Plaintiff (Attorney O-Support, Counsel for plaintiff-appellant)

The superintendent of the tax office

August 30, 2012

1. The plaintiff's claim is dismissed.

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

On January 14, 2010, the Defendant revoked the disposition of imposition of value-added tax of 118,329,250 won for the first term portion of 2001 against the Plaintiff, and value-added tax of 201 for the second term portion of 2001 (the “73,491,000 won” stated in the written complaint appears to be a clerical error).

1. Details of the disposition;

A. The Plaintiff, a business operator engaged in the new construction and sale of real estate with the trade name of “○○○○,” had a total floor area of more than a certain size, and, in order to avoid regulation that no construction business license is granted without a comprehensive construction business license, the Plaintiff, who directly lent the name of the company, e.g., the Plaintiff, in order to avoid a regulation on the construction of the building, to construct a building on the ground of a total floor area of 1,708.05 square meters on the site (number 1 and 2 omitted) in Suwon-gu, Suwon-gu, Suwon-si (hereinafter “instant building”; hereinafter “the instant building”).

B. Accordingly, on May 28, 2001, the Plaintiff newly constructed the instant building contract amounting to KRW 781 million with the non-party company (the supply price of KRW 710 million, value-added tax KRW 71 million, value-added tax KRW 71 million), and the starting date was June 5, 2001, and the completion date was December 10, 2001. (hereinafter “the instant contract agreement”).

C. The Plaintiff selected and implemented most of the construction works of the instant building directly subcontracted, and concluded a subcontract with the Nonparty Company as the subcontractor, and paid the construction cost in the manner of deposit in the name of the Nonparty Company.

D. From June 5, 2001 to July 3, 2001, the Plaintiff transferred KRW 476,007,741 on six occasions to the agricultural bank account of the non-party company. Of these, KRW 421,107,741 was transferred to the bank account of the plaintiff or the plaintiff's wife or the non-party 1's wife within one to three days immediately after or after the payment.

E. The Plaintiff received a tax invoice (hereinafter “instant tax invoice”) of KRW 432,727,00,000 for the first term portion in 2001, the second term portion in 2001, and KRW 277,273,000 for the second term portion in 2001, and filed a value-added tax return after deducting the input tax amount at the time of filing a value-added tax return for the first and second term portion in 201.

F. The Defendant conducted a tax investigation with the Plaintiff from February 9, 2009 to March 23, 2009, and notified the Plaintiff that the contract for construction work between the Plaintiff and the non-party company would be false, and the instant tax invoice would be also corrected on March 26, 2009 to impose the value-added tax for the first and second period of 201 on the ground that it is a processing tax invoice.

G. The Plaintiff filed a request for pre-assessment review on April 28, 2009, but the Defendant dismissed this request and imposed the Plaintiff KRW 118,329,250 on January 14, 201, value-added tax for the first term portion of value-added tax for the year 2001, and KRW 73,491,000 for the second term portion of value-added tax for the year 2001 (hereinafter “instant disposition”).

H. The Plaintiff appealed and filed an objection on January 21, 2010, but was dismissed. The Plaintiff filed an appeal with the Tax Tribunal on August 13, 2010, respectively, but the claim was dismissed on June 29, 201.

[Ground of recognition] Gap evidence Nos. 1, Eul Nos. 1, 2, 3 through 7, 9 through 30 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

(a) Related Acts and subordinate statutes;

It is as shown in the attached Table related statutes.

B. As to the allegation of illegality in the investigation procedure

(1) The plaintiff's assertion

At the time of commencement of the tax investigation against the Plaintiff, the transfer value of the instant real estate between the Plaintiff and Nonparty 2 who purchased the instant real estate from the Plaintiff was subject to the investigation. However, the Defendant extended the illegally subject matter of investigation without going through the conversion procedure under the condition that there is no evidence that there is clear doubt that the Plaintiff’s suspicion of omissions in value-added tax relating to the instant building was found. Therefore, the instant disposition is unlawful unless there is any evident evidence to prove the suspicion of omissions or errors that justify such extension of investigation.

