Disposition Revocation of Imposition of Value-Added Tax

In the disposition of correction of the value-added tax in this case, the amount of the sales agency fee is included in the gross income in the business year 2009 when the sales agency service under the service contract in this case was supplied, and in the disposition of correction of the corporate tax in this case, the amount of the sales agency fee is legitimate.

Article 9 of the former Value-Added Tax Act (Amended by Act No. 10409, Dec. 27, 2010); Article 40 of the former Corporate Tax Act (Amended by Act No. 10423, Dec. 30, 2010)

2015Guhap3127 Value-added Tax and revocation of revocation of the imposition of corporate tax

Note*********

*The Director of the Tax Office

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 110,634,00 of value-added tax for the second term of 2009 against the Plaintiff on January 14, 2015 and KRW 178,684,00 of corporate tax for the business year 2009 shall be revoked.

1. Details of the disposition;

A. In principle, on August 24, 2009, the Plaintiff purchased and sold yachts sold by the Plaintiff with a company AA (hereinafter referred to as “AA”) on behalf of the Plaintiff, but if sold on behalf of the Plaintiff, the Plaintiff entered into a sales agency contract with a company AA to receive sales agency fees (hereinafter referred to as “instant service contract”).

B. On the same day, AAA entered into a yacht sales contract between BB development (hereinafter “BB development”) and BB development (hereinafter “BB development”), between 4.7 billion won for the Plaintiff’s ○○○592 (hereinafter “the instant yacht”), 1.45,000,000 for 1.45,000 for ○○○470,000 for 1.14,000 for △△△ 410 for △△ △△ 4.00 for 114,000 for △△, and △△△ △△ △△ △△ △ △ △△ △ △ △. (hereinafter “former sales contract”).

C. On the same day, the Plaintiff agreed to receive KRW 1.4 billion from the sales agency fees for the instant yachts, and paid KRW 660 million until December 20, 2009, and the remainder of KRW 740 million until February 28, 2010. However, the Plaintiff agreed to immediately pay the said fees to the Plaintiff when the Plaintiff received the payment from the buyer.

D. BB development paid the down payment of KRW 1180,000,000 to AA by October 15, 2009, and KRW 900,000,000 to the first intermediate payment of KRW 1,180,000,000,000 to BB development by entering the instant yacht in the Jeju Do, and then transferring it to BBB development. Since then, BB development delayed the payment of the remainder of the purchase price, AAAA made an agreement on June 23, 2010 to change the subject matter of the pre-sale sales contract between BB development and BB development (hereinafter referred to as “sales contract after amendment”).

E. Since then, when the BB development delays the payment of the purchase price and the reduction of the purchase price was discussed between BB development and AAAA, the Plaintiff agreed on May 21, 2012 to additionally reduce the sales agency fee to be paid by the Plaintiff when the sales agency fee of the instant yacht is reduced to 4 billion won between the AA and the Plaintiff on May 21, 2012, and to reduce the sales agency fee to 600 million won if the subsequent reduction is made.

F. Following the change between AAA and BB development, the dispute regarding the implementation of the sales contract has continued to exist, and the CC Services (Representative KimE, hereinafter “CC”) decided to arbitrate the dispute. On October 5, 2012, the Plaintiff agreed with AAAA andCC as follows:

1) The Plaintiff’s transfer of the sales agency fee claim to be paid by AAA (referring to the remaining balance claim) to theCC, and the AA may consent, but may oppose theCC on the grounds that AA could have asserted against the Plaintiff.

2) AAA shall deposit sales agency fees assigned pursuant to paragraph (1) above toCC.

3) The Plaintiff confirms that there is no claim against AA any longer in accordance with the assignment of claims under the foregoing paragraph (1).

G. On November 29, 2012, AA agreed that AA shall complete the settlement of the sales contract after receiving payment of KRW 2,567,903,619 on December 5, 2012 between BB development and DDD Co., Ltd. (hereinafter “DDDD”), and AA was fully repaid from DDDD on December 5, 2012.

