Seoul Administrative Court

Part V

Plaintiff AAAA

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

Cheong-gu Office

The Defendant’s imposition of value-added tax for the second term of 2008 against the Plaintiff on July 4, 2012 is revoked, respectively, the imposition of value-added tax for the second term of 2008, the corporate tax for 2008, and the corporate tax for 2009.

A. On August 31, 2008, the Plaintiff, a company engaged in the business of manufacturing Internet equipment, issued sales tax invoices with the same amount as the instant transaction amount from Non-Party CCC Co., Ltd. (hereinafter referred to as “CCC”) (hereinafter referred to as “the instant gold transaction”), which include the purchase price of ○○○○○ (hereinafter referred to as “the instant purchase transaction”), as shown in Table 1, to purchase the gold model used in the production of telephone-based products (hereinafter referred to as “the instant gold model”), and issued sales tax invoices with the content of selling the instant gold model again to the CCC with the same amount as the instant transaction amount (hereinafter referred to as “the instant sales transaction”), and after the pertinent taxable year, the tax base and supply price of each of the instant transaction amounts including the value-added tax, and the pertinent tax base and supply price.

Moel de

Class B:

Value of Supply

WirelessIP 5000

Maold, Press

○○ ○

WirelessIP 3000

Maold, Press

○○ ○

WPU-7000

Maold, Press

○○ ○

B2

Maold, Press

○○ ○

WPU-7700

Maold, Press

○○ ○

Total

○○ ○

[Attachment 1, Unit: Won]

[Attachment 2, Unit: Won]

Moel de

Value of Supply

WPU-7700

○○ ○

WPU-7700A

○○ ○

WPU-7700M

○○ ○

S Q-3000

○○ ○

S Q-3500

○○ ○

Consolidateds

○○ ○

B. As a result of conducting a tax investigation with respect to the CCC, DD determined that the instant transaction was a false transaction with no substance performed by CCC for the purpose of improving the accounting records performance, and notified the Defendant of the taxation data on the Plaintiff.

C. As a result of conducting a tax investigation with respect to the Plaintiff on July 1, 2012 based on the above taxation data, the Defendant: (a) on July 1, 2008, the year from January 1, 2008 to September 30, 2008 (hereinafter referred to as “2008 business year”); (b) on January 1 to December 31 each year, 2008, the Plaintiff initially made one business year from January 1 to December 31, 2008; (c) however, on March 31, 2008, the business year was changed from October 1 to September 30 each year; and (d) the Plaintiff imposed a corporate tax of 00○○○○, and from October 1, 2008 to September 30, 2009 (hereinafter referred to as “209 business year”). Each of the instant dispositions (hereinafter referred to as “○○”).

1) Value-added tax ○○○○ in 2008

The Defendant identified the purchase tax invoice of this case as a tax invoice different from the fact that there is no substance of transaction, and deducted the input tax amount from the input tax amount of ○○○○○○○○○○○○○○○○○ from the supply value, and added the additional tax calculated as set forth below [Attachment 3], imposed the total value-added tax amount of ○○○○○○○○○○○○○○○○○○○○○

Items of Taxation

Classification

Grounds for Calculation

Amount of tax (source)

208

2. Value-added tax

Additional Dues

The unpaid tax amount;

Number of days

Tax Rate

○○ ○

○○○○

○○○ ○○

0.03% by mass

Additional Tax for Underreporting (unfair)

Underpaid Tax Amount

○○ ○

○○○○

-

40%

Additional Tax on Indecent Submission of List of Tax Invoice

Value of Supply

1%

○○ ○

○○○○

-

1%

Total sum of penalty tax

-

○○ ○

[Attachment 3]

2) Corporate tax ○○○○○ for the business year 2008

The Defendant identified the instant transaction as false transaction without substance, and added additional taxes to the Plaintiff’s inclusion of the depreciation costs of fixed assets in the business year 2008 as to the instant gold in deductible expenses, and then imposed corporate tax ○○○○○○ upon the Plaintiff as shown below (attached 4).

