Seoul Administrative Court 2006Guhap27861 (Law No. 11, 2006)

National Tax Service Review Division 2005-0633 (2006.10)

During a series of transactions, it is against the good faith principle to claim input tax deduction for gold bullion export transactions in which a malicious business operator exists.

In the course of a series of gold bullion transactions, the Plaintiff’s assertion of input tax deduction in an export transaction based on the gold bullion transaction is not allowed against the principle of good faith to the contrary.

Article 15 of the Framework Act on National Taxes

2011Nu9333 Revocation of Disposition of Imposition of Value-Added Tax

XX Stock Company

Head of the tax office;

Seoul Administrative Court Decision 2006Guhap27861 decided May 11, 2007

Seoul High Court Decision 2007Nu14147 Decided November 5, 2008

Supreme Court Decision 2008Du23146 Decided May 14, 2009

Re-transmission Judgment

Seoul High Court Decision 2009Nu12565 Decided September 3, 2009

[Judgment of re-return]

Supreme Court Decision 2009Du16183 Decided February 24, 2011

May 16, 2012

June 20, 2012

1. The plaintiff's appeal is dismissed.

2. 80% of the total costs of the lawsuit after an appeal is filed shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

The decision of the court of first instance is revoked. The defendant's imposition of 00 won of value-added tax for the second period of December 10, 2005, 000 won of value-added tax for the first period of 2004, 000 won of value-added tax for the second period of 2004, 000 won of value-added tax for the second period of 2004, and 00 won of value-added tax for the second period of 2004, and 200 won of value-added tax for the second period of 204

1. Details of disposition;

A. The Plaintiff is a company established on June 20, 2003 and engaged in the trade business and gold bullion wholesale business (referring to gold in the state of raw materials, such as gold bullion, gold bullion, and gold bullion, the net level of which is at least 95/1,000).

B. During the period from July 1, 2003 to December 31, 2004, the Plaintiff received 160 tax invoice on the purchase of gold bullion of 15 gold bullion (hereinafter referred to as “the purchase tax invoice of this case”) in total from 15 gold bullion wholesalers, including the company XXD (hereinafter referred to as “P pelD”). During the same period, the Plaintiff exported gold bullion of the total export price of 00 billion won to AA located in Hong Kong.

C. During the period from July 1, 2003 to June 30, 2004, the Plaintiff issued 17 copies of the tax invoice on sales of gold bullion amounting to 000 won in total (hereinafter “instant sales tax invoice”) to six domestic gold bullion wholesalers, including D precious Co., Ltd. (hereinafter “DD precious metal”).

D. Based on the purchase tax invoice, sales tax invoice, and the above export facts, the Plaintiff filed each return on the tax base, tax amount, and tax amount of each value-added tax on the second period of 2003, 2004, and 204, and value-added tax amount of value-added tax on the second period of 204, and value-added tax amount of KRW 000 per September, 204, respectively.

E. However, the director of the Seoul Regional Tax Office, from October 7, 2004 to August 23, 2005, found that the purchase tax invoice of this case was a different tax invoice from the fact that the purchase tax invoice of this case was issued without the actual transaction, respectively.

F. Based on the result of the instant investigation, on December 10, 2005, the Defendant imposed on the Plaintiff the value-added tax of 000 won for the second term of 2003, 000 won for the first term of 2004, and 000 won for the second term of 2004, respectively, and refused to refund the value-added tax of 00 won for the second term of 2004 and September.

G. The Plaintiff filed an administrative suit seeking revocation against each of the above dispositions and the rejection of refund, and thereafter the process of the lawsuit is as follows.

O The judgment against the plaintiff (2006Guhap27861) against the Seoul Administrative Court which was the first instance court (2006Guhap27861) to the appellate court (2007Nu14147) to the Seoul High Court which was the appellate court (2007Nu14147) to the Supreme Court that was the appellate court (2008du23146) to the appellate court, and the plaintiff's favorable judgment (2009Nu1

O) After that, the Supreme Court rendered a final appeal by the Defendant, reversed the part concerning the imposition of value-added tax except for the non-faithd penalty tax invoice and remanded this part of the case to the court and dismissed the remainder of the final appeal (2009Du16183).

