Seoul Administrative Court-2015-Gu Partnership-75619 ( November 03, 2016)

A request for financial transaction information is difficult to be deemed to constitute a tax investigation.

The "request for the provision of financial transaction information" is difficult to be deemed to constitute a tax investigation, and the proposal for an unfair under-reported penalty tax cannot be deemed unlawful only with the prosecutor's non-prosecutions, as long as the degree or method of proof of criminal cases

Prior notice of tax investigation and application for postponement thereof under Article 81-7 of the Framework Act on National Taxes

2016Nu76079 Revocation of Disposition of Imposing capital gains tax

Plaintiff and Appellant

○ ○

Defendant, Appellant

○ Head of tax office

Seoul Administrative Court Decision 2015Guhap75619 decided November 3, 2016

March 7, 2017

April 4, 2017

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant's disposition of imposition of capital gains tax of KRW 2,126,54,470 (including additional tax of KRW 721,682,450) for the plaintiff on January 2, 2015 shall be revoked.

1. Quotation of judgment of the first instance;

The court's explanation on this case is consistent with the reasoning of the judgment of the court of first instance, except for dismissal or addition as follows. Thus, this court's explanation is accepted in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Parts to be removed or added;

○ On the 13th judgment of the first instance court, the 14th and 15th judgment are as follows.

The plaintiff asserts that the "request for the provision of transaction information to ask questions and investigate pursuant to tax-related laws" under Article 4 (1) 2 of the Act on Real Name Financial Transactions is limited to cases for tax investigation, and the actual purport of inquiry about transaction information is the same as the request for the submission of transaction information directly to the transaction party, and an investigation into a third party who is not the taxpayer is also included in a tax investigation. Thus, the defendant's request for the provision of transaction information of this case is a tax investigation.

Where all investigation conducted by a tax authority for the collection of taxation data or for the verification of accuracy of details of a tax investigation constitutes a tax investigation, the tax authority is bound to initiate a regular tax investigation in sufficient cases only with the mere fact-finding alone, and the taxpayer, etc. also ought to respond to an unnecessary and fixed tax investigation. As such, it does not constitute a tax investigation even if the taxpayer, etc. has no duty to answer or accept, and the taxpayer’s freedom of business is not infringed, or the right to conduct a tax investigation is not likely to be abused. Furthermore, whether an investigation conducted by a tax official constitutes a tax investigation shall be determined individually in a specific case by comprehensively taking into account the purpose and process of the investigation, the object and method of the investigation, the materials obtained through the investigation, the scale and period of the investigation, etc. (see Supreme Court Decision 2014Du8360, Mar. 1

Article 81-2 (2) 1 of the Framework Act on National Taxes, Article 170 of the former Income Tax Act, Article 122 of the Corporate Tax Act, and Article 74 of the Value-Added Tax Act provide that in order to determine or correct the tax base and amount of tax, the tax investigation is ① to ask questions to taxpayers or their related persons, ③ to inspect, investigate, or submit books or documents they hold. Furthermore, Article 4 (1) 2 of the Act on Real Name Financial Transactions provides that the provision of financial transaction information which is allowed to be provided to the head of the relevant agency is "transaction information, etc. necessary for questioning and investigation in accordance with the tax law" and provides that the provision of financial transaction information in this case is not itself an exercise of the right

The request for the provision of financial transaction information to financial institutions does not fall under questioning taxpayers or their related persons or ordering them to inspect, investigate, or submit their books, etc., and does not directly affect taxpayers' rights and obligations by imposing upon taxpayers the obligation of acceptance or infringing on taxpayers' freedom of business operation. Therefore, the substance of the request for financial transaction information to financial institutions cannot be deemed the same as the request for the submission of data to taxpayers, etc... Meanwhile, in conducting tax investigations under individual tax laws, it is necessary to faithfully prepare for a limited period of time in order to ensure effectiveness of tax investigations. Therefore, there is a reasonable reason to allow the request for financial transaction information as a preparation for tax investigations.

