In a case where a tax authority imposed a taxation before a request for pre-assessment review or a decision thereon is made after the notice of pre-assessment of taxation, whether the taxation disposition is invalid due to its material and apparent procedural defect (affirmative in principle)

Unless there are special circumstances, such as the function and scope of the pre-assessment review system as a pre-determination procedure, the details and purport of the system introduced, and the control methods to efficiently prevent the infringement of taxpayer’s procedural rights, the principle of due process prescribed in Article 12(1) of the Constitution is limited to criminal procedure, and the tax officials should equally comply with the taxation authority. In light of such special circumstances as the Framework Act on National Taxes and the Enforcement Decree of the Framework Act on National Taxes provide for exceptions for taxation even before the pre-assessment review can immediately be imposed or the pre-assessment review is decided, the imposition of taxation before a request for pre-assessment review or its decision is made, as a matter of principle, may not only punish the taxation system itself, but also clarify the relationship and objection procedure between the decision for pre-assessment review and the decision for the pre-assessment review. Thus, such a taxation disposition is an infringement of taxpayer’s procedural rights, and thus it is a significant and apparent procedural defect and invalid.

Article 12(1) of the Constitution of the Republic of Korea; Article 81-15(1)2, (3), and (8) of the Framework Act on National Taxes; Article 63-14(4) of the Enforcement Decree of the Framework Act on National Taxes

Supreme Court Decision 2015Du52326 Decided April 15, 2016 (Gong2016Sang, 657)

Sejong Electronic Co., Ltd. (Law Firm Choi, Attorneys Choi Sung-ho et al., Counsel for the defendant-appellant)

Head of Geumcheon Tax Office

Seoul High Court Decision 2015Nu65607 decided July 20, 2016

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 81-15 of the Framework Act on National Taxes provides, “Any person who has received a prior notice of taxation may request a review of legality of the details of the notice to the head of a tax office or the director of a regional tax office who has received the notice (hereinafter referred to as “pre-assessment review”) within 30 days from the date of receipt of the notice.” Paragraph (3) of the same Article provides, “The head of a tax office, the director of a regional tax office, or the Commissioner of the National Tax Service who has received a request for pre-assessment review shall make a decision after the review of the National Tax Examination Committee and notify the applicant of the result within 30 days from the date of receipt of the request.” The main text of Article 63-14(4) of the Enforcement Decree of the Framework Act on National Taxes delegated by paragraph (8) provides, “The head of a tax office,

Unless there are special circumstances, such as the function of the pre-assessment review system as a pre-assessment procedure and the scope of remedies possible, the details and purport of such system introduced, and the control methods to efficiently prevent taxpayers from infringing their procedural rights, the principle of due process prescribed in Article 12(1) of the Constitution is not limited to criminal procedure, but to be complied with when a tax official exercises the right to impose taxes (see, e.g., Supreme Court Decision 2015Du52326, Apr. 15, 2016). Unless there are special circumstances, such as that the Framework Act on National Taxes and the Enforcement Decree of the Framework Act on National Taxes provide for exceptions that a tax disposition can be imposed immediately without the pre-assessment review or even before a decision on the pre-assessment review is made, a request for pre-assessment review after the pre-assessment notice or a decision on such taxation disposition before it is more likely to undermine the system of pre-assessment review itself and make the relationship and objection between the decision and procedure, and thus, it is also null and void.

2. In the same purport, the notice of change in the income amount of this case issued before the plaintiff made a request for pre-assessment review on the grounds that the period for filing a request for pre-assessment review has not expired, and its defect is serious and clear and invalid. Based on this, the disposition imposing the principal tax on dividend income tax of this case and the disposition imposing the penalty tax are invalid, and thus, it is just to accept the plaintiff's primary claim, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of the legal principle

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)