Seoul Administrative Court 2009Guhap7554 ( October 11, 2010)

Cho High Court Decision 2006Du0906 ( November 28, 2008)

Whether the export amount was reported and omitted and the processed purchase tax invoice was received.

It is confirmed that the sales revenue exported from a foreign local corporation to a third country has been omitted, and the processing tax invoice and processing labor cost have been appropriated.

The contents of the decision shall be the same as attached.

44 44 44 44 44 45 44 444 64 44

1. The plaintiff's appeal is all dismissed.

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

The judgment of the first instance shall be revoked.

In the disposition of imposition against the Plaintiff at the date of the disposition specified in attached Form 1 of the Corporate Tax and Value-Added Tax List A, by the Head of Gangnam Tax Office;

(1) No. 531, No. 500, No. 500, No. 500, No. 500

b. No. 532, No. 3, 500,000.

Cancellation of all parts in excess of the amount

The Defendants’ [Attachment 2] The notice of change in income amount No. 3 in each business year listed above list No. 2 to the Plaintiff on the date of disposition No. 1 in the list No. 2 of the notice of change in income amount shall be revoked.

쇠지지지지 3000 지지지지지지 3000 지지지지지지지지지지 3000

1. Details of the disposition;

The reasoning of this Court's decision on this part is as follows: "The notice of change of income amount in the year 2004" is added to "the notice of Sep. 6, 2005 by the director of the Seoul Regional Tax Office and the notice of change of income amount in the year 2004 by the director of the Seoul Regional Tax Office including all the notice of Sep. 1, 2009 by the director of the Seoul Regional Tax Office and the notice of December 1, 2009 by the director of the Gangwon-dong District Tax Office," and this part is identical to the corresponding part of the reasoning of the judgment of the first

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

(1) In light of the following circumstances, AAA is not merely a company engaged in processing business in relation to the Plaintiff, but a separate company with large scale and independent business activities compared to the Plaintiff (in so doing, the Plaintiff loses the basis for production and export and is merely a company running under its name). The main export amount cannot be deemed the Plaintiff’s sales. Nevertheless, the Defendants deemed the outstanding export amount as not the sales of AAA but the Plaintiff’s sales, and thus the instant disposition was unlawful.

OAA has been managed separately with assets independent of the Plaintiff.

OAA served as a total of 277 persons at the time of March 2004, and included an immigration office located at the time of foreign countries, a large-scale company with a total of 281 persons working as executive officers and employees and equipped with physical facilities. On the other hand, the Plaintiff was merely about 15 executive officers and employees (seven of them are dispatched to AA), and maintained only the minimum office.

O AAAA has been operated in the position of the chief executive officer of the Plaintiff's representative director and JungB, and AAA has been independently engaged in product consultation and acceptance of risks and responsibilities, such as product consultation and receipt of orders, material purchase, product production and shipment, price management, clean management, etc., and it has also been equipped with the substance of the manufacturing business.

O The Plaintiff established AAA in China to reduce costs, such as low-cost personnel expenses, and only reported the AAA to the Chinese authority in accordance with the precedent and practice in order to enjoy benefits under the Chinese tax law.

O The plaintiff wanted to maintain the domestic business foundation, and for this purpose, the plaintiff filed a report on some of the actual sales of AA as the plaintiff's sales and paid the corporate tax accordingly.

O The reason for non-prosecution disposition or criminal judgment is also recognized that the export amount of the issue is not the plaintiff but the actual attribution of the AAA.

The books of accounts are not confidential records of the plaintiff, but all the sales of the plaintiff and the AAB, which are recorded in the accounts of the plaintiff and the AAA, and regular sales, etc., concurrently held by the representative director of the two companies, are merely reported ex post facto, and the plaintiff does not pay processing fees for all overseas products exported from processing and export. The documents, such as a report on the performance of the balance of funds and monthly shipment reports, are only used to identify the business, and the plaintiff did not decide the execution of the funds of the AA and control the business affairs in advance.

OEB's use of the remaining part of the export amount in the project cost of AAA out of the outstanding export amount in Korea by taking advantage of the borrowed-name account of officers, employees, and relatives, is an issue of imposing income tax on an individual of AB, and is irrelevant to the income of the Plaintiff.