H. Around January 18, 2007, the Defendant rendered a decision to reduce ex officio the penalty tax amount (9,500,223 won) out of the payment period of the first half of the value-added tax for the second half of the value-added tax for the year 2004 and the second half of the value-added tax for the year 2004 (hereinafter the above disposition of value-added tax is added to the portion of the imposition of value-added tax for the second half of the imposition of value-added tax for the first half of the imposition of value-added tax for the year 2001 and the portion of the imposition of value-added tax for the second half of the imposition of value-added tax for the year 2003 and the portion of the imposition of value-added tax for the second half of the year 204 (hereinafter the above disposition of imposition of value-added tax for the second half of the imposition of value-added tax for the year 204).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4 (including paper numbers; hereinafter the same shall apply), Eul evidence Nos. 1, 51, and 53, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. Summary of the argument

The Plaintiff asserts to the effect that the instant disposition rejecting input tax deduction based on the instant purchase tax invoice is unlawful, since the instant purchase tax invoice is tax invoices identical to the fact. Accordingly, the Defendant asserts to the effect that the Defendant’s filing of input tax deduction based on the instant purchase tax invoice is prohibited as contrary to the principle of trust and good faith, in light of the route of gold bullion distribution

(b) Fact of recognition;

(1) A general form of gold bullion transaction for the purpose of tax evasion

From 2003, the so-called "explosion business" was spread between precious metal companies located in Jongno-gu Seoul Metropolitan Government, and the above types of "explosion business" are as follows:

(A) In appearance, gold bullion is distributed through the stages of “foreign companies ? importer ? duty-free wholesale companies ? Tax-free wholesale companies ? Tax-free wholesale companies ? Tax-free wholesale companies ? Taxation ? Export companies ? Foreign companies ? The transaction amount is paid in sequence from the export company to the import company in the reverse direction, but in particular, taxation wholesalers issue tax invoices at the order of a specific person, and do not actually trade or transport gold bullion.

(B) The term "explosion business" has purchased gold bullion as a tax-free gold and sold it as a tax-free gold, and then evades the value-added tax by withdrawing, concealing, and closing the profit within a short period. The term "explosion business" sells gold bullion with the supply price lower than the purchase price. However, the supply price added to the value-added tax is higher than the purchase price, and the value-added tax collected by the transaction is not paid, so the difference between the supply price and the purchase price shall be earned as a profit.

(C) On the other hand, the value-added tax collected by the "large Carbon Business" is successively transferred by each of the companies in the immediately preceding phase through the tax invoices received from the immediately preceding phase companies to deduct the input tax amount. Ultimately, after exporting gold bullion, the exporters are entitled to refund from the State in accordance with the application of zero-rate tax rate. Of the amount refunded by the State, the substantial portion of the value-added tax not paid by the "large Carbon Business" is the ultimate source of profits derived from the "large Carbon Business". The profit is distributed to the domestic companies involved in the "large Carbon Business" in the "large Carbon Business" or the amount calculated by the specified ratio out of the profits of the "large Carbon Business" is distributed separately to the participating companies in the transaction, and the difference between the import price and the export price (the export price is lower than the import price if the domestic companies are lower than the import price) shall be distributed in the form of the so-called Maman Capital Business.

(D) In order to maximize profits, the term "large amount of gold bullion business" means distributing the maximum quantity of gold bullion within a short time in order to maximize profits. ① In order to prevent disputes between the participating companies that may arise therefrom, or accidents such as loss of prices, most of the same former owners (referring to a person who prepares for the import fund of gold bullion from the outside of the wide carbon business network) operate simultaneously with the exporting company and the importing company, ② to place the former owner in direct transactions with the "large-scale enterprise"; ③ to determine the volume of the transaction, unit price, and mast in fact at each stage of transaction; ④ to determine the volume of the transaction, the unit price, and the amount of the gold bullion at each stage of transaction; ④ to the exporting company, the series of transactions from the former owner to the latter is made at a very short time, and ⑤ to immediately transport the gold bullion from the latter to the exporting company, and even if the gold bullion is transported every stage of transaction, it is nothing more than a formal transportation for the purpose of normal disguised transactions.

