The disposition of non-public restriction on input tax amount is legitimate because matters such as a person who actually supplies are prepared and delivered differently from the fact.

A disposition of non-public restriction on input tax amount is legitimate because matters such as a person who actually supplies are prepared and delivered differently from the fact, but the imposition of unjust underreporting penalty tax exceeding the general underreporting penalty tax is illegal.

Article 17 of the former Value-Added Tax Act

2016Guhap50178 Revocation of Disposition of Imposition of Value-Added Tax

○○○ Incorporated Company

○ Head of tax office

2016.12

2016.09.02

1. Unfair underreporting of value-added tax imposed on the Plaintiff on December 1, 2014 by the Defendant on December 1, 2014

The imposition of KRW 6,791,040 in excess of KRW 1,697,760 in the imposition of KRW 6,79,040 and the imposition of KRW 30,652,560 in the imposition of penalty tax for unjust underreporting of value-added tax for a period of two years in 2013 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. 8/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

On December 1, 2014, the Defendant revoked the imposition of value-added tax of KRW 29,526,880 (including penalty tax of KRW 12,549,841, including penalty tax of KRW 6,791,040), value-added tax of KRW 129,047,030 (including penalty tax of KRW 30,652,560, including penalty tax of KRW 30,652,560), corporate tax of KRW 18,721,80 for the year 2013.

1. Details of the disposition;

A. The Plaintiff, which was established on May 10, 1982 and operated the business of processing and disposal of scrap metal in ○○○○○○○○○○○○○, and reported value-added tax from the first half to the second half of 2013, when it received 936,090,680 tons of supply value from BB resources (hereinafter “B resources”) being Chinese business entities, and filed a tax invoice for purchasing 2,535 tons of supply value of 936,09,680 tons of supply value from the output tax amount after deducting the said input tax amount from the output tax amount, and filed a corporate tax return by including the said supply value in deductible expenses.

B. Around July 2014, the head of ○○ Tax Office conducted a trade-related tax investigation on BB resources, deeming the instant tax invoice as a false tax invoice received without a real transaction and notified the Defendant of the taxation data.

C. After conducting a tax investigation on the Plaintiff, the Defendant: (a) deemed the instant tax invoice as a false tax invoice; (b) deducted the input tax amount related to the instant tax invoice; and (c) excluded the relevant supply value from deductible expenses; and (d) notified the Plaintiff of KRW 29,526,880 for the first period of December 1, 2013 (including penalty tax of KRW 12,549,841, including penalty tax of KRW 6,791,040), value-added tax of KRW 129,047,030 for the second period of 2013 (including penalty tax of KRW 30,652,560), corporate tax of KRW 18,721,80 for the year 2013 (hereinafter “instant disposition”).

D. The Plaintiff filed a request for a trial with the Tax Tribunal on July 8, 2015, upon filing an objection to the instant disposition, but was dismissed on October 16, 2015.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 to 5, the whole pleadings

purport of this chapter

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The defendant's disposition of this case shall be revoked as it is unlawful for the following reasons.

1) (1) The Plaintiff was actually supplied with scrap metal from BB resources, such as the entry of the instant tax invoice, and paid the price therefor in full. Thus, the instant tax invoice does not constitute a false tax invoice, and even if (2) the instant tax invoice is a tax invoice different from the fact, the Plaintiff confirmed that the Plaintiff was issued a business registration certificate, certificate of personal seal impression, identification card, etc. from BB resources, and transacted in scrap metal after confirming it, and thus, the Plaintiff is a party with good faith and without fault, and thus, the Defendant rendered the instant disposition on a different premise.

2) The instant tax invoice is a tax invoice different from the fact, and even if the Plaintiff did not know such fact by negligence, the Plaintiff was not aware that the tax invoice issued by BB resource was false and that BB resource, the counterparty, would evade value-added tax. As such, the Plaintiff’s imposition of penalty tax for unfair underreporting amounting to KRW 37,443,60 in the instant disposition (=6,791,040 for the first term portion in 2013 + KRW 30,652,560 for the second term in 2013) is unlawful.

B. Relevant statutes

Attached Form 3 is as listed in the "relevant Acts and subordinate statutes".