According to the documents and evidence, it clearly shows that the plaintiff is not equipped with the substance of the manufacturer corresponding to his reported sales. Therefore, there is no ground to recognize the export amount as the plaintiff's sales.

(2) If it is difficult to determine the actual sales due to the shortage of relevant account books or other evidence, the Defendants shall distribute the sales of the Plaintiff and AAAAA according to the method of estimated taxation pursuant to the proviso of Article 66(3) of the Corporate Tax Act and Article 104(1)1 through 3 of the Enforcement Decree of the same Act. Even if following, there is no room for the key issue to be attributed to the Plaintiff.

(3) If the Plaintiff and the AAA’s income in international trade related to the Plaintiff are to be assessed by adjusting the Plaintiff’s income, the transfer price taxation system under Article 4 of the Adjustment of International Taxes Act shall apply to the transaction between the Plaintiff and the AAA. Accordingly, in the instant case in which most profits accrue to the Plaintiff in light of the Plaintiff’s performance function, and the Plaintiff and the AAAA’s performance function, taxation is entirely without any grounds for reverting the Plaintiff’s total profits to the Plaintiff, and it is deviating from the basic principles of the transfer price taxation.

(4) Unlike domestic subsidiaries, the Defendants denied all business activities of the subsidiaries with respect to AAA, which is a Chinese subsidiary, and imposed by deeming that such activities belong to the Plaintiff’s sales as the parent company. This is also in violation of the principle of tax equality.

(b) Related statutes;

[Attachment 3] The entry of relevant Acts and subordinate statutes shall be as follows.

C. Determination

(1) As to the assertion that the Plaintiff was not the actual owner of the export amount at issue

(A) Facts of recognition

① The Plaintiff’s trade department prepared a settlement statement of accounts called “the current status of accounts for each region” or “settlement file (Evidence No. 4). This is not a distinction between the goods shipped by the Plaintiff and AAAAA, but a sales account book written without being omitted for each transaction partner and each item. “Date” means the date of preparation (the date of ordinary shipment is immediately stated on the date of commercial shipment) and the date of shipment, as the commercial invoice number, the date of classification of transaction partners (ML, MM, etc.) and the date of shipment, as the commercial invoice number, the date of shipment, and the date of shipment, as the sales (the same amount as the commercial invoice and the credit sales claim) indicated in US dollars, and the term “alternative” means the amount deposited after the collection of credit sales claims, respectively.

② On the right side of the books of the above settlement statement, the part stating ‘the deposit', ‘China deposit', and ‘Seoul deposit', when the payment is received after export sale, shall request AAA to determine the deposit place to the Plaintiff, and upon receiving the Plaintiff’s order from the Plaintiff (as stated in the evidence No. 27, the representative director of the Plaintiff stated that the due BB would have determined the deposit place to the Plaintiff). The KimF, an employee dispatched to AA, made it known to the Plaintiff by facsimile or e-mail as to whether the deposit is to be made to a certain account for each shipment at the time of deposit, was recorded in the Plaintiff’s trade book, and the deposit place was not determined by the customer or shipping/seller from the time of sale.

③ The Plaintiff’s representative director, representative director, and B, confirmed the contents of the ledger of the books of accounts on every week, and approved the amount entered in the next balance by affixing a seal which is smaller than the daily seal.

④ The Plaintiff grasped the current status of total sales and shipment on a monthly basis, and prepared a monthly shipment list in the Chinese office of AAA and sent it to the Plaintiff’s trade division by e-mail, the trade division prepared the Plaintiff’s final shipment list by adding the items shipped in the Plaintiff’s Seoul office to the details of the shipment. The trade division did not distinguish between the Plaintiff and the Plaintiff’s goods shipped, but entered the entire export sales portion managed by the Plaintiff’s trade division for the entire transaction, and did not coincide with the entries in the above settlement statement (However, the monthly shipment list did not include the “interest payment,” “China payment,” and “Seoul payment”). The representative director of the Plaintiff’s company confirmed the contents of the monthly shipment list director at the first of each month and approved this.