(2) The details of establishment of the Plaintiff

(A) On June 20, 2003, the Plaintiff moved its head office to its head office on June 20, 2003, as a company of KRW 000,000, established with its head office head office of Gangnam-gu Seoul Metropolitan Government 654-3 902 of XX building, and around June 30, 2005.

(B) From 1987 to 2003, the Plaintiff’s representative director’s term “B” worked in LL metal, and engaged in the business related to gold bullion, and had maintained a considerable amount of relationship with the Plaintiff, even before operating the Plaintiff.

(c)Special features of gold bullion transactions related to export transactions;

(A) The Plaintiff’s purchase and sale office of this case classifys the tax invoices received by the Plaintiff from 15 companies such as XXD for each taxable period as follows:

(B) If the Plaintiff’s sales office of gold bullion related to the domestic sales classifys the tax invoices issued by the Plaintiff to six companies, including DD precious metal, by each taxable period, as follows:

(C) The representative director or actual operator of the Plaintiff’s major purchase and trade office, and the major sales office of the Plaintiff’s major sales office is subject to criminal punishment for committing a crime of evading a large amount of value-added tax by using gold bullion transactions through a bom

1) On January 2, 2008, ParkCC, which actually operates SP Co., Ltd. (hereinafter referred to as "SP"), was sentenced to imprisonment for five years and a fine of KRW 000 (207Dahap792) on the grounds of criminal facts that "the amount of value-added tax equivalent to about 700 won was evaded in collusion with the actual operators of 45 wide-scale coal companies, such as "(PS) GGGG ice," and filed an appeal with the Seoul High Court on June 20, 2008 (2008No194).

2) Does, as the pro-friendly representative of YY, Co., Ltd. (hereinafter “YY”), were sentenced to 8 years of imprisonment with prison labor and fines of KRW 170 billion for the crime of “the tax evasion amounting to KRW 000 by making use of gold bullion transactions from Seoul High Court on July 24, 2008,” and “the tax evasion amounting to KRW 00,000” (Supreme Court Decision 2008No385).

3) On May 2, 2008, EF was sentenced to imprisonment with prison labor for three years and a fine of 000 won (207No2245-1) due to the crime that "the actual operator of a large number of wide coal companies, such as "(ju) HH Had, evaded value-added tax amounting to KRW 34.5 billion" in collusion with the Seoul High Court on May 2, 2008 (2007No245-1).

4) On August 14, 2008, the Seoul Central District Court sentenced 4 years of suspension of execution and fine of KRW 000 to 2 years and six months of imprisonment (208 Gohap375) for the criminal facts that the Fund actually operated a corporation (hereinafter referred to as "KF") evaded value-added tax of KRW 00 by using gold bullion transactions through a company with explosions (hereinafter referred to as "KF").

5) On January 12, 2007, the representative director of UUD Co., Ltd. was sentenced to imprisonment for four years and a fine of 00 won (merger 2006da1073, 1096, 1141 (merger)) on the grounds that he/she evaded a large amount of value-added tax by using gold bullion transactions through a heavy coal business (the Seoul Central District Court rendered a judgment on January 12, 2007, and the judgment became final and conclusive.

6) On December 6, 2007, JJ was sentenced to imprisonment with prison labor for 8 years and fines of 210 billion won (2006No2975, 2007No1924 (merger)) by the Seoul High Court on the grounds that it evaded a large amount of value-added tax by using gold bullion transactions through a boming coal company (hereinafter referred to as "JJ") and the appeal was dismissed on April 24, 2008.

7) On October 10, 2008, this KK was sentenced to the suspension of the execution of 5 years in the past 3 years and a fine of 20 billion won in the past 200 billion won for the criminal facts that it evaded the value-added tax of about 10.1 billion won by using gold bullion transactions through a heavy coal company at the Seoul Central District Court of Seoul Central District Court (2008Gohap571).

(D) On June 15, 2008, the changeB of the representative director of the Plaintiff is a member of the “R” which is the friendship golf group of 8 members of the Jongno-gu Seoul Jongno-gu gold bullion business operator, and was present at the regular golf meeting every month from that time to 2005. In addition, in actual operation of the Plaintiff’s major purchase business, the Plaintiff is a member of the golf group, and the ParkCC, EF, and EF are members of the golf group who evaded large value-added tax while actually operating the Plaintiff’s major purchase business. On May 15, 2008, the Plaintiff LL, the president of the golf group, was sentenced to imprisonment for 4 years and a fine of 30 billion won (207Dahap1427).

