion on this part is without merit.

2) Judgment on the second argument by the Plaintiff

A) Generally, in a lawsuit seeking the revocation of a tax imposition disposition, the burden of proof on the facts subject to taxation (including revenues and necessary expenses necessary for calculating the tax base) lies with the tax authority. However, in a case where it is proved that the facts alleged to be subject to taxation in light of the empirical rules in the specific litigation process are inappropriate to apply the empirical rules, or where there are special circumstances to exclude the application of such empirical rules in the pertinent case, it cannot be readily concluded that the pertinent taxation disposition is an unlawful disposition that failed to meet the taxation requirements. Considering that necessary expenses are favorable to the taxpayer and most of the facts generated necessary expenses are located in the area under the control of the taxpayer, and thus it is easy to prove them, it accords with the concept of fairness to recognize the necessity of proof to the taxpayer by permitting the presumption of non-existence of necessary expenses which the taxpayer does not perform the verification (see, e.g., Supreme Court Decisions 2014Du2027, May 29, 2014; 2002Du1588, Sept. 23, 2004).

B) We examine this part of the Plaintiff’s assertion in light of the above legal doctrine.

C) Comprehensively taking account of the purport of evidence Nos. 5-1, 2, and 5-1 and 5-2 of the plaintiff evidence Nos. 5-1, 5-2, the defendant judged the amount equivalent to the management expenses confirmed by the plaintiff's notice of payment of management expenses submitted by the plaintiff at the time of the tax investigation as the sales omission amount. The plaintiff did not include the amount of sales omission amount. The plaintiff received management expenses by using the plaintiff's shareholder or employee without using the plaintiff's account with the building management expenses payment account, the plaintiff's children or wife, etc., and did not enter the amount of the management expenses in the account book. Accordingly, the plaintiff's omitted sales amount is revealed by the data that can be inferred the fact of taxation in light of the empirical rule, such as the notice of payment of management expenses, the account book, etc. submitted by the plaintiff at the time of the tax investigation. Thus, there is no evidence to prove that there is additional sales claims which can not be confirmed by the financial statements, such as the plaintiff's taxpayer.

D) In addition, a claim that can be included in deductible expenses is a claim that cannot be recovered due to the debtor's bankruptcy, compulsory execution, execution of punishment, discontinuance of business, death, disappearance, missing, or missing (Article 19-2(1) of the former Corporate Tax Act and Article 19-2(1)1, 8, and (3) of the Enforcement Decree of the same Act). The fact that the whole of the claim is impossible to recover due to the debtor's bankruptcy, compulsory execution, execution of punishment, discontinuance of business, death, disappearance, missing, or missing during the pertinent business year in which the corporation accounts as bad debt (see, e.g., Supreme Court Decision 2006Du1098, Jul. 10, 2008). Thus, there is no evidence to acknowledge such circumstance, even if the plaintiff asserted that the sale claim exists, it shall not be included in deductible expenses.

E) Therefore, the Plaintiff’s assertion on this part is without merit.

3) Judgment on the third assertion by the Plaintiff

A) The amount of income disposed of as a result of the recognition of the representative of a corporation under the provisions of the Corporate Tax Act is deemed to have been paid by the relevant corporation on the date of receipt of the notice of change in the amount of income, but this does not mean that the relevant corporation actually pays the amount of income to the representative, but merely means the legal fiction of law. Thus, in order to establish a corporate withholding obligation upon receipt of the above notice of change in the amount of income, a corporate withholding liability should be established for the source taxpayer to be deemed to have received the amount of income when the above notice of change in the amount of income was received. If the income tax liability of the source taxpayer already extinguished due to the excess of the exclusion period for imposition of the income tax, the corporate withholding obligation cannot be established. Thus, the subsequent notice of change in amount of income is unlawful (see Supreme Court Decision 2007Du113

B) Meanwhile, “Fraud and other unlawful acts” under Article 26-2(1)1 of the former Framework Act on National Taxes can be interpreted as the same meaning as “Fraud and other unlawful acts” under Article 9 of the Punishment of Tax Evaders Act. “Fraud and other unlawful acts” under Article 9 of the Punishment of Tax Evaders Act refer to the deception and other active acts which make it impossible or considerably difficult to impose and collect taxes. In the crime of tax evasion, “the person liable to pay taxes is aware that one’s own act constitutes fraud and other unlawful acts, and thereby, commits or attempts to commit unlawful acts while recognizing the fact that the result of tax evasion arises (see, e.g., Supreme Court Decision 2004Do817, Jun. 29, 2006). However, even if a corporation’s representative has concealed income by receiving a false tax invoice and appropriating it in books, so it cannot be deemed that it constitutes “the act of tax evasion and other unlawful acts” under Article 28(1)2 of the former Framework Act on National Taxes, and thus, it cannot be deemed that it constitutes “the act of tax evasion and other unlawful acts.”