[Attachment 4, Unit: Won]

Classification

Original

Correction

Difference

Tax Base

○○ ○

○○ ○

○○ ○

Tax Rate

13% / 25%

13% / 25%

-

calculated tax amount

○○ ○

○○ ○

○○ ○

Superintendent of the Office of Education

○○ ○

○○ ○

○○ ○

Amount of deducted tax

○○ ○

○○ ○

○○ ○

Additional Tax

○○ ○

○○ ○

○○ ○

Total determined tax amount

○○ ○

○○ ○

○○ ○

3) Corporate tax ○○○○○ for the business year 2009

The Defendant identified the instant transaction as false transaction without substance, and added additional tax to the Plaintiff’s inclusion of the depreciation costs of fixed assets in the business year 2009 as deductible expenses of the Plaintiff’s gold-type in deductible expenses, and then imposed corporate tax ○○○○○○ as shown below (attached 5).

[Attachment 5, Unit : Won]

Classification

Original

Correction

Difference

Tax Base

○○ ○

○○ ○

○○ ○

Tax Rate

11% / 25%

11% / 25%

-

calculated tax amount

○○ ○

○○ ○

○○ ○

Superintendent of the Office of Education

○○ ○

○○ ○

○○ ○

Amount of deducted tax

○○ ○

○○ ○

○○ ○

Additional Tax

○○ ○

○○ ○

○○ ○

Total determined tax amount

○○ ○

○○ ○

○○ ○

D. On July 30, 2012, the Plaintiff dissatisfied with the instant disposition and filed a request with the Tax Tribunal for a review on July 30, 2012. On May 3, 2013, the Tax Tribunal maintained the instant disposition on the premise that the instant transaction between the Plaintiff and the Nuride had not been accompanied by a transfer of the instant gold model: Provided, That “the Plaintiff shall re-examine whether the gains from the disposal of tangible assets arising in the course of the instant sales transaction to be sold to Nuridedededededededededededededededeed the instant gold model has been included in the Plaintiff’s gross income, thereby correcting the tax base and tax amount according to the said decision of the Tax Tribunal. The Defendant, according to the said decision of the Tax Tribunal, appropriated the amount of depreciation costs of ○○○○○○○○ (hereinafter referred to as “○○○○○○’s depreciation costs”) in the business year from October 1, 2013 to September 30, 2010 (hereinafter referred to as “○○○”).

Classification

Original

Correction

Difference

Tax Base

○○ ○

○○ (Amount carried forward losses)

-○○○

Tax Rate

11%

-

-

calculated tax amount

○○ ○

○○ ○

-○○○

Superintendent of the Office of Education

○○ ○

○○ ○

-○○○

Amount of deducted tax

○○ ○

○○ ○

-○○○

Additional Tax

○○ ○

○○ ○

-○○○

Total determined tax amount

○○ ○

○○ ○

-○○○

[Attachment 6, Unit : Won]

E. The Plaintiff dissatisfied with the instant disposition and filed the instant lawsuit on July 25, 2013.

[Ground for Recognition: Facts without dispute, Gap evidence 1 through 8, entry of Eul evidence 1, purport of whole pleadings]

2. The assertion and judgment

A. The plaintiff's assertion

In other words, as the profitability has deteriorated due to financial crisis around 2008, the CCC purchased the instant gold-type and requested the Plaintiff, which supplied the Internet telephone components to expand the Plaintiff’s business territory. The Plaintiff purchased the instant gold-type according to the CCC’s above request, and supplied them to CCC, using the instant gold-type with other gold-types. After that, the Plaintiff established a company policy to concentrate the Plaintiff’s ability in the Internet telephone components and cases in the latter part of 2009, and then purchased and sold the instant gold-type and other gold-types (the gold-type 2] owned by the Plaintiff, and then requested the CC to purchase the instant gold-type and other gold-types (the gold-type 2) that were generated by the Plaintiff, despite having consented to such request, the Defendant was unlawful as the result of the CCC’s actual sales of the instant gold-type prior to the instant transaction.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

In general, the burden of proving the facts of taxation requirement in a lawsuit seeking revocation of disposition imposing corporate tax must be borne by the imposing authority. However, if the facts alleged in light of the empirical rule in the course of a specific lawsuit are revealed, it cannot be readily concluded that the other party is an illegal disposition that failed to meet the taxation requirement unless it proves the circumstances that the pertinent facts are not eligible for the application of the empirical rule (see Supreme Court Decision 2006Du6604, Feb. 22, 2007). Furthermore, the burden of proving the tax base on taxation in the lawsuit seeking revocation of disposition imposing corporate tax lies in the imposing authority. Since the amount of income for each business year determined the tax base is deducted from the amount of gross income and the burden of proving the existence of gross income and deductible expenses is deducted from the amount of income, the tax authority must bear the burden of proving the existence of necessary expenses, which are favorable to the taxpayer, and most of the facts generated necessary expenses are located within the area under the control of the taxpayer and it is easy to prove them (see, e.g., Supreme Court Decision 2004Du58384.

