Cho High Court Decision 2010No3041 (Law No. 105, 2011)

In addition to the deadline for filing a claim for rectification, even if it satisfies the requirements for reduction or exemption of the small or medium enterprise tax amount, it cannot be retroactively reduced or exempted.

In the case of a business year for which ex officio reduction or correction cannot be made after the expiration of the exclusion period as well as the deadline for filing a request for rectification, even if it satisfies the requirements for reduction or exemption of small and medium enterprises,

2011Guhap27049 Revocation of Disposition of Corporate Tax Imposition

XX Co., Ltd

Head of the tax office;

March 23, 2012

April 6, 2012

1. Of the primary claims in this case, the Defendant’s lawsuit on June 11, 2010 against the Plaintiff is dismissed as to “the portion exceeding KRW 000 in the disposition of imposition of corporate tax of KRW 000 for the business year of 2006.”

2. The plaintiff's remaining main claims and conjunctive claims are dismissed, respectively.

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

The primary purport of the claim / the Defendant’s primary purport of the claim is revoked on June 11, 2010 that exceeds KRW 000,000,000,000,000 for the corporate tax for the business year of 206.

Preliminary claim / The imposition of corporate tax of KRW 000 and additional tax of KRW 000 for the business year 2006 against the plaintiff on June 11, 2010 shall be revoked.

1. Details of the disposition;

(a) Application of tax reduction or exemption to local areas;

Article 63 of the former Restriction of Special Taxation Act (amended by Act No. 6312, Jan. 16, 2001; hereinafter referred to as the "former Restriction of Special Taxation Act, including the Restriction of Special Taxation Act applied to this case,") applies the provision of "tax reduction or exemption for small and medium enterprises located outside Seoul Metropolitan area (hereinafter referred to as "transfer of tax reduction or exemption")" in Article 63 of the former Restriction of Special Taxation Act as the plaintiff engaged in the manufacturing business of precious metals in Jongno-gu Seoul Metropolitan City and moved its head office and factory to Namwon-si on July 6, 2001, and was reduced or exempted in total from corporate tax for 00 won from 20

(b) First revised report:

On April 6, 2006, the Plaintiff re-transfered its head office to Jongno-gu Seoul. In accordance with Article 63(2) of the former Restriction of Special Taxation Act, upon filing a revised return on the tax base of the corporate tax for 2006 business year (hereinafter “the first revised return”) around October 2008, the Plaintiff added the tax amount to be paid for the tax amount to be reduced or exempted as referred to in the above paragraph (a) and additionally paid the special tax reduction or exemption for the small or medium enterprise under Article 7 of the former Restriction of Special Taxation Act for the business year from 2001 to 2004, excluded from double application pursuant to Article 127 of the former Restriction of Special Taxation Act (hereinafter “small or medium enterprise reduction or exemption”), plus the amount equivalent to the interest and the additional tax for insincere payment (hereinafter “amount equivalent to the tax reduction or exemption”).

(c) Second revised declaration:

1) On April 13, 2010, the Seoul National Tax Service: (a) rendered the Plaintiff on April 13, 2010; and (b) for the business year 2001 and 2002 business year, small and medium enterprises are not eligible to tax reduction or exemption after the lapse of the exclusion period for taxation; (c) accordingly, the Seoul National Tax Service: (d) rendered a revised report to add the corresponding amount of tax reduction or exemption for the business year 2001,202, the amount equivalent thereto, and the sum of the amount corresponding to the interest accrued for the business year 2002, and the penalty tax

2) As a result, the Plaintiff filed a revised return on the tax base of the corporate tax for the business year 2006 again on April 14, 2010 (hereinafter “second revised return”), and did not pay the amount of tax reduced or exempted by a small or medium enterprise for the business year 2001 and 2002 plus an amount equivalent to the corresponding interest and an additional tax for insincereful payment (i.e., the amount of tax reduced or exempted by a small or medium enterprise for the business year 2001 and 2002 + an amount equivalent to the corresponding interest + an amount of 000 won + an additional tax of 000 won in good faith payment).