C. Facts of recognition

1) The Plaintiff: (1) from June 4, 2013 to December 31, 2013, 2013, supplied 2,535 tons of scrap metal 2,535 tons to the Incheon Gangseo, Inc., Ltd. (hereinafter referred to as “CCG”), and (2) received the scrap metal payment from theCCG, and thereafter deposited B’s business account [the account name: 00-00-00-00) with the name of the account holder ○○○○, in the English name of Trade Union (the account number: 00-00-00)”; and (3) received the tax invoice of this case from the account holder 1,029,69,000 won (the value of supply of the tax invoice of this case 936,000,000,000 won + the tax invoice of this case 930,000 won; and (4) received the tax invoice of this case from the account holder.

2) BB immediately transferred the gold scrap metal collected from the Plaintiff et al.’s sales office to the purchaser of the FF resources, etc., or withdrawn, in cash, from the business account in the name of the Trade Union on the day or the following day (the amount equivalent to KRW 1.6 billion from the EE bank’s ○○ Dong Branch and the amount equivalent to KRW 700 million from the D Bank’s ○○ Dong Branch).

3) The director of the ○○ Tax Office, upon the failure of BB resources to pay taxes of KRW 10,000,000, such as value-added tax, conducted a tax investigation on BB resources from June 2, 2014 to July 6, 2014, and as a result, found the following facts.

A) At the time of the on-site investigation conducted on July 2, 2014 at the ○○○ Dong, ○○○-dong, ○○○○○○, where the place of business of BB resource existed, there was no worker, person, person, or person with good value.

B) The director of the ○○○ Tax Office sent a notice of request for confirmation of the fact of transaction to 242 of the purchaser who supplied more than 5 million won among 305 purchase places at least 2,431,00,000 won (the amount equivalent to 77.5% of the total purchase amount of B resources) reported by BB resources as the purchase amount of recycled waste resources for the year 2013. The head of the ○○ Tax Office responded to the effect that all 153 persons (overseas migrants, employees, family owners, etc.) who sent the notice of request for confirmation of the fact of transaction with BB resources was not the fact that BB resources were not the fact that the former reported to the head of the ○○ Tax Office as the personal information known to the head of the ○○ Tax Office.”

C) Purchase tax invoices exist that BB purchased scrap metal from the purchaser, such as FF resources, but there is no evidence to acknowledge that BB’s establishment accounts for scrap metal, etc. in relation thereto.

D) The difference between the scrap metal purchased by the Plaintiff from BB was the FF resources or other businesses’ place of business, rather than the location of the BB resources.

4) Meanwhile, the Defendant conducted an investigation related to the transaction order with the Plaintiff, and reported the instant tax invoice as false tax invoices that are different from the facts, and filed an accusation against the Defendant, which was the representative director of the Plaintiff. On February 12, 2015, the Prosecutor: (a) cannot be deemed that the Plaintiff received the instant tax invoice from BB resources without real transaction with BB resources; (b) on the ground that “it cannot be deemed that the Plaintiff received the instant tax invoice from BB resources without real transaction with B,” the Defendant issued a disposition of uncomponed suspicion

[Reasons for Recognition] Unsatisfy, Gap evidence Nos. 4, 5, 7 through 10, 12, 14, Eul evidence Nos. 1, 2 and 6

Each entry, including branch numbers, if any) and the purport of the whole pleading

D. Determination

1) Whether the instant tax invoice constitutes a false tax invoice

A) Article 17(2)2 of the former Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013) and Article 39(1)2 of the former Value-Added Tax Act (wholly amended by Act No. 12167, Jan. 1, 2014) which denies the deduction of an input tax amount on a tax invoice received in the course of transaction refers to cases where the necessary descriptions of a tax invoice do not coincide with those of the parties to the transaction concerning the goods or service, notwithstanding the formal descriptions of the transaction contract, etc. written between the parties to the transaction concerning the goods or service (see, e.g., Supreme Court Decision 96Nu617, Dec. 10, 196); even if a transaction of supplying the goods, etc. actually exists, such transaction constitutes a tax invoice different from that of the issuer.

B) Comprehensively taking account of the facts acknowledged as above and the overall purport of the arguments as a whole, the actual supplier of scrap metal listed in the tax invoice in the name of the representative No.A. of BB resources is not TradeA, but TradeA merely lends the name of the issuer of the tax invoice. Thus, the instant tax invoice constitutes a tax invoice different from the fact that the supplier’s entry is false.