(E) The Plaintiff is a small-scale company with capital and 000 won, and the export price to be paid by the Plaintiff is not included in value-added tax, while gold bullion purchase price is paid in addition to value-added tax. Therefore, it is essential to secure the initial operating fund of about KRW 000 for about 45-65 days before the refund of value-added tax at the competent tax office for gold bullion transaction. However, the Plaintiff’s representative director changed the Plaintiff’s representative directorB made a false statement that the Plaintiff borrowed KRW 000 from the actual operator ParkCC while borrowing KRW 00 from the actual operator of DNA precious metal and borrowed KRW 00,000 from the operator of the actual operator of DNA precious metal, but it was practically impossible to conduct the investigation into the Seoul regional tax office by making a statement that only the above loan was traded in cash.

(F) Most of the instant purchase transaction offices purchased the relevant gold bullion through a typical wide-scale coal business entity, such asCC, NNN, DNA product, DNA precious metal, RR, LL, LL trade, MM, BB, V, PP, EE, WW, Z, Zjuice, FF, TT, HHthd, and II, which evaded a large amount of value-added tax by using gold bullion trade through a boming coal business entity.

(G) The sales of the gold bullion related to the purchase tax invoice of this case, most of the gold bullion were re-exporteded through the 1-2-stage exempted gold sheet sheet after the import declaration from Hong Kong, and then again supplied the Plaintiff, the exporter, through the 2-3-stage wholesale company, and subsequently re-exported to Hong Kong within the short period of time or very short period of time on the date of import. For example, the gold bullion imported from the gold bullion on January 8, 2004, among the said gold bullion trading, was re-exported to the Hong Kong in the order of the importer ? ? ? 1 tax-free wholesale company ? ? 2 tax-free wholesale companies ? ? Plaintiff ? The next day of the same day after converting the details of the gold bullion exported to AAA (Goldex 1.1 mited) located in Hong Kong into 100km (Evidence No. 39).

① 수입업체인 주식회사 QQ(이하 'QQ이라 한다)은 2004. 1. 8. 아침 홍콩 소재 Standard Bank London Ltd로부터 금지금 100kg을 000원에 면세로 수입하여 같은 날 주식회사 △△금속에게 위 금지금을 000원에 면세로 매출하였다.

② The △△ Metal Co., Ltd. sold 100 g of the said gold bullion to △△, a company which is a bombing business, at △△△△. The first taxable wholesale company, △△△△, Inc. sold 100 g of the said gold bullion to the first taxable wholesale company, at the price of supply, including the value-added tax (=00 x1.1 of the sales price).

③ △△ District Co., Ltd. sold the said gold bullion 100 km to the secondary wholesale chain Co., Ltd., the price for supply, including value-added tax, at KRW 000 (sales value of KRW 000x1.1).

④ The XXD Co., Ltd. sold 100 kg of the said gold bullion to the Plaintiff at the price of supply, including value-added tax, (sales value of KRW 000x1.1).

⑤ 원고는 2004. 1. 8. 저녁 무렵 위 금지금 100kg을 홍콩 소재 골드 AA에 수입업체인 QQ의 당일 아침 수입가격보다 더 낮은 000원(USD $000)에 수출(영세율 매출)하고도, 대한민국으로부터 관련 매입세액 000원을 환급받아 000원의 이득(수출금액 000원 - 매입금액 000원 + 환급액 000원)을 얻게 되었다.

(아) 피고가 QQ이 2004. 1. 8. 수입한 금지금 100kg(1kg의 금지금 100 개)의 수출입 내역을 일련번호 대조 방법으로 분석한 결과, 위 1kg의 금지금 99개가 2003. 10. 10.부터 2004. 4. 29.까지 2회 내지 18회에 걸쳐 그대로 수입과 수출이 반복 된 것으로 나타나고 있다(을 제41호증의 2).

