Seoul Administrative Court 201Gudan7642 ( August 17, 2011)

early 2010west2524 ( December 24, 2010)

Embezzlement of employees entrusted with the payment of capital gains tax does not constitute justifiable grounds for exemption from additional tax

Even if an employee entrusted with payment of capital gains tax has embezzled capital gains tax without filing a report, so long as he/she is delegated to an employee according to his/her own intent, he/she shall be responsible for nonperformance and it is difficult to recognize that he/she suffered losses to the extent that he/she is unable to pay

2011Nu31422 Revocation of disposition of imposing capital gains tax

XX

Head of Seocho Tax Office

Seoul Administrative Court Decision 2011Gudan7642 decided August 17, 2011

December 22, 2011

January 12, 2012

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. On February 11, 2010, the Defendant revoked the disposition of imposition of KRW 173,884,935 as to the return and payment of capital gains tax against the Plaintiff on February 11, 201.

1. Details of the disposition;

A. On May 31, 2002, the Plaintiff acquired and owned a building of 000-0 and 390.7 square meters in Gangnam-gu Seoul, Gangnam-gu and its ground (hereinafter referred to as “the instant real estate”) and transferred it on January 23, 2008.

B. On September 17, 2009, the Plaintiff filed an application for reduction of or exemption from penalty tax on the ground that the transfer value was KRW 4.55 billion, acquisition value was KRW 2,979,774,114, and that “an employee who was delegated by the Plaintiff with the report of transfer income tax from the Plaintiff did not report the transfer income tax within the prescribed period because he embezzled and absconded the transfer income tax amount and did not report it within the prescribed period.”

C. Accordingly, on February 11, 2010, the Defendant corrected and notified the Plaintiff of the acquisition value of the instant real estate as KRW 2,060,438,364, and revised capital gains tax for 2008, including KRW 185,362,428, and penalty tax for unfaithful payment of capital gains tax, as well as KRW 748,646,190, and subsequently revised the acquisition value as KRW 2,431,438,364 to reduce and correct the principal tax. The remaining return and penalty tax for unfaithful payment remaining after the correction are KRW 173,884,935 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 5 through 8, Eul evidence No. 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case, which was otherwise reported, is unlawful, despite the following grounds for exemption from additional tax, such as by embezzlement of the capital gains tax to employees of the corporation that he operated, which inevitably subject to the deadline for filing capital gains tax return.

① Article 48(1) of the Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter the same) provides that “In imposing penalty tax, the Government shall not impose penalty tax if the grounds for the imposition thereof fall under the grounds for extension of the due date under Article 6(1) or the taxpayer has justifiable grounds for non-performance of the obligation. In light of the language and text of this Act, in determining whether the grounds for the extension of the due date fall under the grounds for the extension of the due date, the Government shall not consider the causes attributable to

② The embezzlement of the Plaintiff employee constitutes “a case where the Plaintiff employee was stolen” under Article 2(1)1 of the Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 22038, Feb. 18, 2010; hereinafter “Enforcement Decree”) or “a case where the Plaintiff employee was stolen” under Article 2(1)6 of the Enforcement Decree of the Framework Act on National Taxes.

③ Even if it is not so, the Plaintiff suffered a serious loss on the business by embezzlement of employees, and thus constitutes a reason for exemption from additional tax in good faith under Article 2(1)3 of the Enforcement Decree.

(4) In addition, Article 2 (1) 5 of the Enforcement Decree of the National Tax Act applies to cases where an extension of the deadline is necessary in consideration of the taxpayer's circumstances, economic circumstances, etc., and Article 48 (1) of the Framework Act on National Taxes has justifiable grounds for the taxpayer's non-performance of obligations.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On January 23, 2008, the Plaintiff transferred the instant real estate, and instructed Han-B, an employee, to report and pay the transfer income tax on May 26, 2009.

(2) However, Korea-B did not report and pay the transfer income tax on the instant real estate until May 31, 2009, which is the statutory due date of return.

(3) Around September 2009, the Plaintiff filed a complaint against BB with the knowledge of embezzlement of the sum of KRW 1.1 billion, including the amount of KRW 410 million paid by HanB as capital gains tax on the instant real estate. AB was sentenced to imprisonment with prison labor for four years for a crime of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Seoul District Court Decision 2009Dahap394, Seoul High Court Decision 2010No479). Around that time, the Plaintiff became final and conclusive.

[Reasons for Recognition] Facts without dispute, Gap evidence 2-1, 2, Gap evidence 4-1, 2, Gap evidence 5-9, Eul evidence 1-2, Eul evidence 2, Eul evidence 2, the purport of the whole pleadings

D. Determination

(1) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under tax law is an administrative sanction imposed pursuant to the law in cases where a taxpayer violates a tax return, tax liability, etc. under the law without justifiable grounds, unless there is any justifiable reason not to mislead the taxpayer into neglecting his/her obligations (see, e.g., Supreme Court Decision 9Du3515, Aug. 20, 199).

(2) First, in light of the purport of Article 48(1) of the Framework Act on National Taxes, the Plaintiff asserts that in determining whether a cause for extension of the due date exists, the Plaintiff should not consider the taxpayer’s cause attributable

However, Article 2 (1) of the Enforcement Decree provides that "In any of the following cases, if the head of a tax office recognizes it, it shall be deemed that there exists any reason for extension of the due date under the provisions of Article 6 of the Act." Thus, even according to the language and text, it is reasonable to see that it constitutes a reason for extension of due date when the head of a tax office recognizes it as a justifiable reason among the cases falling under any of the following subparagraphs. Further, prior to the amendment on December 30, 2006, Article 48 (1) of the Framework Act on National Taxes provides that "the Government shall reduce the additional tax imposed or to be imposed under tax-related Acts if the reason for the extension of due date under the provisions of Article 6 (1) constitutes a reason for the extension of due date under the provisions of Article 6 (1)." In consideration of the fact that the government recognizes a justifiable reason for the imposition of additional tax as a reason for the extension of due date under the provisions of this Act or other tax-related Acts, if the taxpayer falls under any justifiable reason for the extension of due date.

(3) Next, regarding the existence of legitimate grounds for exemption of additional tax in this case, the facts that the Plaintiff ordered the Plaintiff to report and pay transfer income tax to HanB, who is its employee, but did not perform the obligation due to embezzlement of capital gains tax. However, the following circumstances acknowledged by the evidence are as follows: (a) the Plaintiff ordered B to report and pay transfer income tax on the instant real estate after the lapse of one year from the transfer on January 23, 2008; (b) as long as the Plaintiff delegated or instructed B to do so by her own will according to her own intention, whether the Plaintiff performed the duty, such as reporting of transfer income tax on her own real estate, etc., the Plaintiff’s failure to perform the duty should be confirmed under the Plaintiff’s responsibility; (c) the Plaintiff’s failure to perform the duty should also be held liable to the Plaintiff; and (d) the Plaintiff’s failure to perform the duty to pay additional tax on 10-1, 2, 11, 12, 13, and 16-1.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit. It is so decided as per Disposition.