In case of failure to submit evidentiary documents, such as account books, even if business activities are conducted, it is subject to estimated taxation requirements.

Where a corporation subject to investigation and its representative make an effort to conduct the on-site investigation by investigating the corporation subject to investigation and requesting the submission of relevant books, but the corporation subject to investigation, etc. fails to submit documentary evidence, such as books verifying the amount of revenue, it shall satisfy the requirements for estimated taxation under

208Guhap31758 Disposition of Disposition of Imposition of Value-Added Tax, etc.

○○ Co., Ltd.

Head of Seocho Tax Office

.9, 2009

.9.30

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

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

The Defendant’s imposition of value-added tax of KRW 15,184,190 for 202 on October 10, 2007, value-added tax of KRW 83,504,020 for 203, value-added tax of KRW 50,45,250 for 203, value-added tax of KRW 50,46,260 for 204, value-added tax of KRW 9,369,50 for 204, value-added tax of KRW 85,796,260 for 204, and value-added tax of KRW 830,510 for 205, value-added tax for 2007, KRW 85,435,402 for 203, KRW 8080 for 204, KRW 469, KRW 205, KRW 3605, KRW 205, KRW 6365,2005.

1. Details of the disposition;

A. The Plaintiff is a corporation established on January 17, 2002 for the purpose of running the housing construction and sales business on the three floors of both Seocho-gu Seoul Metropolitan Government 317-1 Yang Jae-dong.

B. The Director of Busan Regional Tax Office conducted a tax investigation on the Plaintiff and notified the Defendant of the result of the tax investigation (not including any content irrelevant to the Plaintiff’s assertion) containing the following:

① A total of 847,201,295 won (i.e., 77,68,548 won in the business year of 2002 + 721,709,517 won in the business year of 2003 + 47,823,230 won in the business year of 2004 + 721,709,517 won in the business year of 2004 + 47,823,230 won in the business year of 204) was omitted in the calculation of the revenue amount (calculated) while the Plaintiff’s operation of the lower hot spring building located in 111-1, Nowon-gu, Seoul Special Metropolitan City (hereinafter “instant building”) that was acquired by auction on May 13, 2002.

② From January 2003 to December 2, 2006, the Plaintiff omitted the lease income of KRW 1,090,909,089 (i.e., the total amount of KRW 909,09,09,9080 + KRW 181,81,81,81, and each supply price of KRW 181,81,818,181, and each of the supply prices) of the instant building, which occurred while putting 1,090,909,08 below the instant building up the instant 2nd and 3nd from the instant 2003rd up to the lower 204.

C. Accordingly, on October 10, 2007 based on the omitted income amount notified as above, the Defendant imposed and notified the Plaintiff respectively value-added tax of KRW 15,184,190 in 202, value-added tax of KRW 83,504,020 in 203, value-added tax of KRW 50,445,250 in 203, value-added tax of KRW 99,369,550 in 204, value-added tax of KRW 85,796,260 in 204, value-added tax of KRW 830,510 in 205 (hereinafter referred to as “value-added tax”), KRW 85,435,402, KRW 2030 in 203, KRW 968,300 in 206 in 205, KRW 206 in 2006, and KRW 1365,206 in 2005.

D. The Plaintiff filed a request for examination with the Board of Audit and Inspection on December 12, 2007, but was dismissed on May 8, 2008.

[Reasons for Recognition: Facts without dispute, Gap evidence 1, 2, Eul evidence 1-1 through 6, 5-1-2, Eul evidence 3-1, 2-5, and Eul evidence 5-2, and the purport of the whole pleadings]

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

The disposition of imposition of value-added tax in this case is unlawful for the following reasons, and subsequent notice of change in income amount in this case is also unlawful.

1) As to the lease income of real estate

A) The lease agreement between the Plaintiff and △&C was rescinded due to the delay in the payment of the deposit of △&C, and the lease agreement was not concluded. The most of the KRW 1 billion that the Plaintiff received as part of the deposit was used as necessary expenses, such as enforcement fines and public charges to be borne by the lessee during the legal dispute period with △&C, but it was erroneous for the Defendant to regard the above KRW 1 billion as the lease income, and calculate and impose it as deemed rent.

B) The lease contract between the Plaintiff and the sub-hot Hot Spring Holdings was terminated due to the lessee’s nonperformance of the obligation to pay the deposit, and in such a case, the contract deposit of KRW 100 million was agreed not to be returned, and KRW 100 million out of KRW 200 million, which the Plaintiff received as part of the security deposit, was used as a public charge borne by the sub-hot Hot Spring Holdings and irrelevant to the lease income, it was erroneous to regard the above KRW 200 million as the lease income and calculate it as deemed the deemed rent.

2) Concerning the estimation of the revenue amount of the subordinate hot spring

Although the Plaintiff did not carry on normal business during the period of the Plaintiff’s operation of the instant building and did not actually carry on income, even though the Plaintiff spent minimum expenses for maintaining the instant building, such as basic personnel expenses, electricity charges, and gas charges, it would be against the necessity of estimation to estimate the amount of income, and there was no possibility of any objective comparison between the same kind of business operator in the selection of the business operator with the right of partner, and thus, it was also difficult to estimate the amount of income.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Determination on the assertion regarding the lease income of real estate

A) According to the facts that the Plaintiff concluded a lease contract with the 200 billion won for each of the above 200 billion won for the period of 10 billion won and 20 billion won for 20 billion won for each of the above 20-year hot spring supply charges of 30 billion won and 40 million won for 20 billion won for each of the above 20-year period, the Plaintiff is not entitled to receive the deposit from the 200-year hot spring supply charges of 200 million won for each of the 20-year hot spring supply charges of 200 billion won for 4.7 billion won for each of the above 20-year hot spring supply charges of 3 billion won for 4 billion won and 1.7 billion won for each of the above 2 years period for 4 billion won for 4 billion won and the amount of the deposit received from the 200-year hot spring supply charges of 100 million won and 100 million won for each of the above 2 years period for lease charges.

