Cho Jae-2014-China-2004 (Law No. 15, 24 April 2015)

The exclusion period of imposition of national taxes is applied to the omission of cash sales by the plaintiff as it constitutes fraud or other unlawful acts.

Since it is reasonable to deem that the Plaintiff, with positive concealment intent to evade value-added tax and corporate tax on the key amount of the instant case, made it impossible or considerably difficult to impose and collect taxes, the exclusion period for imposition of ten years is applied.

Article 26-2 of the National Tax Basic Act

2015Guhap6999 Revocation of Disposition, etc. of Imposition of Corporate Tax

Han-chul Co., Ltd.

The superintendent of the tax office

March 21, 2016

April 11, 2016

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant revoked all imposition dispositions of KRW 10,398,768 on January 6, 2014 for the first term portion of value-added tax for the year 2006 against the Plaintiff, KRW 9,246,983, value-added tax for the second term portion of value-added tax for the year 2006, KRW 6,294,555, value-added tax for the second term portion of value-added tax for the year 2007, KRW 11,747,915, and value-added tax for the second term portion of value-added tax for the year 207, KRW 56,453,218, corporate tax for the year 2006, KRW 51,705,911 for the Plaintiff, and the Defendant revoked all imposition dispositions for the Plaintiff as KRW 51,705,91 for the year 207, KRW 139,937,9539,97.

1. Details of the disposition;

A. The plaintiff is a corporation that was established on April 10, 2001 and runs wholesale and retail business of automobile parts, etc., and G* is the representative director of the plaintiff.

B. The corporate tax assessment results against the Plaintiff, approximately approximately KRW 617,164,940 between 2006 and 2011, and approximately KRW 350 between 2006 and 2007

The fact that the Plaintiff’s cash sales amount up to approximately KRW 210,295,107 (hereinafter referred to as “instant amount”) have been transferred or deposited to the account of the Plaintiff* the representative director of the Plaintiff * the personal account.

was confirmed.

C. Accordingly, on January 6, 2014, the Defendant added the key amount of this case to the Plaintiff on January 6, 2014, and notified the Plaintiff of KRW 10,398,768, value-added tax for the first term of 2006; KRW 9,246,983, value-added tax for the second term of 2006; KRW 6,294,555, value-added tax for the first term of 2007; KRW 11,747,915, value-added tax for the second term of 207; on January 7, 2014, the Defendant notified the Plaintiff of the correction and notification of KRW 56,453,218, corporate tax for 51,705,911 in corporate tax for 207 (hereinafter collectively referred to as “value-added tax and corporate tax for the Plaintiff”); each of the instant dispositions on the change of income amount for the Plaintiff’s 2005, 19394,197.7.

D. On March 19, 2014, the Plaintiff appealed to each disposition of the instant case and filed an appeal with the Tax Tribunal for adjudication.

However, the Tax Tribunal dismissed the plaintiff's appeal on April 24, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 6, Eul evidence No. 1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the Plaintiff’s act of omitting cash sales on the issue amount of this case is subject to the exclusion period of national tax imposition for five years, each disposition of this case on the premise that the exclusion period of national tax imposition for ten years is applicable because the Plaintiff’s act constitutes “Fraud or other unlawful act as prescribed by the Framework Act on National Taxes” is illegal.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the lawfulness of each of the dispositions of this case

A) According to Article 26-2(1) of the Framework Act on National Taxes, national taxes may not be imposed more than five years after the date on which the national taxes can be imposed (Article 26-2(1)3). However, in cases where a taxpayer evades a national tax, obtains a refund or deduction by fraud or other unlawful means, ten years (Article 10(1)); and where a taxpayer fails to file a tax base return within the statutory due date of return, seven years (Article 208Du109522, Dec. 23, 2010) may not be imposed after the expiration of the statutory due date of return; and such dispositions taken after the limitation period of imposition of national taxes are null and void (see, e.g., Supreme Court Decision 208Du109522, Dec. 23, 2010). Here, “Fraud or other unlawful acts” means acts which enable the evasion of taxes, which are generally recognized by social norms, i.e., fraudulent means or other active acts that make it difficult to impose or collect taxes without any other acts.