In light of the above legal principles, the instant transaction appears to be a false transaction that does not involve the transfer of gold punishment, and thus, the instant disposition is lawful, considering the following circumstances, comprehensively taking into account the facts of recognition as seen earlier, evidence, and the purport of the entire pleadings.

1) First of all, it appears that the CCC and the Plaintiff did not have any fact of transferring the gold type of the instant gold. In other words, in light of the fact that the EE, the representative director of the CCC, was investigated by the prosecution and stated that it purchased and sold the gold type by means of occupancy revision without actual possession transfer (see, e.g., a written decision not to prosecute evidence 9) the gold type of the instant gold type was not actually transported or delivered to the other party while the purchase transaction of the instant gold type was conducted and the sales transaction of the instant gold type of the instant gold type was completed, and the relevant subordinate companies continued to hold the gold transfer form of the instant gold type of the instant gold type of the Plaintiff at the time of completing the gold type of the lower company’s factory specializing in the production of the gold type of the instant gold type of the instant gold type of the instant gold type of the instant gold type of the instant gold type of the Plaintiff’s acquisition and transfer form of the gold type of the instant gold type of the Plaintiff’s acquisition and transfer form of the instant gold type of the Plaintiff’s purchase and sale of the instant gold Type 10.

2) The Plaintiff’s burden of proving the facts of taxation in the lawsuit imposing tax should be borne by the taxation authority. However, considering the above legal principles, it is necessary to present evidence to the extent that the Plaintiff actually paid the amount of the instant transaction to the extent that the depreciation costs of the instant gold type would have the nature of the Plaintiff’s necessary expenses due to the inclusion in deductible expenses. However, there is insufficient evidence to support that the Plaintiff actually paid the amount of the instant transaction between the Plaintiff and CCC. In other words, the Plaintiff was actually paid the amount of KRW 462,457,270 out of the instant transaction in the process of the instant purchase, and the remaining amount was accounted for the account settlement of the amount of the instant gold type 300,000,000 won, which was incurred from the instant transaction. However, considering the fact that the Plaintiff’s purchase and transfer agreement was concluded between the Plaintiff and the Plaintiff’s seller and the Plaintiff’s sales of the instant gold type 20,000 won, it appears that it would be reasonable to view the Plaintiff’s sales of the instant account amount as evidence.

3) The Plaintiff asserts to the effect that the Plaintiff purchased the instant gold type from CCC to acquire the Internet telephone license manufacturing business division, and that the instant gold type was actually produced by using the instant gold type, and that sales were generated therefrom. However, there was no evidence suggesting that the Plaintiff acquired the Internet telephone license manufacturing business division from CCC, or that the Plaintiff was engaged in actual production activities by using the instant gold type. However, the Plaintiff asserted that the Plaintiff was presented evidence No. 15 and presented evidence corresponding thereto. However, as evidence showing that “CCC produced and sold products including the instant gold type,” it is contrary to the Plaintiff’s assertion that the Plaintiff acquired the Internet telephone license manufacturing business division from CCC.

4) The Plaintiff asserted to the effect that CCC and EE, the representative director of the Plaintiff, at the time of the instant transaction, were investigated by the prosecutor, and received a non-prosecution disposition due to insufficient evidence, and thus, they cannot be deemed false transaction. According to the evidence evidence No. 9, the Plaintiff’s assertion that CCC and EE received a non-prosecution disposition due to lack of evidence regarding the instant transaction. However, as otherwise alleged by the Plaintiff, the Seoul Central District Public Prosecutor’s Office may recognize the fact that CCC and EE had received a non-prosecution disposition due to lack of evidence. However, even if the prosecutor issued a tax office’s accusation against the tax office that issued tax invoices without real transaction, it may be recognized that there was no normal real transaction taking into account the details of the supply of the goods, payment method, etc. (see Supreme Court Decision 2010Du8263, Nov. 15, 2012). The Plaintiff’s representative director, at the time of the instant transaction, stated that the instant transaction was false transaction that does not involve the instant transaction.

