Seocho 2012west 1202 (Law No. 105.04)

It is difficult to deem that the payment of personnel expenses is actually made due to the plaintiff's burden of proof and due to various circumstances.

Whether or not to pay personnel expenses claimed to have been omitted at the initial time should be proved by the plaintiffs, but it is legitimate to impose the initial tax due to the lack of evidence and circumstances that the personnel expenses were actually paid

2011Guhap26015 Revocation of Disposition of Imposing global income tax

ParkA et al.

The head of Yangcheon Tax Office

April 3, 2012

April 26, 2012

1. All of the plaintiffs' claims are dismissed.

2. The costs of lawsuit are assessed against the plaintiffs.

The Defendant’s imposition of global income tax of KRW 000 on December 21, 2010 and KRW 000 on the global income tax of KRW 000 on December 200 and KRW 000 on the global income tax of KRW 200 on Plaintiff EE for December 21, 200.

1. Details of the disposition;

A. Plaintiff Park Jong-A operated the restaurant (hereinafter “instant restaurant”) in the name of “DDD” from May 1, 2002 to July 5, 2007, the Yangcheon-gu Seoul OO-dong 000 OA, and Plaintiff EE operated the instant restaurant from July 6, 2007 to the same place.

B. In the first taxable period of the value-added tax in 2007, Plaintiff Park Jong-A received a tax invoice that causes 000 won of the value of supply from the FF Alcoholic Alcoholic Beverages Co., Ltd. (hereinafter “FF Alcoholic Beverages”), and filed a comprehensive income tax return for the year 2007, by including the said amount in the necessary expenses.

C. In 2007, Plaintiff EE received a tax invoice that causes 000 supply value from FF alcoholic beverages during the 2nd taxable period of the value-added tax, and included the said amount in the necessary expenses, and filed a comprehensive income tax return for the year 2007.

D. On March 2, 2010, the Defendant: (a) deducted the input tax amount of value-added tax on the grounds that each of the said tax invoices was received without a real transaction; and (b) subsequently corrected and notified Plaintiff GambA of KRW 000 for the first quarter of 2007; and (c) KRW 000 for the second quarter of 2007 to Plaintiff EE.

E. On July 15, 2010, Plaintiff Park Jong-A included KRW 000 as the personnel expenses omitted at the initial return instead of excluding KRW 000 as the value of supply under the said tax invoice from necessary expenses (hereinafter “instant personnel expenses”) in the necessary expenses, and filed a revised return on global income tax for the year 2007.

F. On July 15, 2010, Plaintiff EE included KRW 000 as the personnel expenses omitted at the initial declaration instead of excluding KRW 000 as necessary expenses under the above tax invoice (hereinafter “instant 2 personnel expenses”), and revised the global income tax return for the year 2007 by including the instant 1 and 2 personnel expenses in the necessary expenses (hereinafter “the instant personnel expenses”).

G. On December 21, 2010, the Defendant denied all of the instant personnel expenses for which the Plaintiffs filed a revised report on December 21, 2010, on the grounds that there is no objective evidence that the Plaintiffs deemed necessary expenses, and imposed KRW 000 of the global income tax for the Plaintiff Park Jong-A in 2007 (hereinafter “instant Disposition 1”) and KRW 000 of the global income tax for the Plaintiff EE in 207 (hereinafter “instant Disposition 2,” and combined the instant Disposition 1 and 2.

H. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on March 18, 201, but the latter dismissed all of them on May 4, 2011.

[Reasons for Recognition] Each entry of Gap evidence 7, 8, Eul evidence 1, 2, and 3 (including numbers, hereinafter the same shall apply) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

The Plaintiffs did not appropriate the instant personnel expenses paid in cash to employees at the time when they initially reported the general income tax attributed to year 2007. The instant personnel expenses are unlawful on the ground that there was no objective evidence, notwithstanding that the instant personnel expenses were actually paid to run the business.

B. Relevant statutes

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

C. Facts of recognition

1) At the time of filing a global income tax return for the year 2007, the Plaintiff Park Jong-A included KRW 000 as personnel expenses in the income statement accrued to the year 2007, and submitted a report on the performance of withholding taxes and a statement on the payment of daily earned income.

2) Plaintiff EE filed a return on the total income tax attributed to year 2007 by means of a simple book, including 000 won in the necessary expenses statement as personnel expenses, and submitted a report on the status of withholding tax and a statement on the payment of daily earned income.

3) At the time of filing the global income tax return for the initial year 2007, the Plaintiffs did not include the instant personnel expenses other than the personnel expenses reported as necessary expenses, and did not submit evidentiary documents, such as the report on the performance of withholding taxes and the statement on payment of daily earned income

4) After July 15, 2010, the Plaintiffs included the instant personnel expenses as the personnel expenses omitted from the initial return at the time of filing a revised return on global income tax for the year 2007, and submitted only the supplementary details of the daily worker’s work (Evidence A A1 and 4) related thereto. However, the Plaintiffs did not submit the original market register (employment-related documents, work log, receipt of personnel expenses and payment evidence, etc.) concerning the details of withholding tax on earned income or the details of the wage and salary income and the payment of wages.

5) During the instant lawsuit, the Plaintiffs submitted a written confirmation (Evidence A No. 3, 6, and 9) under the name of Park GG and four other persons, which are indicated in the details of addition to the daily work in question.

[Grounds for recognition] Gap evidence Nos. 1, 3, 4, 6, 9, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

D. Determination

In a lawsuit seeking revocation on the grounds of illegality of taxation, the tax authority bears the burden of proving the legality of disposition and the existence of taxation requirements. Therefore, in principle, the tax authority bears the burden of proving the amount of expenses to be included in the necessary expenses which are the basis of establishing income tax base. However, in a case where the taxpayer claims that some of the expenses reported are false or that the reported amount is false, or that the taxpayer himself/herself bears other expenses equivalent to the same amount, the taxpayer needs to prove the existence and amount of such other expenses (see, e.g., Supreme Court Decisions 94Nu5816, Oct. 28, 1994; 96Nu8192, Sept. 26, 1997). In light of the aforementioned legal principles, it is difficult to view that the Plaintiffs had already submitted additional documents concerning the labor cost of daily workers and the amount of additional documents concerning the labor cost of KRW 160,000,000, and there is no specific evidence that the Plaintiffs had already been submitted during the aforementioned period of time when they were reported.

3. Conclusion

The plaintiffs' claims are dismissed for lack of reasonable grounds.