C) Article 26-2(1)1 of the former Framework Act on National Taxes only provides that “if a taxpayer evades a national tax, obtains a refund or deduction by fraudulent or other unlawful means, it shall be ten years from the date on which the national tax can be imposed, if the taxpayer evades a national tax, or obtains a refund or deduction by means of fraud or other unlawful means,” the former Framework Act on National Taxes added that “if the national tax is evaded by unlawful means, or refunded or deducted by the amended Act No. 11124 of Dec. 31, 201, if the national tax is corporate tax, it shall be ten years from the date on which the income tax or corporate tax can be imposed on the amount disposed of pursuant to Article 67 of the Corporate Tax Act.” This is deemed as a supplementary legislation to supplement the fact that it is difficult to recognize the intention of tax evasion in the case of income tax due to a disposition of income, as well as corporate tax that evades the exclusion period of national tax on the amount disposed of as bonus, dividend, etc.

D) We examine the instant case in light of the purport and circumstance of the amendment of the aforementioned legal doctrine and relevant laws.

E) Whether the instant disposition, i.e., the notice of change in the amount of income is unlawful is recognized as above.

The amendment of the latter part of Article 26-2(1)1 of the Framework Act on National Taxes to Article 26-2(1) of the former Framework Act on National Taxes applies from the amount that is first disposed of pursuant to Article 67 of the Corporate Tax Act after January 1, 2012 (Article 2(1) of the latter part of the amended Framework Act on National Taxes). However, on November 8, 2010, which was first disposed of in relation to CCC on May 16, 2011, all of the first disposed of in relation to BB was made before January 1, 2012. Thus, in this case, it is apparent that the first disposed of in relation to BB was made before January 1, 2012, not Article 26-2(1)1 of the amended Framework Act on National Taxes, but Article 26-2(1)1 of the former Framework Act on National Taxes.

F) However, according to the facts acknowledged earlier, it is sufficiently recognized that the Plaintiff did not receive management expenses through the account such as CCC’s A, son, Plaintiff’s shareholder and employee, and did not understand the cost by field due to the omission of payment of management expenses, and the payment of expenses by using the above account. However, even though there was an intention to evade corporate tax and value-added tax to the representative of the taxable year in which the sales amount was omitted, the above facts alone do not constitute a case where: (a) the omission of sales was discovered; (b) the omission of sales was leaked; and (c) the omission of sales was leaked; and (d) it is difficult to deem that the Plaintiff committed a crime to evade income tax to be imposed due to fraud or other unlawful act; and (b) there is no other evidence to support that there was a criminal intent to evade the above income tax due to income disposal by the above recognized act. Accordingly, Article 26-2(1)1 of the former Framework Act on National Taxes cannot be deemed as a case where the taxpayer evades national tax or obtains tax refund by fraud or other unlawful act.

G) Meanwhile, according to Article 12-3(1)1 of the former Enforcement Decree of the Framework Act on National Taxes, in the case of a national tax on which the tax base and amount of tax are reported, as well as global income tax, the day following the due date of the due date of filing the tax base and amount of national tax is the date on which national tax can be imposed. Article 70(1) of the former Income Tax Act provides that the due date of filing the global income tax shall be May 31 of the year following the following year of the taxable period. Thus, in this case where the general exclusion period of national tax (5 years) applies, the starting date of the exclusion period of imposition of global income tax for 2004 shall be June 1, 2005, which is the day following the due date of filing the tax base (5 years May 31, 2005), and the expiration date of the exclusion period of imposition of national tax shall be May 31, 2010, which was the first day after the expiration date of the exclusion period of imposition of national tax as seen earlier.

H) The Plaintiff’s assertion on this part is with merit within the scope of recognition above.

4) Sub-committee

Among the instant dispositions, the notice of change in the amount of income related to the disposition of income is illegal as the amount equivalent to the amount of the OO on the BB, the representative of BB in 2004, and the subject of the revocation is reduced if the reduction is made. Accordingly, the part of the Defendant’s notice of change in the amount of income on May 16, 201, which exceeds the amount of the OOO (OOB, the total amount of the disposition of income to BB - the above illegal OOB) out of the notice of change in the amount of income of the Plaintiff on May 16, 201.

4. Conclusion

The plaintiff's claim is reasonable within the scope of the above recognition, and the remaining claims are dismissed. It is so decided as per Disposition.