H. Since then, AAA paid sales agency fees of KRW 660,000 (including value-added tax) toCC and issued a tax invoice of KRW 660,000,000 fromCC (hereinafter “instant tax invoice”). On December 24, 2012,CC paid KRW 250,000 to the Plaintiff and issued a tax invoice of KRW 250,000,000 from the Plaintiff as supply price.

(i) On December 10, 2013, the Defendant: (a) provided a sales agency service to AAA on December 10, 2013, notCC; (b) deemed that the instant tax invoice as the Plaintiff was a false tax invoice by the supplier; and (c) determined that the Plaintiff omitted sales of KRW 350 million (i.e., KRW 660 million-250 million) and notified the Plaintiff of the rectification and notification of value-added tax amounting to KRW 56,349,500 for the second period of February 2012 (hereinafter “previous disposition”); and (d) filed a request for judgment by the Plaintiff; and (e) rendered a reinvestigation decision by the Tax Tribunal on November 24, 2014, as follows.

The Defendant’s imposition of KRW 56,349,50 of value-added tax on December 17, 2013 against the Plaintiff on KRW 2012, the assessment of KRW 56,349,500 on the following grounds: on October 5, 2012, the Plaintiff’s assessment of the additional agreement prepared by the Plaintiff, AAA, andCC was conducted on October 5, 2012, and the assessment standard and tax amount were corrected accordingly.

(j) In the course of reinvestigation, the Defendant determined that the time of supply for sales agency services provided by the Plaintiff to AA was not 2 years 2012 but 2009. On January 14, 2015, the Defendant issued a correction and notification of the amount of value-added tax of KRW 110,634,00 (including additional taxes) for the second period of time in 2009 (hereinafter “instant disposition for correction of value-added tax”), and the amount of corporate tax of KRW 178,684,00 (including additional taxes) for the business year 209 (hereinafter “instant disposition for correction of corporate tax of this case”); and the sum of the disposition for correction of value-added tax of this case “each of the instant dispositions”).

(k) On March 25, 2015, the Plaintiff filed a petition for an adjudication with the Tax Tribunal on March 25, 2015, and on December 4, 2015, the Tax Tribunal rendered a final decision to dismiss the Plaintiff’s request for adjudication.

Facts that there is no dispute over recognition, Gap Nos. 1, 5 through 9, 14, 17, 20, 26, 39, 40 (Gam number)

Each entry, the whole purport of the pleading, including all evidence attached thereto,

2. Summary of the plaintiff's assertion

A. The sales agency service provided by the Plaintiff is a conditional contract under which sales agency fees are paid in the event of the payment of the remainder of the instant yacht, that is, the time of the completion of the terms and conditions, namely, the time of the payment of the remainder. The BB development, the purchaser of the instant yacht, did not have the ability to pay the remainder, and the remainder was settled only through the instant settlement agreement, and thus, when the provision of the service is completed, it shall be deemed that the settlement amount was paid in the second half of 2012.

B. The possibility of realizing the right should be considerably mature in order to ensure that the profit was determined in relation to the corporate tax. At the time of 2009, DDR had no ability to pay for BB development, and DDR could not be deemed to have been considerably mature in terms of the possibility of realizing the right that is the cause of income because it could not be deemed that the right that is the cause of income was realized. Therefore, the sales agency fee cannot be included in the gross income in the business year 200

C. The decision of the Tax Tribunal on October 5, 2012 to re-examine whether or not the plaintiff received part of the price before the re-investigation, and to correct only the tax base and tax amount of the previous disposition. The defendant, after re-investigation, violated the binding effect of the Value-Added Tax for 2009 and the corporate tax for 2009 business year after re-investigation. Since the corporate tax is imposed on which the plaintiff did not request an administrative appeal and the value-added tax is increased, each of the dispositions of this case violates the principle of non-defluence and the principle of prohibition of disadvantageous alteration as stipulated in Article 79 of the Framework Act on National Taxes.

