There is no evidence to recognize that there was an actual payment, such as the fact that service charges are not separately separated from credit card sales slip.

It is insufficient to recognize that the service fee was paid in full view of the fact that the credit card sales slip did not separately state the service fee separately, that part of the female employees asserted that the service fee was paid while serving in the Plaintiff’s entertainment tavern, and that the female employees did not submit a written confirmation of the fact that the service fee was paid, and that there is no evidence to acknowledge that there was no evidence.

2011Guhap6776 global income and revocation of disposition

Shin XX

Head of Eastern Tax Office

June 14, 2011

July 14, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of global income tax of KRW 104,450,180 for the Plaintiff on September 1, 2009 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a business proprietor who runs respectively the entertainment tavern’s entertainment tavern’s business under the trade name, i.e., “ XXbe” on the 0th floor of the building located in Jongno-gu Seoul Metropolitan Government 00, and “OO main store on the 2nd floor of the building” (hereinafter “instant entertainment tavern”). The Plaintiff reported the global income tax base for the entertainment tavern’s global income tax for 2007 and reported the total amount of income to KRW 1,133,610,562 (6,80,000,000,000), necessary expenses to KRW 1,06,878,899 (the necessary expenses for the instant entertainment tavern) on the 00th floor of the building.

B. On March 25, 2009, the Defendant: (a) investigated the appropriateness of the Plaintiff’s report on simple book keeping in accordance with the guidelines for inspection of persons subject to simple book keeping by the director of the Seoul Regional Tax Office; (b) denied the Plaintiff’s return of KRW 241,515,591, out of the amount reported as necessary expenses (other expenses) for the entertainment tavern of this case; and (c) notified the Plaintiff of the rectification and notification of KRW 122,68,830, global income tax for the year 2007, on the ground that the objective disbursement was not verified (hereinafter “the initial disposition”).

C. On December 10, 2009, the Plaintiff appealed against the original disposition and filed an objection with the Defendant. On December 14, 2009, the Defendant recognized KRW 33,945,591, which the Plaintiff paid with credit card fees, etc., as necessary expenses, among the necessary expenses denied as above, and corrected the Plaintiff’s total income tax for the year 2007 by reducing the amount to KRW 104,450,180 (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on February 26, 2010, but the Tax Tribunal dismissed the Plaintiff’s appeal on November 25, 2010.

[Ground of recognition] Facts without dispute, Gap 1, 5, 6 evidence, Eul 1, 2, 3, 7, 8 evidence (including additional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the instant entertainment drinking house is a place of business for entertainment drinking house business with entertainment entertainment reception workers, a service fee for female workers who are entertainment entertainment entertainment entertainment entertainment entertainment workers occurs inevitably, and even if the Plaintiff had a considerable number of female employees as entertainment reception workers due to the name of the employee of the instant entertainment drinking house that should be kept and managed in accordance with the Enforcement Rule of the Food Sanitation Act, it is confirmed that the Plaintiff had a considerable number of female employees as entertainment reception workers, and the instant disposition that denied necessary expenses for the instant entertainment drinking house industry is unlawful, since it was reported to the head of the competent tax office on the fee (service fee) paid to female employees (hereinafter “service fee”).

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) At the time of 2007, six of the female employees claimed by the Plaintiff to have worked in the instant entertainment tavern (MA, OB, OB, ECC, ParkD, ME, and MMF) had worked for other business establishments, other than the instant entertainment tavern, (Yel, △△, △△, Y, K, △△△, and MF) (the employer of the foregoing business reported the current status of withholding income tax on service charges paid to the said six persons in 2007, and the Plaintiff’s entertainment entertainment bars operated separately from the instant entertainment tavern).

2) Of the sales revenue of the instant entertainment tavern in 2007, the credit card sales ratio was approximately KRW 96.7%, and the Plaintiff did not separately state service charges on the credit jet sales table.

3) In 2007, the Plaintiff did not file a report on the performance of withholding taxes on service fees paid to the female employees framework of the instant entertainment drinking club. On or around March 2009, the Plaintiff filed a report en bloc on September 28, 2009, after receiving a request from the Defendant for submission of account books and documentary evidence related to the report of simple books. Meanwhile, the Plaintiff did not pay the withheld income tax reported as above. On the other hand, on November 6, 2009, the head of the Sejong District Tax Office, the head of the district tax office having jurisdiction over the instant entertainment place, issued a notice of payment of the said income tax on the Plaintiff.

Facts that there is no dispute over the basis of recognition, Gap evidence 5, Eul evidence 4 and 8, and the purport of the whole pleadings

D. Determination

1) In the administrative litigation seeking the revocation of a taxation disposition on the ground of its illegality, in principle, the tax authority bears the burden of proving the legality of the taxation disposition and the existence of the taxation requirements. Therefore, in principle, the tax authority bears the burden of proving necessary expenses, which are the basis of the determination of taxable income. However, the deduction of necessary expenses is not only favorable to the taxpayer, but most of the facts that are the basis of necessary expenses are located within the control area of the taxpayer and thus the tax authority is difficult to prove. Thus, if it is reasonable to have the taxpayer prove the burden by taking into account the difficulty of proof or the equity between the parties concerned, the need for proof should be returned to the taxpayer (see, e.g., Supreme Court Decisions 94Nu3407, Jul. 14, 1995; 2005Du647, Apr. 14, 2005).

2) In full view of the following circumstances, the Defendant’s disposition denying that the instant service fee was included in the expense of the entertainment tavern in the instant case is lawful, and the Plaintiff’s assertion is without merit.

A) Article 19(2) of the former Income Tax Act (amended by Act No. 8825, Dec. 31, 2007; hereinafter the same) provides that business income shall be the amount obtained by deducting the necessary expenses required therefor from the total amount of income during the pertinent business year. Thus, in order for the instant service fees to be deemed necessary expenses, the instant service fees should be premised on the fact that the instant service fees are included in the income amount from the business of the instant entertainment tavern business. However, it is unclear whether the Plaintiff reported the total amount of income for 2007 years including the instant service fees, as the Plaintiff did not separate service fees from the credit card sales slip for the instant entertainment

B) The Plaintiff included the instant service charges in the amount of credit bar sales slip for entertainment tavern business. The Plaintiff deemed that the amount of the instant service charges constitutes subject to withholding under Article 127(1)7 of the former Income Tax Act. However, under Article 184-2 of the former Enforcement Decree of the Income Tax Act (amended by the Presidential Decree No. 20516, Dec. 31, 2007), the amount of the service charges subject to withholding is that the Plaintiff did not receive the service charges separately from the amount of the said service charges, and the Plaintiff did not receive the service charges separately from the amount of the service charges for entertainment tavern business under Article 1(4) of the Special Consumption Tax Act (amended by the Individual Consumption Tax Act, Act No. 829, Dec. 31, 2007. The Plaintiff stated that the Plaintiff did not receive the service charges separately from the amount of the service charges for those employees who provided the service under Article 35 subparag. 1 of the Enforcement Decree of the Value-Added Tax Act.

3. Conclusion

The plaintiff's claim is dismissed on the ground that it is without merit.