(2) Facts of recognition

① On October 10, 2001, the Plaintiff sold the instant real estate to Nonparty 2. Nonparty 2 sold the instant real estate to a third party, and on August 12, 2002, reported the transfer income tax with the transfer value of KRW 1.8 billion and the acquisition value of KRW 1.7 billion.

② At the time of filing a transfer income tax return, Nonparty 2’s value of the instant real estate on the balance sheet for the return of global income tax return for the year 2001 is causing KRW 1.439 billion, and the acquisition value was KRW 1.7 billion, and the indirect investigation of transfer income tax against Nonparty 2 was conducted from December 5, 2007 to December 27, 2007 on the ground that there was a suspicion of excessive appropriation of acquisition value. As a result, the acquisition value of the instant real estate was investigated as KRW 1.7 billion, and the head of Suwon Tax Office notified the head of Suwon Tax Office of taxation data on December 27, 2007.

③ Around October 2008, the head of the Suwon District Tax Office requested the Plaintiff to submit explanatory data on the transfer price of the instant real estate, and accordingly, the Plaintiff submitted explanatory data. On November 7, 2008, the Suwon Tax Dispute Advisory Committee decided that “The Jungbu District Tax Office, which conducted an investigation with respect to Nonparty 2, shall refer to the Plaintiff’s opinion along with explanatory data submitted by the Plaintiff and make a decision according to the result of the investigation.” Accordingly, on November 2008, the head of the Suwon District Tax Office requested the Central District Tax Office to present its opinion.

④ Accordingly, in order to verify the sale price of the instant real estate, the Central Regional Tax Office: (a) selected the Plaintiff as the person subject to a partial investigation on the part of an individual entrepreneur; (b) conducted a tax investigation on the Plaintiff from February 9, 2009 to March 23, 2009; and (c) deemed the sale price of the instant real estate as KRW 1.7 billion and notified the head of the Suwon Tax

⑤ On March 26, 2009, the head of the Suwon Tax Office notified the Plaintiff of the pre-announcement of taxation that the global income tax for the year 2001 and the second half-year value-added tax for the year 2001 according to the above findings.

④ As to this, the Plaintiff filed a request for pre-assessment review on April 28, 2009. On December 28, 2009, the Plaintiff re-audited the sale price of the instant real estate from January 21, 2010 to February 1, 2010. Since it is necessary to verify the appropriateness of the transfer price of the instant real estate, the investigating authority reviewed the acquisition cost incurred in the Plaintiff in constructing the instant building. During that process, the Plaintiff entered into a false construction contract form with the Nonparty company and received the processed purchase tax invoice and received the input tax deduction of value-added tax.

[Reasons for Recognition] Evidence Nos. 2 through 9, Evidence Nos. 31 and 32, the purport of the whole pleadings

(3) Determination

According to the above facts of recognition, the Central Tax Office, which conducted tax investigation with the Plaintiff, conducted a review of the acquisition cost incurred in the construction of the instant building in order to verify whether the transfer value of the instant real estate was appropriate. During that process, it is recognized that the Plaintiff and the non-party company met the processing transaction between the Plaintiff and the non-party company, such as the Plaintiff’s transfer of the money paid to the non-party company to the Plaintiff or his wife Non-party 1, and that the investigation on the suspicion of the omission of value-added tax during the construction of the instant building was commenced. Thus, this constitutes a case where the specific suspicion of tax evasion exists in any other taxable period, tax item or item, and Article 63-1(1)1 of the Enforcement Decree of the Framework Act on National Taxes and Article 81-9(1) of the same Act.

However, according to Article 81-9(2) of the Framework Act on National Taxes, where the scope of tax investigation is expanded, the reason and scope thereof must be notified in writing to the taxpayer. However, according to the above acknowledged facts, the mid-term regional tax office is recognized as having failed to notify the Plaintiff in writing, but such procedural illegality merely does not notify the Plaintiff of the extension of the scope of tax investigation, and it is difficult to view that such procedural illegality is so serious that the degree of illegality is so large that the taxpayer’s disposal is deemed unlawful.