In such a case, whether active concealment intention is objectively revealed should be determined based on whether the basic book stating import or sale is falsely prepared, as well as on whether the method of determining the relevant tax is a tax return method or a tax imposition method, the developments leading up to a failure to file a return or a false return, and the degree different from the facts; the specific details of false matters in the case of a false report; and the method of pretending false documents in the case of a false report; and the function of documents related to the calculation of the tax base, etc., in full view of all the circumstances, such as whether the relevant document can be deemed unfair under social norms (see, e.g., Supreme Court Decision 2013Do13829, Feb. 2

B) In light of the above legal principles, the following circumstances acknowledged by the aforementioned evidence: ① Value-added tax and corporate tax at issue in the instant case are taxes in which the taxpayer voluntarily filed a tax base and tax amount, thereby determining the tax liability; ② the omission of cash sales by the Plaintiff’s representative director’s personal account from 2006 to 2011 was about KRW 617,164,940 over 1,40 over 2,400.

The key issue amount among them is about 350 won, approximately KRW 210,295,107, and the number and amount thereof are significant. ③ The cash sales of the small amount that is difficult to capture the omission of sales are deposited into the personal account for a long time, it would be difficult to clarify the fact of tax evasion due to the ordinary tax investigation. ④ The plaintiff did not issue a tax invoice for the omitted cash sales, including the key amount in this case, but appears to have falsely entered the account books, etc. ⑤ Furthermore, the plaintiff appears to have intentionally omitted the cash sales portion on which the tax invoice was not issued at the time of the final return of the value-added tax and the corporate tax.

In full view of (see, e.g., Supreme Court Decision 83Do1929, Sept. 27, 1983) etc., it is reasonable to deem that the Plaintiff, with positive intent to evade value-added tax and corporate tax on the key amount of the instant case, made it impossible or considerably difficult to impose and collect taxes, and on such premise, each of the instant dispositions taken within the exclusion period for imposition of ten years is lawful.

2) Determination on the legitimacy of the notice of change in each of the instant income amounts

A) The amount of income disposed of as a bonus for a representative of a corporation pursuant to 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. This does not mean that the relevant corporation actually pays the amount of income to the representative, but merely means that it is legal fiction by the law. Thus, in order to establish the withholding obligation of a corporation that received the above notice of change in the amount of income, when the corporation received the notice of change in the amount of income, the source taxpayer should be deemed to have received the amount of income at the time of receipt of the above notice of change in the amount of income, and the said corporation’s withholding obligation cannot be established if the said obligation of the source taxpayer

Supreme Court Decision 85Nu451 Decided September 22, 1992, 91Da40931 Decided September 22, 1992

Meanwhile, Article 26-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011) provides that "where 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, in cases where the taxpayer evades a national tax, obtains a refund or deduction by fraudulent or other unlawful means," as amended by Act No. 11124, Dec. 31, 2011, if the national tax is evaded, refunded or deducted by unlawful act, 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, and Article 2 of the Addenda provides that "the amended provisions of Article 26-2(1)1 of the latter part of the Corporate Tax Act shall apply to the disposal of the amount from January 1, 2012 to Article 67 of the first Corporate Tax Act."

B) Therefore, as the representative of a corporation was out of the company and the person to whom the income tax was collected is not revealed, it is difficult to view that the income tax was paid in order to evade the income tax to be imposed as the representative of the corporation because it was expected that the person to whom the income tax was collected as the representative of the corporation was not identified, and therefore, it cannot be viewed that the income tax from the recognized loan disposal constitutes "where the taxpayer evades the national tax by fraudulent or other unlawful act" as provided in Article 26-2 (1) 1 of the Framework Act on National Taxes. However, if the national tax which was refunded or deducted by illegal act is corporate tax, the exclusion period of imposition of income tax, etc. on the amount of corporate tax imposed pursuant to Article 67 of the Corporate Tax Act after January 1, 2012 is ten years in relation to it, so long as the notice of change in the income amount of this case is legitimate within the exclusion period of 10 years against the income tax against the plaintiff* as the representative director of the corporation.

3. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.