(1) The Plaintiff’s employee, who was in charge of transaction with BB resources, stated that “At around 209 or around 2010, NoA was in charge of the first transaction with BB resources, and at the same time, at the time, NoA was in charge of the work and work related to scrap metal without the place of business, and was in charge of the work, and he was in operation. It was called that ○○ was directly in charge of the operation of NoB resources around June 2013. At the same time, there was a container used for the place of business and a scrap metal was in place for the purpose of office, and only the president of NoA was in place without other employees.” The Plaintiff stated that “NoA was in charge of transaction with BB resources such as unit price, grade, and timing of payment.” As seen below, the Plaintiff was a Chinese national who had not been in possession of property as a pre-registered transaction and had not been operated by a trade company, and that it was not easy for the first time between the Plaintiff and the employee who was in charge of No.B resources for more than six (6).

(2) As follows, BB resources are not equipped with human resources, physical facilities, capital, etc. as normal scrap metal traders, and thus, there is no ability to supply the instant scrap metal to the Plaintiff.

① Although the Plaintiff was running a scrap metal distribution business by lending the part of the ○○ Resources, which is a different scrap metal distributor, the Plaintiff did not confirm the existence of the lease agreement or the details of rent payments made between the BB Resources and the ○○ Resources. Moreover, the Plaintiff did not have any business facilities such as the fraternity, storage, etc. basically required for the scrap metal business, and did not have any inventory of the scrap metal.

(2) The measurement table (Evidence A No. 10) prepared in connection with the scrap metal transaction between the Plaintiff and BB resources is prepared and delivered to the Plaintiff in ○○○ System, and in fact, it is merely prepared by the Plaintiff as the supplier of scrap metal, etc., even though it was directly transported from ○○ Resources, etc., and there was no involvement or confirmation measure in BB resources in the process of its preparation and delivery. In addition, the “B resources submitted by the Plaintiff and the Plaintiff’s transaction statement (Evidence A No. 11)” cannot be known as the preparing entity, and even considering its contents, it is merely a statement of the volume and value of scrap metal supplied directly through the CC System and the tax amount related thereto. Accordingly, it cannot be said that “the Plaintiff” is the actual supplier of scrap metal related to the instant tax invoice.

(3) BB resources did not have any surplus funds to be paid to the purchaser, even before the payment for scrap metal was made from the sales office, including the Plaintiff, etc., to the business account in the name of the Trade Union.

④ As a result of the tax investigation of the ○○ Tax Office’s ○○ Tax Office, it is confirmed that all 153 persons, from among the 305 business operators of the 242 business operators, who supplied scrap metal with at least five million won of the 2013 business operators that reported that the 205 business operators had traded with the 2013 business operators, sent a reply to the Defendant’s request for the transaction of BB resources, did not engage in the transaction with the 2013 business operators, and most of the purchase tax invoices for the 1st and 2th 2nd 2013 of B resources were processed purchases.

(3) It is difficult to view the instant transaction as a normal scrap metal transaction even if examining the details, details, etc. of the instant transaction.

① Although Trade Union, the representative of BB resources, appears to have resided in the Republic of Korea with permission to stay as a Chinese national on October 29, 201 as an overseas Korean national (F-4) and had no experience in engaging in scrap metal and waste goods wholesale business, Trade Union, the representative of the BB resources, seems to have reached approximately KRW 3,244,529,00,00 of the short-term sales from June 5, 201 to December 31, 2013, the opening date of business, until approximately KRW 708,446,00 of the purchase amount, and the difference between the purchase amount and sales amount is also excessive.

(2) The Plaintiff asserted that the volume of the BB resource scrap metal [this is the scrap metal that occurs in the process of covering steel products] that the Plaintiff purchased from the BB resource, the Plaintiff had the purchaser transport the scrap metal, as set forth in the sales contract, to the ○○○, directly. The Plaintiff calculated the weight of the scrap metal transported from the transport of the BB resource, and then paid it to the Plaintiff, the Plaintiff transferred the purchase price pursuant to the sales contract with the BB resource to BB. However, the Plaintiff did not confirm the status or weight of the scrap metal supplied directly to the Plaintiff, while having the Plaintiff supply it through the purchaser, and the Plaintiff received the purchase price in accordance with the empirical rule, without confirming the status or weight of the scrap metal supplied directly through the purchaser.