3. Relevant statutes;

The entries in the attached Table-related statutes are as follows.

4. Determination

A. Determination as to the time of supply for services in the disposition of rectification of value-added tax in this case

1) According to Article 9(2) of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010; hereinafter the same) a person who independently supplies goods or services on a business basis is liable to pay value-added taxes; the time when the services are supplied is the time when the goods, facilities, or rights are used or the services are supplied to another person upon receipt of a consideration may not affect the conclusion of the obligation to pay value-added taxes (see, e.g., Supreme Court Decision 94Nu146, Nov. 28, 1995). In addition, Article 9(2) and (4) of the former Value-Added Tax Act; Article 22 subparag. 1 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 22395, Sep. 20, 2010; hereinafter the same).

2) As seen in the above facts, upon entering into the instant service contract, the Plaintiff and AAA entered into an agreement with the Plaintiff to receive a sales agency fee if the Plaintiff were to act on behalf of the Plaintiff, and did not enter into any particular agreement on the timing for payment of the price. Although the implementation of the sales contract was not completed on the day the previous sales contract was concluded, AAA entered into on the day of the amendment, the Plaintiff shall be paid KRW 1.4 billion with the sales agency fee to the Plaintiff on December 20, 2009 and February 28, 2010. However, AA agreed to pay the said commission immediately upon receipt of the sales payment from the BB development, the buyer.

In light of these circumstances, the content of the sales agency service performed by the Plaintiff under the instant service contract is limited to the fact that the Plaintiff acts on behalf of the Plaintiff, or acts as a broker of the buyer, to enter into a sales contract for the instant yachts on behalf of the Plaintiff, and furthermore, it does not include the fact that the Plaintiff and the AAA made the actual payment of the sales amount from the BB development. In addition, even before the due date of the agreed payment, it is reasonable to deem that the Plaintiff and the AA made the payment of the sales agency fee to the Plaintiff immediately after the receipt of the sales amount from the BB development, and it cannot be deemed that the AA agreed to pay the sales agency fee under the instant service contract on condition that the AA would receive the sales amount from the BB development.

However, as seen earlier, the Plaintiff’s brokerage entered into a pre-sale contract between AAA and BB development on August 24, 2009 (i.e., the fact that AAA entered the yacht in this case into the port of Jeju △, around October 15, 2009 and made BB development use the yacht in the public relations for the sale of the new ○○○○○ △△△△△△ Construction Project, which he/she had run, in full view of the respective descriptions and arguments in subparagraphs 14 and 17, and the overall purport of the arguments.)

On the other hand, as seen earlier, the Plaintiff transferred the sales agency fee claim toCC on October 5, 2012, but this is merely an event that occurred after the supply of sales agency service as above, and thus does not affect the Plaintiff’s liability to pay value-added tax.

3) Therefore, it is legitimate that the Defendant’s supply of sales agency services under the instant service contract to the second period in 2009 in the disposition of correction of the value-added tax in this case, and the Plaintiff’s assertion contrary thereto is without merit.

B. Determination of the period of attribution of earnings in the disposition of correction of the corporate tax of this case

1) Article 40(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides that a domestic corporation’s business year to which the income and deductible expenses accrue shall be the business year to which the date on which the income and deductible expenses are determined belongs, thereby adopting the so-called “right confirmation principle” in which the income and the taxable income are calculated, even if there is no actual income, if the right that became the cause of such income accrues even if there is no actual income. In such a case where there is an interval of time between the time and the time when the right that became the cause of the income and the time when the income are realized, the right that is the cause of the income and the time when the income are realized shall not be deemed the time when the income are determined, and thus, the method of calculating the income of the pertinent business year shall be deemed the time when the income and the income actually uncertain income will be realized in the future (see Supreme Court Decision 2011Du1245, Dec. 2

In addition, Article 40(2) of the former Corporate Tax Act provides that the scope of the business year of accrual of earnings and losses shall be determined by Presidential Decree, and Article 69(1) of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010) provides that the business year of accrual of earnings and losses from the provision of services shall be the business year which includes the date on which the provision of services is completed

2) In light of the above legal principles, the provision of sales agency service under the instant service contract is completed as it was concluded on August 24, 2009 between AA and BB development by proxy of the Plaintiff’s sales agency, and thus, the Plaintiff’s claim for sales agency service fee against AA was confirmed at that time. Thus, the amount of such claim should be included in gross income in the business year 2009.

