Seoul High Court 2011Nu13134 (Law No. 10, 2012)

National High Court Decision 2006No3913 (Law No. 14, 2007)

If it is proved that the facts can be inferred in light of the empirical rule in specific litigation process, the taxpayer has the burden of proof.

Generally, the burden of proving the facts of taxation requirements is a taxable person in a lawsuit seeking revocation of a tax disposition, but if it is proved that the facts can be inferred in light of the empirical rule in the course of a specific lawsuit, the taxpayer cannot be subject to the empirical rule, or in the case in question, the taxpayer must prove that there are special circumstances to exclude the application of such empirical rule.

Article 15 of the Framework Act on National Taxes

2012du667 Such disposition as rectification of value-added tax, etc.

AAice Corporation

Head of the tax office;

Seoul High Court Decision 2011Nu13134 Decided February 10, 2012

April 25, 2013

The part against the defendant is reversed, and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined.

1. In a series of continuous transactions, where a malicious entrepreneur in bad faith created profits only through the method of evading value-added tax and does not evade value-added tax from the beginning, and where he/she does not pay the value-added tax collected, if he/she does not pay the value-added tax, the country is bound to pay the input tax without the burden of the output tax, such as the exporter in the subsequent transaction, and if the exporter does not pay the value-added tax, the country is bound to pay the input tax without the burden of the output tax amount. This constitutes an active outflow of the national treasury beyond the passive tax revenue gap, and thus, the burden exceeds the damage of the value-added tax system itself, thereby causing serious harm to the overall tax system. Accordingly, where an exporter in the subsequent transaction stage is in a specific public contest or an accomplice relationship with the malicious entrepreneur, or where the exporter did not know such illegal transaction due to gross negligence, the exporter’s seeking the deduction of the input tax amount and the refund of the input tax amount is contrary to the principle of good faith and good faith as stipulated in Article 15(14.201).

2. According to the reasoning of the judgment below, the court below rejected the plaintiff's assertion that DD funds and HH funds were owned by large amounts of gold bullion, other than those purchased from BBB Gad Co., Ltd. or CCC, connected with so-called bB Gad Co., Ltd. or CCC, and were sold large amounts of gold bullion to sales places other than the plaintiff. Further, DD funds purchased gold bullion from EE refining Co., Ltd or FF Gabu Co., Ltd., and they were included in gold bullion purchased from EE refining Co., Ltd. among gold bullion exported by the plaintiff, and it cannot be concluded that the gold bullion purchased from the plaintiff was made through the above intermediate taxation. In light of the above facts, it cannot be concluded that the plaintiff's purchase price deduction and refund from the plaintiff was not known or there was no gross negligence that the plaintiff did not know that there was a malicious business operator who makes fraudulent transactions for the purpose of evading the output tax amount in the process of trade prior to the export of the gold bullion of this case, and that it violated the principle of good faith.

3. However, the lower court’s determination is difficult to accept.

A. Generally, in a lawsuit seeking the revocation of a taxation disposition, the burden of proving the facts of taxation requirements is against the person liable to taxation, but if it is proved that the facts of taxation requirements can be inferred in light of the empirical rule in the course of specific litigation, the other party to the taxation disposition cannot be readily concluded to be illegal disposition that failed to meet the pertinent taxation requirements, unless it proves that the pertinent facts of taxation are not subject to the empirical rule, or that there are special circumstances to avoid the application of such empirical rule (see, e.g., Supreme Court Decisions 2006Du6383, Sept. 22, 2006; 2006Du13831, May 29, 2008).

B. Review of the reasoning of the lower judgment and the evidence duly admitted reveals the following circumstances.

① At the time of the Plaintiff’s trading of the instant gold bullion, gold bullion was imported through abuse of the value-added tax or zero tax exemption system among precious metal companies located in Seoul, and distributed them through various stages of zero tax or zero tax exemption. After converting it into the so-called “tax amount”, the Plaintiff exported the gold bullion and then distributes it to the so-called “tax amount” through various stages of wholesalers, and then the exporter did not pay the value-added tax and the exporter did not pay the value-added tax but paid the value-added tax.