B) The Plaintiff asserted that each of the above lease agreements was rescinded due to the delayed payment of rent No. 1 (in particular, KRW 100,000,000,000,000,000,000,000,000 won, which was paid by the hot spring hole No. 1) and that each of the above lease deposits was used as necessary expenses, such as public charges to be borne by the lessee. However, even if the lease agreement was terminated due to the lessor’s termination notice, if the lessee continues to use the building without ordering it, and the lessor’s possession of the rent deposit was deducted from the deposit amount, it constitutes the supply of services, which is subject to value-added tax (see, e.g., Supreme Court Decisions 202Du8534, Nov. 28, 2003; 202Da3828, Nov. 22, 2002).

Therefore, this part of the plaintiff's assertion is without merit.

2) Determination as to the assertion regarding estimation of revenue amount of the sub-hot spring

A) According to the purport of the entire pleadings in each of the items in Eul evidence Nos. 1 through 4 Eul, 5, 10, 13, 14, Eul evidence Nos. 15-1, 2, and 16-1, 2, and 3 of the hot spring No. 15-2, and each of the items in the hot spring No. 16-3, the plaintiff company acquired the building of this case from May 2002 to January 2004, which included expenses, electricity charges, gas charges, etc. in its deductible expenses, but the amount of revenue is not reported at all. The defendant did not keep the accounts on an average of the revenue amount, etc. for the above period from the plaintiff's representative director, and it is reasonable to determine that the amount of revenue amount was calculated on the basis of the estimated amount of revenue amount for each of the above period's estimation under the proviso of Article 21 (2) of the Value-Added Tax Act, it is reasonable to recognize the relationship between the plaintiff's business operators's right to use and other amount of revenue amount.

B) However, since taxation by estimation under tax law is exceptionally acknowledged in cases where there are no books or documentary evidence of a taxpayer, which serves as the basis for income or tax base, or where it is impossible to use them as the basis for taxation due to lack or falsity, the tax authorities may determine the tax base and tax amount by estimation method only if there are insufficient documents, etc. presented by the taxpayer or new materials are presented and the contents of such documents are suspected to be false after the on-site investigation, and if all documentary evidence are found to be clearly false as a result of the investigation, the tax authorities may determine the amount of income or tax base by estimation method, and the method and contents of estimation shall also be determined by reasonable and reasonable grounds so as to reflect the amount of income or actual income which is close to the truth, and if there is a dispute as to the legality or validity of the estimation, the burden of proof as to its rationality and validity shall be borne by the tax authorities (Supreme Court Decisions 94Nu1037 delivered on January 12, 195; 87Nu182 delivered on February 23, 1988).

However, as seen earlier, the Defendant appears to have determined the amount of revenue by deeming the Plaintiff to fall under the requirements for estimation of the Plaintiff’s business activities, such as the Plaintiff’s estimation of the amount of revenue for the said period of 3 years. However, the Plaintiff’s assertion that the Plaintiff did not produce documentary evidence for the said period of 10 years, despite the fact that the Plaintiff did not have to do so at all (this assertion does not constitute the requirements for estimation taxation) and that the Plaintiff did not appear to have been able to use the said documentary evidence for the period of 17, 18, 19, and 21 for each of the following reasons: (a) the Plaintiff did not appear to have been able to have been able to file a report on the use of the said documentary evidence for the period of 0 years since the Plaintiff did not appear to have been able to use the said documentary evidence for the period of 10 years, and (b) the Plaintiff did not appear to have been able to have been able to use the said documentary evidence for the period of 20 years.

Furthermore, it is reasonable to calculate the average value of each of the above businesses, considering the changes in the sales environment or business capacity, etc. of each of the above businesses, which the plaintiff and the hot spring business entities selected as a comparative method of partner authority, prior to the acquisition of the building in this case, as a hot spring business entity who has discontinued the direct management of hot spring before the purchase of the building in this case and leased the business facilities, and have close connection with the plaintiff's low-carbon hot spring in the business situation, location and size of the business establishment, reputation, etc. In addition, considering the changes in business capacity and economic situation, the current use of the building, etc., and the changes in sales of each of the above businesses presumed to have been caused by the above businesses, it is reasonable to consider the estimation as the basis for calculating the estimated revenue amount. ② Even though the changes in the sales amount of each of the above businesses, the difference in the ratio of contribution to the use of the electricity and gas in each of the above businesses in calculating the revenue amount can not be seen as an unreasonable method in calculating the revenue amount of each business entity.

3) Sub-decisions

Therefore, the disposition imposing the value-added tax in this case and the subsequent notice of change in the income amount are legitimate, which included the Plaintiff Company’s real estate rental income and estimated the revenue amount.

3. Conclusion

Thus, the plaintiff's claim is without merit.