⑤ When cash settlement is made after the purchase of materials, the Plaintiff prepared a "written statement of purchase (written evidence No. 10)" (written evidence No. 10), and obtained approval from the representative director of the Plaintiff. The Plaintiff prepared and managed a written statement of payment without distinguishing the original and original materials purchased in China from the original materials purchased in China.

6. The plaintiff's accounting division did not enter all the descriptions of the monthly shipment list received from the trade division into the accounting computer program, but entered only the main part of the shipment list designated by YB or the KG vice-general of YG, the representative director of the plaintiff, into the accounting computer program of 'Seoul', 'Seoul', 'Seoul', and 'the sales portion' and 'the omitted portion' separately from 'the current sales status of 'B' (Evidence No. 15)' (Evidence No. 15) and 'the omitted portion' as the plaintiff's sales report.

7) The representative director of the Plaintiff’s representative director and his relativeB had a borrowed account under the name of the principal and his relative, and the Plaintiff, using the above borrowed account, brought in the Republic of Korea with the method of so-called so-called “repaid” the sales amount for the omitted sales amount received from a foreign customer, and used it for the settlement of the purchase amount related to the omitted sales amount for the domestic customer.

8. The Plaintiff’s representative director JeongB had signed and registered with the chamber of commerce and industry, and used W. B. CHU in written form as signature and signature rubber, and W. B. CHA in written form as well as W. B. CHA’s signature and seal written at the top of the above registered signature and seal written at the MR. B.W. CHG PRESIDNT, written at the bottom of the term “MARINE CO. LTD.” (However, there is a difference in that there is a separate term “MAE.” in written at the top of the above registered signature and seal written at the MR. B. CHG. PREDNT, written at the estimate, the seller as the Plaintiff (proformed evidence No. 12, No. 17-2, and No. 12-3) and the phrase “AMAA” written at any of the above LMAA.

9) The Plaintiff had the employees dispatched to China prepare a report on the performance of the weekly fund balance (No. 18, No. 18, No. 2) in the format of one-day or fifteen-day-day-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-based-

(10) On April 29, 2003, the Plaintiff provided a tax consultation related to the production and export of foreign processing to certified public accountants, etc. at the time, and at the time, the Plaintiff’s question is "materials purchased in Korea are sent to China through free transfer, and added taxes are also sent. When purchasing raw materials in China, it will be transferred to a Chinese company through the Bank of Korea and take over and process raw materials in a Chinese factory and then directly exported in China. The payment will be deposited in Korea. The sales declaration would also be made in Korea. In such case, whether Korea can be recognized as a raw material price for the amount sent to a Chinese company as a raw material price?

① During the tax investigation related to the instant disposition, the Plaintiff’s representative director, B, or the Plaintiff’s employee stated as follows.

- The representative director of the Plaintiff is the transaction partner of the Plaintiff, the amount of the difference is the sales of the Plaintiff, and the amount of the difference is the sales of the Plaintiff. The amount of the difference is the collection of the sales amount. The most of the sales amount is deposit in the Plaintiff’s foreign currency account, and the amount indicated by the transfer and the Chinese remittance is the payment of the purchase price or the processing fee purchased by the Lee Postal Office or AAAAA(Evidence 8).

- With the knowledge of the Plaintiff’s trade assistant member as “AA’s pre-processing factory of the Plaintiff, HaH expressed almost all products in the AAA as “pre-processing factory” or “a pre-processing factory of AAA” (Evidence 7).

(12) The order of the representative director of the Plaintiff is written by the Plaintiff as HEAD OFICE, and the AAA or EFICE as ‘BR' (Evidence No. 36, 49).

(13) In 202 and 2004, the mail on the consultation and order of products sent from foreign customers to AAA in 2004, is indicated as ‘the thickness of party directors or ‘party directors', which is not ‘the highest manager of AAAA' (Evidence No. 10).

4) The Plaintiff dispatched 30 persons from January 200 to December 2004 to AA, and paid the benefits therefrom. This includes both the general manager of AA and Jeong-CC, a management director of the Plaintiff, and the rest of the dispatched employees were in charge of sampling management, design work, and material inspection (No. 35).

Facts without dispute over the basis of recognition, Gap evidence 10, 27, Eul evidence 4, 6 through 19, 28 through 30, 35, 36, 43 through 49 (including each number), and the purport of the whole pleadings.