(i) According to the statement of export performance (Evidence No. 7) submitted by the Plaintiff at the time of the declaration of value-added tax, the Plaintiff appears to have exported not only at the domestic time on the date of export but also at a lower price than at the Ksi tax, as shown in Table No. 3.

(j) Meanwhile, gold bullion importers pay customs duties equivalent to 3% of the price of gold bullion at the time of the import of gold bullion, which is included in the transaction price in the gold bullion distribution stage, and gold bullion exporters are entitled to refund 3% of customs duties paid to the purchaser. However, for the purpose of refund of customs duties, the "certificate of subdivision" under the Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export is issued from the purchaser and trader. However, in the said gold bullion transaction, the parties, including the Plaintiff, did not receive at all necessary installments for refund of customs duties, and the Plaintiff, the exporter, did not take necessary procedures for refund of customs duties at 3%.

(k) The Plaintiff immediately purchased the said gold bullion, exported it to AA located in Hong Kong, and paid the purchase price after one to two days, and exported the gold bullion amounting to approximately KRW 000,000 for one year and six months, but did not prepare a security device for the payment. The purchase price for a part of the purchase transaction office was paid after the export price was deposited.

(l) On the premise that the Plaintiff’s representative director B conspired with the breadth company, he was indicted for evading a large amount of value-added tax by using gold bullion transactions through the breadth company. The first instance court (Seoul Central District Court 2008 Gohap311) held that some of the facts charged are insufficient to recognize that the Defendant was involved in or was involved in the act of evading value-added tax under the agreement between the operator, etc. of the breadth company and the owner, etc. of the breadth company regarding the transaction indicated in the facts charged, and there is no other evidence to find otherwise. In addition, among the facts charged in the case of this case, there was no evidence to acknowledge that the Plaintiff, operated by the Defendant on November 6, 2003, purchased 30 kggg of gold bullion through H1st and W1thd, and purchased Z1st and W1stm of gold bullion through the breadth company’s Z1st and H1st of the same day, and purchased 200 g of gold bullion through the judgment of 20130 g of this day.

(m) The appellate court (Seoul High Court 2009No20) rendered a judgment of conviction against BB due to aiding and abetting the crime of tax evasion (a two-year suspended sentence, a fine of KRW 6.3 billion, and the part of the judgment of innocence). The Supreme Court (2009Do7166) reversed the judgment of the lower court by misunderstanding the legal principles as to changes in the indictment, and the Seoul High Court (201No334) sentenced BB to the indictment by changing the indictment to an aiding and abetting crime (a two-year suspended sentence, a fine of KRW 00) (a two-year suspended sentence, and a fine of KRW 6.3 billion).

[Reasons for Recognition] Facts without dispute, Gap evidence 4, 5, Eul evidence 3, 4, Eul evidence 7 to 9, Eul evidence 28, 29, Eul evidence 34 to 50, and Eul evidence 52, Eul evidence 34 to 52, witness KimO of the first instance court, Eul's testimony, and the purport of the whole pleadings.

C. Determination

1) Article 15 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter referred to as “Framework Act on National Taxes”) provides that “A taxpayer shall drive away decently and faithfully in performing his/her duties. The same shall apply where a tax official performs his/her duties.”

This principle is naturally applicable to legal relations with respect to value-added tax (Article 1 and Article 3(1) main text of the Framework Act on National Taxes). In a series of continuous transactions where a malicious business operator does not pay a fixed value-added tax by attempting to make an abnormal transaction in which only losses are deemed to have been incurred and not evaded only by a method of evading value-added tax (hereinafter referred to as “illegal transaction”) at any stage, in which he or she has attempted to evade value-added tax from the beginning to the end

If an exporter knew that there was an illegal transaction at the preceding stage, seeking an input tax deduction or refund is not permitted in violation of the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes. Furthermore, such legal doctrine also applies to cases where an exporter was unaware of such an illegal transaction due to gross negligence in light of the fair view and consequence D and universal sense of justice, and where an exporter was sufficiently aware of such illegal transaction, it is reasonable to view that the same doctrine is equally applicable to cases where the exporter was unaware of such an intentional transaction. Furthermore, the exporter’s failure to know that there was a bad faith relationship between the exporter and the malicious supplier and the bad faith supplier, and the same does not apply to cases where the exporter was in bad faith and the bad faith supplier’s illegal transaction (see, e.g., Supreme Court Decisions 2009Du13474, Jan. 20, 201; 2009Du16183, Feb. 24, 2011).