② The Plaintiff’s purchase and sale office of this case purchased a large amount of gold bullion through a typical boming coal company, such as Co., Ltd. II trade, J trade and KJD, and KHD. The Plaintiff’s purchase and sale office of this case was punished by imprisonment with prison labor for five years and by a fine of 150 billion won, or by a fine of 15 billion won for a suspension of execution and a fine of 15 billion won on June 2, 2000, on the ground that the actual operators of the stock company or HH had evaded value-added tax through gold bullion trade through such a boming company.

③ The Plaintiff’s representative director’s LL had not engaged in the business related to the export of gold bullion before establishing the Plaintiff Company. The Plaintiff traded gold bullion equivalent to the total amount of KRW 000 from July 11, 2003 to November 11, 2004. The Plaintiff exported the purchased gold bullion to the company of MF and NNNA located in Hong Kong on or after the date of initial import as a substitute or 2,3 days after the date of initial import, or after the date of initial import, and the Seoul Regional Tax Office’s investigation, the LL obtained contact details or method with MFD and did not prepare the contract at that time. After the confirmation of the purchase intention, the Plaintiff purchased gold bullion in the Republic of Korea and conducted the first transaction. After that fact, the Plaintiff did not receive a separate refund from the airport in the process of the transaction, but did not receive a separate refund from the airport.

④ After indicating the intention to purchase gold bullion in the instant purchase transaction office, the Plaintiff had been aware of the intention to purchase the gold bullion, and the purchased gold bullion was transferred to the airport immediately without entering the Plaintiff’s place of business. There were many cases where gold bullion is transferred to the airport without entering into the Plaintiff’s place of business. The Plaintiff did not have any record to confirm it in the process of purchasing and exporting gold bullion, and exported gold bullion at the price lower than the HH market price on the date of export.

⑤ If only several days of the transaction volume on the day at issue, it seems difficult for the Plaintiff to readily conclude that the gold bullion purchased from the Company or the Company had gone through the intermediate taxation from the Company of Exposure. However, in light of such a total transaction volume and flow, the Company BBB CCC supplied gold bullion amounting to KRW 000 to the Company. The Company supplied gold bullion amounting to KRW 000. The Company supplied the Plaintiff with gold bullion amounting to KRW 000. The Company supplied the amount equivalent to KRW 000 to the Plaintiff. The Company supplied the amount of gold bullion amounting to KRW 000 directly or through the intermediate taxation by the Company of breadth. The Company supplied the Plaintiff with gold bullion amounting to KRW 000,00,000, and HH gold bullion supplied some gold bullion amounting to KRW 00,000 to the Plaintiff. In view of the Company and its size, it appears that the Company and the Company supplied the Plaintiff with gold bullion amounting to KRW 00.

Luxembourg Also, DDR Co., Ltd. was supplied with 21k gold bullion as tax-free goods by the EE refining Co., Ltd. on July 1, 2003, and the FG refining Co., Ltd. was supplied with 14 July 2003 and 10kg on July 31, 2003 respectively as tax-free goods. On the other hand, the Plaintiff’s 20k-g and 10k-g of export declaration form as of March 18, 2004, and the Plaintiff’s 20k-free gold bullion exporter Co., Ltd. was not aware of or was not aware of the fact that there were 1.0k-free gold bullion exporter Co., Ltd. at the time of the above trade., Ltd.’s trade or 20k-free gold bullion export declaration form, and the Plaintiff’s 20k-free gold bullion exporter Co., Ltd. was not aware of the fact that it was no more than 10k-free gold bullion exporter’s trade declaration form.

4. Therefore, the part of the judgment below against the defendant is reversed, and that part of the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.