Therefore, since the request for financial transaction information made by the head of the competent government office pursuant to Article 4 (1) 2 of the Act on Real Name Financial Transactions cannot be deemed as a tax investigation, it cannot be uniformly applied the regulation of Articles 81-7 (1) and 81-8 (1) of the Framework Act on National Taxes. In this case, the defendant's request for financial transaction information made by the defendant in this case is sufficient to collect data on lease income of the real estate of this case or actual residence of the plaintiff, and it does not go to the collection of data that can promptly determine the tax base and tax amount, and it does not go to the substance of the preparation act for tax investigation. Ultimately, this part of the plaintiff's assertion on the premise that Articles 81-7 (1) and 81-8 (1) of the Framework Act on National Taxes

○ On the 14th judgment of the first instance court, the following shall be added to the third:

The Plaintiff also raises a problem that the Defendant’s request for financial transaction information from September 30, 2014 was sent to the computer room (business support center) of the financial institution. In order to facilitate the provision of each store’s financial transaction information, some financial institutions have established a business support center separately under their jurisdiction and have them take charge of the affairs of financial transaction information, and even in such case, they reply only to a specific store’s transaction information as stated in the inquiry document, as stated in the inquiry document. In fact, in light of the data on the reply of financial transaction information of the instant bank, the Plaintiff stated that “the details of the account transaction in the name of the bank designated as the specific recipient (○○ bank’s central branch) specified in the above request for financial transaction information were inquired” (the Plaintiff’s aforementioned assertion is without merit.

○ In Part 15 of the first instance judgment, the following shall be added to the following:

The plaintiff asserts that the defendant's request for financial transaction information seriously violated the Real Name Financial Transactions Act, and that the tax investigation based on this is also illegal, so the disposition of this case cannot be exempted.

Since taxation is based on the existence of tax base, its propriety should be determined by the existence of objective taxation requirements in principle, and even if there is any illegality in the tax investigation procedures, it does not constitute grounds for revocation of taxation unless it is serious, such as where it was conducted at all by investigation or where it was collected data that form the basis for taxation by fraud or coercion, etc. (see Supreme Court Decisions 2009Du2580, Apr. 23, 2009; 2007Nu34707, Dec. 19, 2008).

The instant disposition is basically based on the statements made by the relevant persons and objective evidence secured in the course of the tax investigation. The Defendant’s request for financial transaction information is merely a supplement to confirm whether the Plaintiff reported that the instant real estate constitutes one house for one household, and thus, it was possible to impose the same disposition as the instant disposition even if excluded. In addition, despite the mistake that the Defendant stated “the purpose of use” as “the inheritance tax investigation” on the “purpose of use of the written request for financial transaction information,” the “legal basis” only includes the “Article 4(1)2 of the Act on Real Name Financial Transactions and Guarantee of Secrecy,” and the “Article 83 of the Inheritance Tax and Gift Tax Act” is not stated in the “Article 4(1)2 of the Act on Real Name Financial Transactions and Guarantee of Secrecy,” and in fact, it appears that the request for financial transaction information to a specific store, which is not the head office, was made only by such materials. Therefore, even if there is such procedural defect in the Defendant’s request for financial transaction information, it cannot be deemed that the Defendant’s tax investigation itself is unlawful due to such defect.

○ The following is added to the fact that the period of tax investigation was extended on No. 16, 13, the first instance court ruling.

[1] On October 24, 2014, the Defendant sent e-mail questions to △△ Co., Ltd., the purchaser of the instant real estate. On October 29, 2014, the Defendant was unable to receive the response until around the time when he notified the extension of the tax investigation period to the Plaintiff, and the Defendant sent a written statement (Evidence No. 9) to October 29, 2014.

○ The following is added to the fact that the last 17th judgment of the first instance court was made by actively false statements.

(5) The real estate of this case has been used for a long time as a commercial building, and the lease business itself in the real estate of this case was comprehensively transferred to △△△, a purchaser of the real estate of this case (Evidence No. 14-1), but the real estate of this case was prepared as a "single Housing Sales Contract (Evidence No. 14-2)" on July 22, 2013 as if it falls under a housing. 6. The Plaintiff reported the final return of value-added tax for a period of February 2013 at the time of the transfer of the real estate of this case, stating that the area of the lease in the specification of real estate rent was reduced to the first floor (Evidence No. 9-1), 7. The Plaintiff did not take a non-prosecution disposition as to the suspicion of evading the transfer income tax of this case (Evidence No. 13 and 14). However, this is merely the prosecutor's decision that the Plaintiff's act is not subject to criminal punishment, and as long as the degree and method of proof of administrative cases or any other additional tax is unlawful."

3. Conclusion

Therefore, the judgment of the first instance court is justifiable, and the plaintiff's appeal is dismissed as it is without merit.