5) In addition to the above facts and evidence, the Plaintiff and CCC deemed to have a close relationship in terms of human resources composition and the Plaintiff and CCC have taken office on April 15, 2003 as the Plaintiff’s auditor on October 13, 2005. In particular, the Plaintiff worked as the Plaintiff’s representative director from January 10, 2008 to February 24, 2012, which was the time when the instant transaction occurred, and was the Plaintiff’s largest shareholder at 45% of the share ratio at the time of the instant transaction. GGG had worked for CCC, which was holding the shares of CCC at the time of the instant transaction, and had a close relationship between EE and the representative director at the time of performing military service as the representative director of CCC, which was the date of the instant transaction, and the Plaintiff had been the Plaintiff’s spouse at the time of 201.27th of 3rd 207.27th 207.

For the above reasons, all the plaintiff's assertion cannot be accepted, and the transaction of this case is judged to be a false transaction that does not involve the transfer of the gold punishment of this case.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

▣ 구 부가가치세법(2008. 12. 26. 법률 제9268호로 개정되기 전의 것)

Article 17 (Payable Tax Amount)

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as the “paid tax amount”) shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as the “in-house tax amount”) from the tax amount on the goods and services supplied by him (hereinafter referred to as the “the output tax amount”): Provided, That where an input tax amount exceeds the output tax

1. The tax amount for the supply of goods or services used or to be used for his own business;

2. The tax amount for the import of goods used or to be used for his own business; and

(2) The following input tax amounts shall not be deducted from the output tax amount:

1. An input tax amount in case where the list of the total tax invoice by customer is not submitted under Article 20 (1) and (2), or the input tax amount on the portion not entered or entered differently from the fact, in case where the whole or part of the registration numbers or supply values by transaction parties in the submitted list of the total tax invoice by customer is not entered or entered differently from the fact, except in such case as prescribed by

1-2. An input tax amount, in case where the tax invoice as provided in Article 16 (1) and (3) is not delivered, or the whole or part of the matters to be entered under Article 16 (1) 1 through 4 (hereinafter referred to as a “necessary entry item”) is not entered or entered differently from the fact on the delivered tax invoice: Provided, That the input tax amount in such case as prescribed by the Presidential Decree shall

▣ 구 부가가치세법(2010. 1. 1. 법률 제9915호로 개정되기 전의 것)

Article 17 (Payable Tax Amount)

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as the “paid tax amount”) shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as the “in-house tax amount”) from the tax amount on the goods and services supplied by him (hereinafter referred to as the “the output tax amount”): Provided, That where an input tax amount exceeds the output tax

1. The tax amount for the supply of goods or services used or to be used for his own business;

2. The tax amount for the import of goods used or to be used for his own business; and

(2) The following input taxes shall not be deducted from the output tax amount:

1. An input tax amount in case where the list of the total tax invoice by customer is not submitted under Article 20 (1) and (2), or the input tax amount on the portion not entered or entered differently from the fact, in case where the whole or part of the registration numbers or supply values by transaction parties in the submitted list of the total tax invoice by customer is not entered or entered differently from the fact, except in such case as prescribed by

1-2. An input tax amount, where the tax invoice under Article 16 (1), (2), (4) and (5) is not delivered, or all or part of the matters to be entered under Article 16 (1) 1 through 4 (hereinafter referred to as "necessary entry items") are not entered or entered differently from the fact on the delivered tax invoice: Provided, That the input tax amount in cases prescribed by Presidential Decree shall be excluded;

Article 21 (Settlement and Correction)

(1) The head of a district tax office having jurisdiction over a place of business, the Commissioner of the competent Regional Tax Office or the Commissioner of the National Tax Service shall determine or correct the tax base of value-added tax or tax amount

1. Where the final tax return is not filed;

2. Where there are any mistakes or omissions in details of the final tax return;

3. Where the list of the total tax invoice by buyer or the total tax invoice by buyer is not submitted in the final tax return, or all or part of the submitted list of the total tax invoice by buyer is not entered or

4. Where the value-added tax is likely to be evaded due to the causes prescribed by Presidential Decree other than those in subparagraphs 1 through 3.

▣ 구 법인세법(2010. 12. 30. 법률 제10423호로 개정되기 전의 것)

Article 6 (Settlement and Correction)

(1) Where any domestic corporation fails to report pursuant to Article 60, the chief of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall determine the tax base and tax

(2) Where a domestic corporation files a report under Article 60 in any of the following cases, the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and

1. Where there are errors or omissions in the contents of the report;