(3) The rent of scrap metal purchased by the Plaintiff from BB resources is identified as FF resources or other companies’ place of business, rather than the location of BB resources, and the purchase tax invoice of scrap metal issued by BB resources to the Plaintiff is not written with the size, quantity, and unit price of scrap metal. The BB resources did not manage the details of transactions, such as the product and quantity of scrap metal supplied to the Plaintiff by the Plaintiff through the arrangement of account books, and do not seem to have properly known the details of supply transactions to the Plaintiff.

④ After receiving the scrap metal from the Plaintiff to the account under the name of Trade Union, the Plaintiff deposited the scrap metal in cash on the day or the following day, or remitted it to the account of FF, etc., a purchaser, on the same day or the following day. As seen in Article 2(c)(2), the amount of cash withdrawal from two business accounts in the name of Trade Union and Trade Union and Trade Union and Trade Union and Trade Union and Trade Union and Trade Union and the amount of cash withdrawal from two business accounts in the name of Trade Union and Trade Union and Trade Union and Trade Union and Trade Union have reached KRW 2.3 billion.

(4) Even though the prosecutor who investigated the Plaintiff’s representative director Kim○ and No.A. who conducted the instant transaction in relation to the suspicion of violation of the Punishment of Tax Evaders Act by the Plaintiff’s representative director Kim○ and No.A. who conducted the instant transaction, issued a disposition of non-prosecution due to lack of evidence against Kim○ and No.A. on the accusation of the tax office that issued a tax invoice without actual transaction, the prosecutor issued the tax invoice, the court may deem that the actual supplier did not have a normal real transaction because, even if there was a real transaction taking into account the details of the supply of the relevant goods, the method of payment, etc., of the price, etc., the person who actually supplied the relevant goods may be deemed to have been different from the issuer of the tax invoice. Thus, the prosecutor’

2) Determination as to whether the Plaintiff is a trader of good faith and negligence

A) Unless there is any special circumstance that the actual supplier and the supplier on a tax invoice did not know the fact that the supplier was unaware of the name of the tax invoice, and that the supplier was not aware of the fact that the supplier was not negligent, the input tax amount cannot be deducted or refunded, and that the supplier was not negligent in not knowing the fact that the supplier was not aware of the fact

The claimant must prove (see, e.g., Supreme Court Decision 2002Du2277, Jun. 28, 2002).

B) As to whether the Plaintiff was unaware of the difference between the supplier and the actual supplier as indicated in the instant tax invoice, and whether there was no negligence due to the failure of such knowledge, the evidence submitted by the Plaintiff alone is insufficient to find that the Plaintiff was not negligent due to the failure of such knowledge and the failure of such knowledge, and there is no other evidence to find otherwise.

Rather, comprehensively taking account of the following circumstances acknowledged as a whole and the purport of the entire arguments, it is reasonable to deem that the Plaintiff was negligent in knowing or not knowing that the Trade Union, a representative of the business registration of BB resources, was the operator of the supply of scrap metal. Therefore, the Plaintiff’s assertion on this part is without merit.

(1) The rent of scrap metal purchased by the Plaintiff from BB resources was different from the location of the BB resource’s workplace.

(2) In the location of the BB resource business site, there was no physical facilities, such as fraternity, and human resources other than NoA, and there was an employee Kim ○○, who was in charge of transaction with BB resource, visited the location of the Plaintiff’s business site, and thus, the Plaintiff was well aware of such circumstances. In addition, Kim ○ stated that the Defendant did not visit the business site or confirm scrap metal subject to supply after the first transaction with BB resource at the time of the tax investigation with the Plaintiff.

(3) As seen earlier, at around June 2013, the Plaintiff began to engage in transactions with BB resources immediately after the Trade with the Trade Union and Labor Relations Commission opened the transaction with the Trade Union and Labor Relations Commission. On October 29, 2011, the Plaintiff, as a Chinese national, had been residing in the Republic of Korea after permission was granted on stay on October 29, 201, and had no record of operating the scrap metal business as a business operator registered in a regular manner. As can be seen, the Plaintiff confirmed that there was only the working person of the place of business of BB resources immediately before commencing the transaction with BB resources through the employee Kim○○, who was in charge of the business operation.