As to this, the Plaintiff’s application of the former part of Article 15 of the Framework Act on National Taxes, which is an abstract general provision, as a supplementary ground for the disposition of imposing taxes on matters that are not taxable objects in individual tax-related Acts, is contrary to the principle of no taxation without law under Articles 38 and 59 of the Constitution. However, the former part of Article 15 of the Framework Act on National Taxes declares that the principle of no taxation without law is applied to the tax-related field. It is natural that such principle can be applied to the legal relationship concerning value-added tax, and that it appears reasonable to deny the deduction and refund of the input tax amount as a sanction against exporters by the principle of good faith

2) First of all, whether to seek input tax deduction and refund in relation to the export transaction is contrary to the principle of good faith or not. In light of the following circumstances revealed by the aforementioned facts and evidence, namely, the transaction behavior, distribution channel, the period, quantity and value of the Plaintiff’s transaction, the payment process, the relationship with the Plaintiff’s import transaction of gold bullion previously, the transaction partner’s status, the Plaintiff’s establishment process, and the Plaintiff’s criminal investigation and criminal trial result as to the Plaintiff’s transaction partner, etc., even if there was no specific conspiracy or accomplice between the exporter and the malicious business operator who illegally traded with the exporter, it is reasonable to deem that the Plaintiff knew or did not know by gross negligence that there was any malicious business operator who illegally traded for the purpose of evading the output tax amount in the series of transaction process at the time of the gold bullion transaction

As above, the Plaintiff’s assertion of the input tax deduction of the purchase tax invoice of this case based on the transaction of gold bullion, which was aware of, or was unaware of, the fact that there was a malicious entrepreneur, and the malicious entrepreneur, regarding the gold bullion related to the purchase tax invoice of this case, is not allowed in violation of the good faith principle stipulated under Article 15

However, as seen earlier in the criminal judgment on the changedB, as the Plaintiff purchased 30 km from the Zjuice on November 6, 2003 through HH1 thald and W1 thald, and purchased 20 km from the Zjuice through HH1 thald and TW1 thald from the Zju on the same day, and purchased 20 km from the Zjuice through HH1 thald and Trid, and purchased 10 km from the M1 trade in the breadth of the breadth company on December 23, 2003 through S1 and K thald from the M1 trade in the breadth company on December 23, 2003, the judgment of innocence became final and conclusive. In light of these facts, there is insufficient evidence to support that there was a malicious business operator in bad faith in the previous transaction process, and thus, it is difficult to view this part of the Plaintiff’s assertion on this part of the Defendant’s trade cannot be accepted.

3) Meanwhile, the above legal doctrine on the principle of good faith does not apply to domestic sales. In this case, the Defendant denied most of the pertinent sales tax invoice and the pertinent input tax amount on the ground that each of the above taxes was included in the processed sales tax invoice issued without real transactions at the time of the imposition of the above value-added tax (Evidence Nos. 1 and 4). However, in light of the fact that the instant sales tax invoice concerning domestic sales does not constitute the above processed sales tax invoice, not only constitutes the aforementioned processed sales tax invoice, but also is related to domestic sales conducted during the second period of 203 and the first taxable period of the value-added tax in 204, as alleged by the Defendant, the principle

4) Sub-committee

Thus, in the case of export transaction, after deducting the input tax amount on the tax invoice for the transaction that does not go against the principle of good faith, and in the case of domestic sales transaction, the relevant tax amount should be calculated by deducting the relevant tax amount and the input tax amount on the sales statement of this case as it is. Accordingly, the relevant tax amount should be calculated by deducting the input tax amount on the tax invoice for the transaction that does not go against the principle of good faith. The relevant tax amount is KRW 000 for the second period of 2003 as shown in the attached Table, and KRW 00 for the first period of 200 for 204 (

The instant disposition is lawful.

3. Conclusion

The judgment of the first instance is justifiable. The plaintiff's appeal is dismissed.