National High Court Decision 2006J3852 (Law No. 27, 2007)

The initial date in calculation of additional dues due to the cancellation of imposition of revaluation tax;

Where corporate tax is imposed on revaluation marginal profits due to stock listing and the imposition disposition of revaluation tax is revoked, the initial date of additional dues on refund shall be deemed the day following the date of payment of revaluation tax.

The contents of the decision shall be the same as attached.

1. The Defendant’s disposition imposing additional dues of KRW 152,223,590 against the Plaintiff on August 14, 2006 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. Article 56-2 (1) of the Act on the Regulation of Tax Reduction and Exemption of Tax and the Act on the Regulation of Tax Reduction and Exemption of Tax and the Act on the Regulation of Tax Reduction and Exemption provides that when an enterprise is opened to the public in order to support the sound development of the capital market through the expansion of supply of superior stocks, re-evaluation under the same Act even if it does not meet the requirements for re-evaluation under the Assets Revaluation Act, and Article 56-2 (1) newly established after the amendment by Act No. 3939, Nov. 28, 1987, a corporation intends to list stocks for the first time at the Korea Stock Exchange under Article 8(1) of the Securities and Exchange Act may conduct re-evaluation under the Assets Revaluation Act on the first day of every month, notwithstanding the provisions of Articles 4 and 38 of the Assets Revaluation Act: Provided, That where a corporation which conducted re-evaluation fails to list stocks on the Korea Stock Exchange within 2 years from the date of re-evaluation, the re-evaluation already conducted shall not be deemed a re-evaluation under the Assets Revaluation under the Assets Revaluation Act.

B. The Plaintiff is an unlisted corporation established for the purpose of manufacturing and selling and importing asphalt and petroleum products and their subsidiary products, civil engineering, drying, packing, steel materials installation, dredging, landscaping construction business, etc., and as such, the former Tax Reduction and Exemption Control Act (Law No. 428, Dec. 31, 1990) providing for special cases concerning revaluation at the time of the disclosure of the company.

On January 1, 1990 on the premise that shares are listed in accordance with the provisions of Article 56-2 of the 4285 (amended by Act No. 4285; hereinafter the same shall apply), the assets were revaluated (hereinafter referred to as the "reassessment of this case") and the assets were reported to the defendant on March 30, 1990.

C. Around July 10, 1990, the Defendant applied Articles 9 and 12 of the Assets Revaluation Act (amended by Act No. 5531 of Apr. 10, 198), etc., and imposed revaluation tax of KRW 115,658,240 (hereinafter “instant disposition imposing revaluation tax”) on the Plaintiff at KRW 3,85,281,065 (hereinafter “instant revaluation spread”) (hereinafter “instant disposition imposing revaluation tax”), and the Plaintiff paid revaluation tax of this case at that time, while the Plaintiff did not add revaluation spread under the Assets Revaluation Act to gross income, to gross income pursuant to Article 15(1)5 of the former Corporate Tax Act.

D. After that, with the amendment of the former Regulation of Tax Reduction and Exemption Act, the Enforcement Decree thereof, and other relevant Acts and subordinate statutes that stipulate special cases concerning revaluation at the time of disclosure of a company, the listing period of the stocks last extended to December 31, 2003, but the Plaintiff did not list stocks by December 31, 2003 (hereinafter referred to as “stock listing”).

E. When the Plaintiff was unable to list shares by December 31, 2003, the listing deadline, the Plaintiff reported and paid KRW 434,422,273 as corporate tax for 1990 and defense tax for 1,737,769,093 as corporate tax for 1990 and corporate tax for 1,737,769,093 and defense tax for 434,422,273 as of December 30, 2003.

F. Accordingly, on January 17, 2004, the Defendant imposed an additional tax of KRW 1,935,746,080 on the corporate tax reported and paid by the Plaintiff as above, and KRW 57,829,210 on the defense tax. On the same day, the Plaintiff did not list shares by December 31, 2003, within the listing period, and thereby did not list shares by December 31, 2003 (Article 4285).

In accordance with the provisions of Article 23(1) of the Act and Article 138 of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17458, Dec. 31, 2001; hereinafter the same shall apply), the disposition imposing the revaluation tax of this case ex officio revocation of the disposition imposing the revaluation tax of this case, and refund of refund of 152,23,590 won for refund corresponding to the revaluated tax of this case paid by the Plaintiff and refund of refund of 152,23,590 won (hereinafter referred to as the "additional refund of this case") calculated from the day following the date of payment of the revaluated tax of this case.

G. On January 17, 2004, the Plaintiff filed a request for the revocation trial with the National Tax Tribunal on the grounds that the Defendant was dissatisfied with the disposition of imposition such as corporate tax, etc., and on April 29, 2005, the National Tax Tribunal rendered a decision to revoke the disposition of imposition of additional tax on the above corporate tax, etc.

H. Accordingly, on March 22, 2006, the Ministry of Finance and Economy enacted an established rule (tax policy-363) stating that where a corporate tax and additional dues on the refund of property revaluation tax already paid are closely related to the corporate tax in cases where a corporate tax is not imposed within the same period, the corporate tax and additional dues on the refund of property revaluation tax (tax policy-363) was not paid in cases where a corporate tax is not imposed within the same period. Based on this, the Defendant issued the instant disposition 1 on August 14, 2006.

I. On November 20, 2006, the Plaintiff filed an appeal with the National Tax Tribunal, but the National Tax Tribunal dismissed the Plaintiff’s appeal on July 27, 2007.