Therefore, it is legitimate that the Defendant included the amount of sales agency fee in the gross income in the business year 2009 in the disposition of revising the corporate tax of this case, and the Plaintiff’s assertion against this is without merit.

C. Whether the re-audit decision has binding force

The ruling authority's re-audit decision on a tax disposition shall only have the binding effect of ordering the disposition authority to make any decision or make it impossible to make any disposition contrary to the ruling, only with respect to the pertinent taxable period and the taxation disposition of tax item which are the object of a request for adjudgment, and shall not affect the binding effect with respect to the tax disposition which differs in the taxable period or items (see Supreme Court Decision 80Nu504, Jul. 13, 1982).

As seen earlier, the Review Decision by the Tax Tribunal is subject to value-added tax for the second half-year period of 2012. As to each of the instant dispositions subject to value-added tax for the second half-year period of 2009 and corporate tax for the business year 2009, its binding effect does not extend. Therefore, the Plaintiff’s assertion that each of the instant dispositions is in violation of the binding force of the Review Decision is without merit.

D. Whether there is a violation of the principle of non-defluence and the principle of prohibition of disadvantageous alteration

1) Article 79(1) of the Framework Act on National Taxes provides that when making a decision upon a request for adjudgment, the Council of Tax Judges or the Joint Session of Tax Judges shall not cancel or modify all or part of the disposition other than the request for adjudgment, or make a decision on a new disposition. Article 79(2) of the same Act provides that the Council of Tax Judges or the Joint Session of Tax Judges shall not make a decision unfavorable to the requester, rather than the disposition for the request for adjudgment.

Meanwhile, with respect to the matters pointed out in the pertinent decision, the ruling authority’s re-audit decision constitutes a modified decision with the intent to take the contents of the follow-up disposition as part of the ruling on the objection filing, etc. as a result of the re-audit, and the re-audit decision ought to be deemed to take effect by supplementing the contents thereof in accordance with the follow-up disposition of the disposition authority (see Supreme Court en banc Decision 2007Du12514, Jun. 25, 2010). Therefore, it is reasonable to determine whether it is an unfavorable decision for the claimant under Article 79(2) of the Framework Act on National Taxes compared to the disposition filed by the ruling authority and the follow-up disposition in accordance with the re-audit decision. Re-audit decision of the disposition authority is limited to the extent that the need for re-audit is recognized by the ruling authority, and it is not, in principle, permissible for

However, this prohibition does not apply to the case where the tax authority decides the tax base or tax amount with omissions or errors on the basis of the grounds revealed in the grounds of the ruling (see Supreme Court Decision 2005Du10675, Nov. 16, 2007).

B) In light of the above legal principles, the disposition filed by the Plaintiff was the previous disposition that corrected the value-added tax for the second period of February 2012, and the Defendant corrected the value-added tax for the second period of February 2012 after a reinvestigation to 0 won. Each of the dispositions of this case is related to separate taxation requirements, namely, value-added tax for the second period of February 2009 and corporate tax for the business year 2009. Each of the dispositions of this case was corrected as to the facts of taxation requirements separate from the disposition that was filed by the Defendant, who is the tax authority, to correct omissions or errors related to the tax base and customs found in the re-audit process, and it cannot be deemed that the disposition of this case violates the principle of no objection or the principle of no disadvantageous alteration, even if the total amount of the taxation exceeds the amount of the previous disposition.

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

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.