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

C. As to the Exclusion Period and argument

(1) The plaintiff's assertion

According to Supreme Court Decision 2007Du16974 Decided December 24, 2009, when a taxpayer evades national taxes, or does not receive refund or deduction, even if he/she committed a fraudulent or other unlawful act, the exclusion period for imposition is five years since the input tax amount is not unfairly deducted, in cases where the output tax amount was processed along with the input tax amount, or where the actual cost is paid in lieu of the input tax amount.

In the case of the plaintiff, it was true that the non-party company prepared a contract document in the form of the non-party company and received a refund of the remainder except for the portion actually performing the construction work. However, the plaintiff actually paid the remainder of the construction work to the subcontractor company as the price for the construction work. In other words, the plaintiff did not receive an input tax deduction for the funds actually paid, but did not receive an unfair deduction of the tax amount because it did not receive an input tax deduction for the funds actually paid. Thus, the exclusion period for taxation is five years

Therefore, the disposition of this case is null and void after the expiration of the exclusion period of imposition.

(2) Determination

(A) In full view of the following circumstances, the Plaintiff’s assertion to the effect that the exclusion period of imposition is five years according to the above Supreme Court Decision and the legal principles are without merit.

① The above Supreme Court decision cited by the Plaintiff merely states that “In the event that an entrepreneur who supplies goods or services files a return on the tax base of value-added tax or the amount of tax payable or the amount of tax refundable based on the processing’s purchase tax invoice along with the processing sales tax invoice, the supply price on the processing’s sales tax invoice shall not be deemed to have established an abstract tax liability for the said portion as to the supply price of goods or services subject to value-added tax. Therefore, even if the input tax amount subject to deduction is processed, it shall be deemed that there was an evasion, unjust refund, or deduction of value-added tax in relation to the processing transaction only for the portion exceeding the output tax amount.” In calculating value-added tax, it cannot be deemed that there was a evasion, unjust refund, or deduction of value-added tax in the case where the input tax amount becomes zero in the form of “0” in the calculation of value-added tax

② In cases where the cost in lieu of the input tax amount has been actually submitted as alleged by the Plaintiff, it is deemed that the input tax amount has not been unfairly deducted, the purport of demanding the receipt of a tax invoice meeting legal requirements in order to obtain the deduction of the input tax amount under the Value-Added Tax Act, i.e., to force the performance of a duty to cooperate in the tax administration and impose sanctions on the neglect thereof, and the tax authority imposes an unreasonable burden on the person who actually

③ Inasmuch as the Plaintiff voluntarily recognized that the cost was less than the contract amount stipulated in the instant contract to construct the instant building, it cannot be deemed that there was no evasion of value-added tax related to the construction of the instant building (Evidence No. 10).

(B) Furthermore, under Article 26-2(1)1 of the Framework Act on National Taxes, where a taxpayer evades a national tax, obtains a refund or deduction by fraudulent or other unlawful means prescribed by Presidential Decree, national tax may be imposed for ten years from the date on which the relevant national tax can be imposed. According to Article 3(6)2 of the Punishment of Tax Evaders Act, “the preparation and receipt of false evidence or false documents” constitutes fraud or other unlawful acts. In fact, the Plaintiff prepared a false contract form different from the actual contract form under the agreement with the non-party company even though the Plaintiff directly subcontracted the construction of the instant building, and submitted it as documentary evidence at the time of filing the return of value-added tax. As such, the Plaintiff’s act constitutes a case where the value-added tax was refunded or deducted by fraudulent or other unlawful means.

(C) Therefore, the exclusion period of imposition against the plaintiff is ten years pursuant to Article 26-2 (1) 1 of the Framework Act on National Taxes. Thus, the plaintiff's assertion on this part is without merit.

3. Conclusion

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

[Attachment Form 5]

Judges Jinhee (Presiding Judge)