D. The instant notice of payment

On June 11, 2010, the Defendant issued a payment notice to the Plaintiff on June 11, 2010, stating that the penalty tax for non-payment of corporate tax pursuant to the second revised return was added until June 11, 2010 (i.e., the amount of tax reduction or exemption for small and medium enterprises in the business year 2001, and 2002 + the amount equivalent to interest 000 won + penalty tax for unfaithful payment on the second revised return + penalty tax of 000 won + penalty tax for non-payment in good faith on the second revised return from the date of the second revised return to the date of the payment notice until June 30, 2010 (hereinafter “instant payment notice”).

E. The Plaintiff appealed and filed an appeal on September 8, 2010, but was dismissed on May 20, 201, and filed the instant lawsuit on May 25, 201 by being served a written notice of the decision.

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

2. Determination as to the legitimacy of the lawsuit on the part of KRW 000 among the main claims

We examine ex officio the legitimacy of the lawsuit on the part of KRW 000 among the main claims.

A. The plaintiff's assertion

A revised return is effective only when the tax authority issues a revised return and notifies the tax base and amount of tax. However, since the second revised return of this case was inevitably made by the tax authority to notify the tax base and amount of tax after the tax authority actually completed the correction of the tax base and amount of tax, it is not effective as a revised return to determine the tax liability in the form of tax return and payment. Therefore, the instant notice of payment on the ground that the tax payment was not paid pursuant to the second revised return constitutes a substantial taxation to determine the tax liability. However, the instant notice of payment is inappropriate because it is not applied to a small and medium enterprise for the business year 2001 and 2002, as seen below, and thus, it is inappropriate to determine the tax liability. As such, the instant notice of payment is deemed as follows: (i) the amount of tax to be paid at the time of the final return of 200 won + the amount of tax to be paid at the time of the first revised return of 00 won + the amount of tax to be paid at the first revised return of 000 won.

B. Determination

1) The method of filing a return is that a taxpayer is obligated to pay the tax amount determined at the time when the taxpayer files a return on the tax base and amount of tax, which is the same as in the case of a return on modification. The same applies to the case of a return on modification. The taxpayer’s notification that the taxpayer should pay the tax amount uniformly with the reported matters without any competition on the grounds that the taxpayer did not pay the tax amount after filing the return on the tax base and amount of tax is a collection disposition for the collection of the determined tax, and cannot be deemed as a tax assessment subject to an appeal litigation (see, e.g.

2) In light of the fact that the Seoul National Tax Service notified the Plaintiff of the notice of the revised return when the notice was given to the Plaintiff, as seen earlier, the Seoul National Tax Service notified the Plaintiff of the content of the notice, it is insufficient to recognize that the second revised report was made in a situation where the Defendant was actually corrected, and there is no other evidence to acknowledge that the second revised report was made in a situation where the Defendant’s correction was made.

Therefore, inasmuch as the Plaintiff’s obligation to pay late corporate tax in 2006 upon filing the second revised return became final and conclusive, the Plaintiff’s obligation to pay late corporate tax in 2006 is limited to KRW 000 (i.e., paid additional tax due to the second revised return + KRW 000 + additional tax KRW 000 due to the second revised return from the date of the second revised return to the date of the payment notice in this case), which the Plaintiff sought the second revised return, and thus, the amount of paid additional tax pursuant to the second revised return is merely a quorum for collecting the determined corporate tax, and thus, cannot be deemed a tax assessment subject to appeal. Therefore, this part of the Plaintiff’s claim

3. Determination as to the remaining main and conjunctive claims

A. The plaintiff's assertion

1) Even if the instant notice of payment is deemed to be combined with the collection disposition and the imposition disposition of additional tax according to the unpaid portion of the amount of the second revised tax, the second revised tax return is null and void as follows, even though there is no tax liability, the second revised tax return was inevitably made in order to avoid the disadvantage of operating a business if it fails to comply with the guidance of the tax authority for the revised tax return.

