Heungjin Co., Ltd. (Law Firm Written, Attorney Lee Dong-chul, Counsel for defendant-appellant)

Head of Ulsan District Office

November 6, 2015

Ulsan District Court Decision 2014Guhap2236 Decided June 25, 2015

1. Revocation of the first instance judgment.

2. The Defendant’s disposition of imposition of KRW 46,913,310 in total, KRW 46,913,310 in the business year 2009 against the Plaintiff on July 1, 2014, KRW 3,546,180 in the business year 2010, and KRW 42,65,980 in the business year 201 is revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

The court's explanation on this part is the same as the corresponding part of the judgment of the court of first instance. Thus, it is accepted by Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. The legality of disposition.

A. The parties' assertion

(1) Defendant

The Plaintiff’s purchase of scrap metal constitutes a disguised tax invoice different from the fact, each of the instant tax invoices that the Plaintiff received from the purchaser of the instant scrap metal. As such, insofar as the Plaintiff received a disguised tax invoice while purchasing the actual scrap metal, and received unjustly an input tax deduction from the actual scrap metal, and as the Plaintiff did not receive evidentiary documents under each subparagraph of Article 116(2) of the Corporate Tax Act, or received a disguised tax invoice different from the fact from the actual trader, it is justifiable to impose an additional tax on the Defendant for lack of evidentiary evidence pursuant to Article 76(5) of the Corporate Tax Act.

(2) Plaintiff

The Plaintiff made a normal transaction with the purchaser of the instant case, and even if the purchaser of the instant case is so-called “data”, it is unlawful to impose additional tax on the Plaintiff, even though the Defendant did not disclose the actual transaction company.

B. Relevant statutes

Attached Form "Related Acts and subordinate statutes" shall be as stated.

C. Determination

(1) Article 76(5) of the former Corporate Tax Act (amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply) provides that where a corporation (excluding corporations prescribed by Presidential Decree) is supplied goods or services with an entrepreneur prescribed by Presidential Decree in connection with its business and fails to obtain evidentiary documents falling under any of the subparagraphs of Article 116(2) or receives false evidentiary documents, an amount calculated by adding an amount equivalent to 2/100 of the unpaid amount or the amount received differently from the fact (hereinafter “additional tax on evidence collection”) as corporate tax shall be collected, except for cases where the proviso to Article 116(2) of the former Corporate Tax Act is applicable; Article 116(2) of the former Corporate Tax Act provides that "tax on credit card sales slips and cash receipts under the Specialized Credit Financial Business Act; Article 16(3) of the Value-Added Tax Act; Article 121 and Article 163 of the former Enforcement Decree of the Corporate Tax Act shall be excluded from an entrepreneur prescribed by Presidential Decree No. 2516 of the same Act.

In light of the language and purport of the above related Acts and subordinate statutes, if an enterprise that supplies goods or services is not “a corporation, a businessman under the Value-Added Tax Act, a businessman under the Income Tax Act, or a businessman under the Income Tax Act, etc. as prescribed by the Presidential Decree”, a corporation that is supplied with goods or services may not impose an additional tax for receiving evidence under Article 76(5) of the former Corporate Tax Act. Whether an enterprise that supplies goods or services is a business under Article 76(5) of the former Corporate Tax

(2) However, in the instant case, the Defendant only submitted evidentiary materials to the effect that the instant purchaser is the data, and without specifying the actual trader that supplied the scrap metal to the Plaintiff, and in light of the general characteristics of the scrap metal transaction, the Plaintiff’s purchase of scrap metal, etc., it is argued that the actual trader is presumed to be a business entity as prescribed by the Presidential Decree under Article 76(5) of the former Corporate Tax Act. As examined below, it is difficult to view that the actual trader that supplied scrap metal to the Plaintiff solely on the grounds alleged by the Defendant is a business entity as prescribed by the Presidential Decree under Article 76(5) of the former Corporate Tax Act, and there is no other evidence to acknowledge this.

(A) According to Article 2(1)1 of the former Value-Added Tax Act, the Defendant: (a) a person who independently supplies goods for profit-making purposes constitutes a person who independently supplies goods; (b) a seller who actually supplies scrap metal to the Plaintiff falls under a wholesale business under the “standard expense rate and simple expense rate for 2011” book published by the National Tax Service; and (c) Article 25(1) proviso of the former Value-Added Tax Act (amended by Act No. 11873, Jun. 7, 2013; hereinafter the same shall apply); and (d) Article 74(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter the same shall apply); (c) a seller who supplies scrap metal to the Plaintiff may not be presumed to be a seller of goods for profit-making purposes in light of Article 120 and Article 158(1)2 of the former Enforcement Decree of the Corporate Tax Act. However, it is difficult to recognize that the Plaintiff’s simplified and simplified of the standard expense rate for 21.