(B) Determination

Comprehensively considering the above facts and the evidence, in light of such various circumstances as the Plaintiff and the AAAA’s sales, accounting management, and processing details, the Plaintiff’s control and management level for the Plaintiff, the Plaintiff’s representative director, employees, and foreign customers’ awareness of the relationship between the Plaintiff and the AAA and the details of the indication, the key export amount is deemed to have been substantially reverted to the Plaintiff, not the AAA but the Plaintiff.

O) The Plaintiff, without distinguishing between domestic export proceeds and the export proceeds of products shipped in China including AAAA, manages the export proceeds by making a statement of accounts for each transaction and confirming their balance, without distinguishing both domestic and Chinese shipping products, and grasping the current status of sales and shipment by making a monthly shipment report from both domestic and foreign countries. This well indicates that the Plaintiff, without recognizing AA as a separate corporation, has been aware of the Plaintiff’s permanent factory and branch office of the Plaintiff, and managed the profits. If the Plaintiff or the representative director of the Plaintiff, who is the Plaintiff, has recognized the AA as a separate company separate from the Plaintiff’s accounts (if the BAB concurrently holds office as the representative director of the AAB), it is natural to grasp the current status of sales and shipment of the two companies by integrating the balance or shipment details of the two companies by making a statement of accounts and the current status of their sales and shipment separately from that of the Plaintiff (if the BAB concurrently holds office as the representative director of the Plaintiff or the Plaintiff’s representative director, this is because it is not difficult for each of the Plaintiff or PB.

O The Plaintiff’s own decision made an appropriate division of the total export price, and some of them were omitted, and some of them have controlled and managed the total export price including the issues in the manner of paying the purchase cost of raw materials of AA or the total export price by discretionary processing cost. Even if the above settlement statement states that the Plaintiff was shipped and exported in AAA, it is not determined by the customer, shipping, or seller from the time of the sale of the product. Thus, the content of the above settlement statement does not immediately mean the total sales of the product loaded in AAAA, as it does not mean the sales of the product.

O) If AAA had operated an independent business as the Plaintiff’s assertion, the Plaintiff and AAA had separate accounting management to distinguish the cost portion of the AAA, but the Plaintiff did not distinguish the cost portion of the AA and managed and managed it by means of preparing a single statement of payment.

O The plaintiff actually controlled and managed the AA's funds by managing the details of the funds to be used in China through "report on the performance of the funds in China" from the plaintiff's employees dispatched to China.

In the current state of monthly sales prepared by the plaintiff, it indicates that the remaining sales except those designated and gathered as "the plaintiff's sales portion" are omitted without indicating "China sales portion" or "AAAA sales portion". This indicates that the total sales belong to the plaintiff and some of them are omitted in the plaintiff's report of sales, which is recognized and managed by the plaintiff.

In light of the rubberer of JungB as the representative director of the Plaintiff and the rubberer of JungB as the representative director of the AAB, the main part of which is identical, and furthermore, the estimated invoice and the estimated invoice indicated by the seller as the Plaintiff is indicated by the seller as AAA, and above, the rubber mark as the representative of the Plaintiff; the details of the Plaintiff’s tax counseling; the details of the Plaintiff’s statement in the process of the tax investigation; the details of the Plaintiff’s employee’s statement in the due BB; and the details of using the proceeds of the sales; rather than considering that the accounts of the Plaintiff or its representative director, JungB and its employees, etc. were operated by recognizing and expressing it externally to the extent that the Plaintiff established in order to use the Chinese low labor force in China, rather than deeming the accounts of AA as an independent corporation.

In light of the contents of the OAA’s product consultation and orders, foreign customers seem to be aware of AA as the Plaintiff’s branch office, and the PP manager of AA as the director of the Plaintiff company. In addition, the major employees of AA, including regularCC, are all dispatched by the Plaintiff and the payment of the benefits, thereby controlling and managing the overall work of AAA.