A) The Plaintiff added the amount of tax reduction from 2001 to 2004 to the amount of tax reduction for the business year 2006 to the Seoul Jongno-gu pursuant to Article 63(2) of the former Restriction of Special Taxation Act by re-transfering the head office in 2006 to the Seoul Jongno-gu and added the amount of tax reduction and exemption for the business year 2006 to the business year 2004 to the business year, and applied the tax reduction and exemption for the business year 2006 business year by deducting the relevant amount of tax reduction and exemption in accordance with the overlapping exclusion provision. Thus, the second revised return and the notice of tax payment following the second revised return, which excluded some tax reduction and exemption from the first revised return, were related to

B) Even if such issues are to be considered as a matter of business year 2001,202, which is the business year subject to reduction or exemption, Article 63(2) of the former Restriction of Special Taxation Act provides that a taxpayer shall file a corporate tax base return for the year when the grounds for estimating the amount of tax reduction or exemption have occurred, and Article 12-3(2)3 of the Enforcement Decree of the Framework Act on National Taxes extends the exclusion period by calculating the exclusion period from the date when the grounds for estimating the amount of tax reduction or exemption occur, it shall be deemed that the exclusion period for the amount of tax reduction or exemption for small or medium enterprises in the same business year, which would have been naturally applicable if they were not subject to

C) Even if the corporate tax for the business year 2001, 2002 is subject to the exclusion period, the exclusion period is only limited to the period for which the tax authority can impose national taxes, and there is no provision prohibiting the application of tax reduction or exemption in the case of taxpayer. Therefore, the reduction or exemption period can not be excluded from the tax reduction or exemption on the ground of the Do of the exclusion period.

D) Therefore, notwithstanding the absence of an error in the first revised return that applied the reduction or exemption of the tax amount for the business year 2001 and 2002 to provinces, the second revised return, which excluded the error, filed a return on the tax amount to be additionally paid, and thus, is unlawful.

2) As above, once the second revised report becomes null and void, the defect of the invalid revised report succeeds to the instant payment notice, which is a subsequent disposition, and thus, the fixed number disposition and disposition included in the instant payment notice cannot be exempted from revocation due to its illegality.

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination

1) If the instant notice of payment is deemed an authorized number and an additional tax imposed and collected pursuant to the second revised return, any defect may be cancelled by succession to the instant notice of payment, which is the subsequent revised return, in the instant case where there is no evidence to acknowledge the unique defect of each of the above dispositions, and only if it can be deemed that the second revised return is null and void due to a significant and obvious reason, it can be seen that the defect exists in the instant notice of payment, which is the subsequent revised return. Therefore, first of all, we examine what defect exists in the second revised return, which excluded the application of reduction and exemption for small and medium enterprises in 20

A) Whether the application of tax reduction or exemption for the business year 2001, 2002 is related to the corporate tax for the business year 2006

A person who has filed a tax base return by the statutory due date of return shall file a revised return if the tax base and tax amount entered in the tax base return are less than the lawful amount (Article 45 of the Framework Act on National Taxes), and where the tax base and tax amount entered in the tax base return exceed the legitimate amount, he/she may file a request for correction within three years after the statutory due date of return expires (Article

In this case, the first revised return, regardless of its name and form, has the nature of the revised return as to the presumption of the tax reduction or exemption in the region having been reduced from the business year of 2001 to the business year of 2004, and also has the nature of a request for correction to request the correction by applying the tax reduction or exemption to the same period. However, in the latter case, since the deadline for filing a request for correction has already expired, it shall be deemed that the request for correction by the tax authorities should be made. However, in the case of small and medium enterprise tax reduction or exemption, there is no provision for the reduction or exemption by filing a corporate tax return after the business year of the reduction or exemption, so it shall be made by filing a request for correction of the corporate tax base and amount of tax for the business year of the reduction or exemption, but the plaintiff simply deducted the amount of tax reduction or exemption from the amount of tax to be paid by filing a revised return for the tax base and amount of corporate tax for the

Ultimately, the instant notice of payment was made regarding the exclusion of the tax reduction or exemption for the business year of 2001, 2002 included in the first revised return. Thus, it cannot be viewed as a corporate tax for the business year of 2006. Therefore, the Plaintiff’s assertion on this part is without merit.