(4) The Plaintiff asserted that the Plaintiff is a party to a transaction with good faith and negligence since it confirmed whether the Plaintiff was registered as a business operator, the name of the Trade Union, the domestic residence report certificate, etc. while commencing the transaction with BB resources. However, the business registration certificate is issued by a business operator to the head of the competent district tax office having the head of the competent district tax office in order to identify the taxpayer of value-added tax and secure taxation data, and is merely a certificate proving the registration of the business, and does not recognize that the Plaintiff is merely a certificate proving the business fact and satisfies the qualification or requirements to operate the business accordingly (see, e.g., Supreme Court Decision 2003Do6934, Jul. 15, 2005). The name of the representative Trade Union and the domestic residence report certificate are irrelevant to the qualification or requirements to operate the business, and in light of the reality of the transaction of scrap iron scrap metal with heavy data transactions, the Plaintiff’s assertion alone does not constitute a party to a transaction with good faith and negligence by taking adequate verification measures against the other party to supply transaction.

3) Determination as to whether the imposition of unfair under-reported additional tax is legitimate

A) The former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014; hereinafter “Gu”).

In light of the language, structure, etc. of the relevant provisions such as Article 47-3(2)2 of the Framework Act on National Taxes, even if a taxpayer received false evidence and underreporting the amount of tax due, it can be said that the taxpayer received false evidence

When the evidence acquired is not known that it is false, "in cases of underreporting the tax base by an illegal act".

(2) If the taxpayer did not know that the taxpayer was false due to gross negligence, the taxpayer was not aware of the fact;

It does not mean that the taxpayer and the actual supplier in the tax invoice are different; and

(1) If an input tax amount is deducted or refunded upon receipt of a tax invoice different from the facts stated therein;

such an act is paid for a 'unlawful act' as stipulated in Article 47-3(2)2 of the former Framework Act on National Taxes.

in order to constitute an under-reported tax invoice, the taxpayer shall be entitled to a tax invoice on a false basis.

(2) In addition to the recognition that an input tax amount is deducted or refunded, a false tax invoice shall be issued;

The tax base and payment tax amount of value-added tax, excluding the output tax amount under the tax invoice by the taxpayer.

or after reporting and paying all the output tax amount under the tax invoice; or

Liability for the payment of value-added tax on the tax invoice by filing a claim for refund, etc.

As a result, the taxpayer is entitled to deduct the input tax amount by evading it.

There should be awareness that the reduction of import would result in the reduction of import (Supreme Court on January 15, 2015).

[See Supreme Court Decision 2014Du11618]

On the other hand, whether a disposition is lawful in a lawsuit seeking revocation of a tax disposition is determined depending on whether it exceeds a legitimate tax amount. The parties may submit objective tax bases and materials supporting the tax amount until the closing of arguments in the fact-finding court, and when calculating the legitimate tax amount to be imposed lawfully based on such materials, only the part exceeding the legitimate tax amount should be revoked (see, e.g., Supreme Court Decision 94Nu13527, Apr. 28, 199

B) As to the instant case, the following circumstances are revealed, comprehensively taking account of the facts acknowledged as above and the purport of the entire pleadings, i.e., (1) the Plaintiff purchased and actually supplied scrap metal on the instant tax invoice; (2) there is no evidence to deem that the Plaintiff had paid the purchase price and the value-added tax on the instant tax invoice through an account in the name of Trade Union, where the Plaintiff was the nominal owner of the BB resource’s business registration; and (3) there is no evidence to find that the Plaintiff knew that the Plaintiff would actually suspend its business while failing to pay value-added tax, etc., in light of the following circumstances, such as (i) the special relationship between the Plaintiff and the BB resource operator, etc., and (ii) even if the Plaintiff received a tax invoice different from the fact from the B resource and received the deduction of the input tax amount, the evidence submitted by the Defendant alone did not support that the Plaintiff would have reduced the Plaintiff’s input tax revenue by evading the liability to pay value-added tax on the instant tax invoice.

Therefore, in imposing value-added tax on the Plaintiff, the general under-reported penalty tax under Article 47-3 (1) of the former Framework Act on National Taxes should be imposed, not the unfair under-reported penalty tax under Article 47-3 (2) of the same Act. As such, the portion exceeding the scope of the general under-reported penalty tax

C) If a general under-reported penalty tax is imposed, if the penalty tax is calculated for the Plaintiff’s failure to file a return with due care, the amount that exceeds the amount of “justifiable penalty tax” column of “justifiable penalty tax” should be revoked. Therefore, this part of the Plaintiff’s assertion is with merit within the scope of recognition.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claims are dismissed as it is without merit. It is so decided as per Disposition.