O The plaintiff declared that a Chinese authority is engaged in a discretionary processing business, and reported only the franchise processing fees that the plaintiff remitted to the Chinese authority as the revenue amount. From the beginning, the plaintiff had no intention to report the sales of the AA, such as the amount of exports, on the ground that the AA was engaged in a manufacturing business independently as it is not a simple franchise processing business, but a mere franchise processing business.

According to the evidence submitted by the Plaintiff, the personal and material status of AAA, the details of business activities, the details of the Plaintiff’s separate tax return on the Plaintiff’s sales, the grounds for the prosecution’s non-prosecution disposition against the Plaintiff and the Plaintiff’s material cost details, etc., the said evidence alone is difficult to readily conclude that the income generated from the business was naturally reverted to or after the Plaintiff was transferred to the AAA or the Plaintiff. Rather, in light of the above circumstances, it is determined that the income generated from the business was practically attributed to the Plaintiff, not the AAA but the Plaintiff.

(c)Indemy:

This part of the Plaintiff’s assertion is without merit, and by applying Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 9911 of Jan. 1, 2010), Article 4(1) of the Corporate Tax Act and Article 4(1) of the Corporate Tax Act, the pertinent tax amount accrued to the Plaintiff is imposed, and the instant disposition that notified the change of income

(2) As to the assertion that taxation should be made by means of an additional investigation

In principle, the tax base of corporate tax shall be determined by the on-site investigation method, and the determination by the method of the on-site investigation shall not be based on the method of the on-site investigation if it is possible to calculate the amount of income by the account books or other documentary evidence on the grounds prescribed by the Presidential Decree, such as where the account books and other documentary evidence of a taxpayer exist or where the important part of the account books or other documentary evidence exists, or where it is impossible to calculate the amount of income by the account books or other documentary evidence. Thus, if the tax base can be calculated based on the existing account books or other documentary evidence even if a part of the account books or other documentary evidence is incomplete or there is a false reason stated in a false manner, the tax base and amount of tax shall not be determined by the method of the on-site investigation (see

However, the settlement of accounts prepared by the Plaintiff is a book prepared and managed by the Plaintiff’s trade department, which includes both the export portion in Korea and the export portion through AAAA, and all sales of the Plaintiff and the AAAAA, which are substantially attributable to the Plaintiff, by stating each year and each customer, and its credibility is given in light of other documentary evidence, such as monthly shipment statements or payment items, monthly sales status, etc.

Therefore, it is difficult to view that the Plaintiff’s account books and other documentary evidence are insufficient or that the amount of income can not be calculated based on account books or other documentary evidence for reasons prescribed by the Presidential Decree, such as the lack of material parts of the Plaintiff’s account books and other documentary evidence, and it is determined that the Defendants can calculate the tax base based on the account books and other documentary evidence. Thus, even if the Defendants did not impose tax by means of additional investigation, it is not unlawful even if the Defendants were not subject to tax by means of additional investigation. Even if the Defendants recognized only 13.8 billion won, the Plaintiff’s net profit rate would reach 40% by recognizing only the amount of exports at issue to the Plaintiff, and even if the total expense rate of precious metal, i.e., precious metal, and related products applied to the case of estimated taxation is less than 90% prior to and after 90% according to the detailed items, the Plaintiff’s

Therefore, there is no reason for the plaintiff's assertion on this part.

(3) As to the assertion that the transfer price taxation should be applied

Article 4 of the Adjustment of International Taxes Act applies to cases where the transaction price falls short of or exceeds the arm’s length price in an international transaction, which is a foreign related party, and the instant disposition is not based on an international transaction between the Plaintiff and the AAA, but on the premise that the sales of the AA, including the key export price, should actually belong to the Plaintiff. Thus, it cannot be deemed that there was an error in applying the transfer price taxation.

Therefore, there is no reason for the plaintiff's assertion on this part.

(4) As to the assertion that the tax equality violates the principle of tax equality

The evidence presented by the Plaintiff alone is insufficient to deem that the Defendants treated AAA, a Chinese subsidiary, differently from other domestic subsidiaries. Therefore, this part of the Plaintiff’s assertion is without merit.

3. Conclusion

The plaintiff's claim shall be dismissed in its entirety because there is no reason to do so. The judgment of the court of first instance is just, and the plaintiff's appeal is dismissed in its entirety due to the lack of reason.