(B) The Defendant also purchased scrap metal worth KRW 1.1 billion from approximately KRW 200 million, and in light of such transaction scale, the actual transaction entity that supplied scrap metal to the Plaintiff is presumed to be a business entity prescribed by the Presidential Decree under Article 76(5) of the former Corporate Tax Act. The Plaintiff purchased scrap metal worth KRW 1.1 billion from each of the purchase entities of this case as seen earlier. However, according to the Defendant’s assertion, each of the purchase entities of this case is limited to the so-called “data,” and each of the tax invoices of this case received from each of the purchase entities of this case cannot be inferred into actual transaction details or scale through each of the tax invoices of this case, ② The actual transaction details or scale through each of the tax invoices of this case cannot be inferred into the Plaintiff, and the Defendant’s assertion that each of the purchase entities of this case had purchased scrap metal worth KRW 1.5 billion from each of the purchase entities of this case cannot be seen to have been more than KRW 1.5 billion from each of the purchase entities of this case.

(C) Meanwhile, in light of the characteristics of scrap metal transactions, the possibility that a real trader that supplied scrap metal to the Plaintiff is an enterprise that has not been registered under the Value-Added Tax Act or the Income Tax Act may not be ruled out. In such cases, considering the following circumstances, it is reasonable to deem that such unregistered company does not constitute an “business entity prescribed by Presidential Decree” under Article 76(5) of the former Corporate Tax Act.

1) The Plaintiff, who is supplied with goods or services in connection with the business, shall receive documentary evidence under each subparagraph of Article 116(2) of the former Corporate Tax Act from “the person who actually conducted the transaction of supplying goods or services.”

2) However, Article 116(2)3 of the former Corporate Tax Act provides that "tax invoices under Article 16 of the Value-Added Tax Act" shall be deemed as supporting documents to be received. Article 16(1) of the former Value-Added Tax Act provides that a business operator registered as a person liable for tax payment shall issue a tax invoice, and the tax invoice issued shall stipulate that the business operator's registration number, name, or name, etc. shall be inevitably stated. Thus, the person liable to prepare and deliver a tax invoice under the Value-Added Tax Act shall be deemed as limited to a person registered as a business operator under the Value-Added Tax Act (see Supreme Court Decision 95Do100, Apr. 25, 1995). Therefore, it is difficult to view that a person who fails to make a business registration under the former Value-Added Tax

3) In addition, Article 116(2)4 of the former Corporate Tax Act provides, “Account under Article 121 of the Corporate Tax Act and Article 163 of the Income Tax Act” as documentary evidence to be received. Article 121 of the former Corporate Tax Act basically provides that where a “corporation” supplies goods or services, it shall issue an invoice or receipt as prescribed by the Presidential Decree. Article 163(1) of the former Income Tax Act provides that where a “business operator who has registered his/her business pursuant to Article 168 of the former Income Tax Act” supplies goods or services, he/she shall prepare and issue an invoice or receipt as prescribed by the Presidential Decree. Thus, if an actual business operator who supplied the Plaintiff with scrap metal fails to register his/her business pursuant to the former Income Tax Act, it is difficult to view that the actual business operator who supplied the Plaintiff constitutes a “business operator as prescribed by the Presidential Decree” under Article 76(5) of the former Corporate Tax Act

4) Article 116(2)1 and 2 of the former Corporate Tax Act provides credit card sales slips and cash receipts under the Specialized Credit Financial Business Act with documentary evidence to receive. However, in this case, there is no evidence to prove that actual traders who supplied scrap metal to the Plaintiff are credit card merchants under the Specialized Credit Financial Business Act, and that they are cash receipt merchants under Article 162-3 of the former Income Tax Act and Article 210-3 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 24638, Jun. 28, 2013).

(3) Ultimately, if the actual transaction company that supplied the Plaintiff with the scrap metal does not specify, it seems practically impossible to confirm whether the company is a “business entity prescribed by the Presidential Decree” under Article 76(5) of the former Corporate Tax Act, and it cannot be easily presumed that the actual transaction company that supplied the scrap metal to the Plaintiff solely on the grounds of some circumstances asserted by the Defendant is a “business entity prescribed by the Presidential Decree” under Article 76(5) of the former Corporate Tax Act. Thus, the instant disposition imposing the additional tax on the Plaintiff under the different premise is unlawful.

3. Conclusion

Therefore, the plaintiff's claim seeking the cancellation of the disposition of this case shall be accepted on the grounds of its reasoning, and the judgment of the court of first instance, which concluded differently, is unfair, and it is so decided as per Disposition with the cancellation and acceptance of the plaintiff

[Attachment Omission of Related Acts]

Judges Park Jae-soo (Presiding Judge)