B) Extension of exclusion period for reduction of or exemption from the tax amount of small and medium enterprises

Under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of fair taxation to strictly interpret that the provision is clearly preferential in terms of the requirements for reduction and exemption (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009).

In a case where a cause for presumption arises after being subject to reduction or exemption for the tax year when the tax base return of the taxable year when such cause occurred to local areas, the exclusion period for imposing the estimated tax amount shall be calculated from the date when the cause occurred (Article 63(2) of the former Restriction of Special Taxation Act). However, the exclusion period for imposing the estimated tax amount shall be calculated from the date when the cause occurred (Article 12-2(2)3 of the Enforcement Decree of the Framework Act on National Taxes). However, if a request for correction is made within the request period for correction of the tax year when the request for correction for the tax reduction or exemption expires, a person who is not subject to reduction or exemption

Therefore, in light of the strict interpretation of the provision on reduction and exemption as seen above, the Plaintiff’s assertion that the exclusion period of reduction and exemption should also be extended if the amount of reduction and exemption to local areas is estimated, cannot be accepted as it does not

C) If the reduction is applied after the expiration of the exclusion period.

The principle of strict interpretation of tax laws is as seen earlier, and in light of Article 26-2(2) of the Framework Act on National Taxes, it is a principle that neither a new decision nor a new decision of correction of increase nor a decision of correction of reduction, etc. may be made as well as a decision of correction, etc. at the expiration of the exclusion period (see, e.g., Supreme Court Decision 2000Du6657, Sept. 24, 2002). The Plaintiff’s assertion that there is no problem as to whether the exclusion period is the limit of the exclusion

D) Sub-determination

Therefore, in the case of a business year for which ex officio reduction or exemption cannot be made after the expiration of the exclusion period as well as the request period, even if it satisfies the requirements for reduction or exemption of the tax amount, it cannot be retroactively reduced or exempted. Therefore, it cannot be deemed that there is any defect with the second revised return stating that the exclusion period has expired at the time of the first revised return, which is 201, 2002 business year.

2) Next, we examine whether, even if any defect exists in the second revised declaration, the defect is serious breach of the essential part of the law and is objectively apparent.

However, in a case where there is room for dispute over the interpretation of a certain legal relationship or factual relationship because the legal principles are not clearly revealed, even if an administrative disposition was taken by an erroneous interpretation of such legal principles, it is merely a misunderstanding of the facts subject to disposition, and it cannot be said that the defect is evident. In this case, even if there is any defect on the application of reduction or exemption of the corporate tax for the business year 2006 when filing a revised return for the business year 2006, and it cannot be objectively apparent even if there is any defect on the application of reduction or exemption of the corporate tax for the business year 2001 and 2002, it cannot be said that the second revised return becomes null and void

3) Therefore, the second revised declaration does not contain any unlawful defects, and even if there exists any defect, it cannot be deemed null and void since the second revised declaration cannot be deemed null and void. Thus, any defect in the instant notice of payment, which is a subsequent revised disposition, cannot be succeeded. Ultimately, the collection disposition and disposition included in the instant notice of payment, are lawful and the Plaintiff’s claim seeking revocation thereof is groundless.

4. Conclusion

If so, the plaintiff's main claim is dismissed as illegal. The remaining main claim and the conjunctive claim are dismissed as it is without merit. It is so decided as per Disposition.