[Reasons for Recognition] The purport of the whole pleadings for evidence Nos. 1 through 4 in the absence of dispute

2. Whether the disposition is lawful;

A. The parties' assertion

1) Plaintiff

A) It is unreasonable to not pay additional dues on the ground that the assets revaluation tax and additional taxes are completely different from the legal nature and the grounds for imposition of corporate tax.

B) Also, for the following reasons, the initial date of the initial date of the refund in this case is the day following the payment date of revaluation tax in this case as stipulated in Article 52 Subparag. 1 of the Framework Act on National Taxes, and such other Defendant’s disposition

① Under the principle of strict interpretation under the tax law, the meaning of the "e.g., correction or cancellation of a declaration or imposition which served as the basis of the payment after the payment was made," under subparagraph 1 of Article 52 of the Framework Act on National Taxes, regardless of whether the cancellation was made by litigation or ex officio, applies regardless of whether there was an illegal cause at the time of the payment, or whether there was a cause attributable to the payer, or whether there was a cancellation or a cause attributable to the payer after the payment. However, as the refund of this case was made by ex officio revocation of the disposition of imposition of the revaluation tax of this case due to the later reasons for correction, which occurred after the payment of the revaluation tax of this case, the initial date of calculation of the refund of this case should be "the day following the payment date" under subparagraph 1 of Article 52 of the Framework Act on National Taxes.

② Even if Article 52 subparag. 1 of the Framework Act on National Taxes applies only to the cancellation of illegal payment, as alleged below, this case is a result of the Plaintiff’s failure to regard revaluation due to the Plaintiff’s stock listing as a revaluation under the Assets Revaluation Act, and the payment of the initial revaluation tax itself constitutes retroactively unlawful, and thus, Article 52 subparag. 1 of the Framework Act on National Taxes is still applicable (i.e., the payment of revaluation tax of the instant case may have its effect depending on the fulfillment of the condition of cancellation, which is stock listing, and thus cannot be deemed as a final and lawful payment).

2) Defendant

A) In a case where a revaluated tax amount paid is refunded while imposing the corporate tax, etc. reduced or exempted on the same asset revaluation difference, the corporate tax, etc. and the revaluation tax are closely related to each other. Thus, if the unpaid additional tax, etc. cannot be collected until December 31, 2003, it is natural that additional dues on refund should not be added for the period during which additional tax, such as corporate tax, is not collected even in cases where the revaluated tax amount already paid on the

B) Furthermore, the first Defendant’s payment of the refund surcharge on the date following the date of payment of revaluation tax of this case was erroneous for the following reasons, and thus, the instant disposition to correct it is lawful.

① The fundamental cause of the Defendant’s ex officio revocation of the disposition of revaluation tax of this case is due to the amendment of relevant Acts and subordinate statutes, such as the Act on Regulation of Tax Reduction and Exemption, which provides for special cases concerning revaluation at the time of disclosure. Since revaluation tax of assets ceases to be a taxable ground due to the amendment of relevant Acts and subordinate statutes, the national tax refund is either the “national tax refund by the amendment of Acts and subordinate statutes, which was duly paid” under Article 52 subparag. 5

② The first imposition disposition of revaluation tax of this case was lawful without any defects, and there was no reason to pay in addition to additional dues for refund calculated from the day after the date of payment of revaluation tax of this case, since the Defendant’s possession of revaluated tax paid until the Plaintiff’s stock listing had legal grounds for payment of national tax refund.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) As to the period in which the additional tax on corporate tax, etc. was not collected, whether additional dues for additional dues should not be added to the revaluation tax in the instant case

Under the tax law, where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, an additional tax is an administrative sanction imposed as prescribed by the law, and it is not possible to impose an additional tax on a taxpayer if there is a justifiable reason that it is unreasonable to expect the taxpayer to fulfill the obligation (see, e.g., Supreme Court Decision 2004Du930, Nov. 25, 2005). Meanwhile, additional tax is characterized by a legal interest on a refund having the nature of unjust enrichment by a tax authority (see, e.g., Supreme Court Decision 2001Da60767, Jan. 11, 202). Thus, it is different from each other’s legal nature. Thus, the Defendant cannot be said to be liable to pay the additional tax on a refund in this case solely on the ground that the Plaintiff did not collect an additional tax on the corporate tax, etc.

2) As to the occurrence and initial date of the refund of this case

A) According to the provisions of Articles 51(1) and 52 of the Framework Act on National Taxes and Article 30 of the Enforcement Decree of the same Act, the head of a tax office shall immediately determine the amount of national tax refund when a taxpayer erroneously paid, overpaid paid, paid, or refunded, out of the amount of national tax, additional dues, or expenses for disposition on default. In addition, the amount of erroneous payment is determined according to the statutory regular calculation date and interest rate, and the additional amount is to be added when a refund of national tax is appropriated or refunded. Here, the term “additional payment” refers to a return (in the case of a tax return) or a disposition on imposition (in the case of a tax assessment) which serves as the basis of the statutory due date and the fixed number of taxes is nonexistent or invalid, and the amount of excess payment means the amount of tax reduced wholly or partially by either the return or the disposition on imposition (in the case of a tax refund) which is not automatically null and void, or the amount of tax refund becomes final and conclusive at the time of tax return or other tax refund becomes final and conclusive under the law.

B) However, Article 52 of the Framework Act on National Taxes provides that the initial date of calculating the additional tax refund shall be the date following the date of payment, ① in case of a national tax refund due to erroneous payment, double payment, or correction or cancellation of a return or imposition that forms the basis of the payment, ② in case of a national tax refund due to the reduction or exemption of the national tax paid lawfully, the day following the date of determination (Article 3) in case of a national tax refund due to the amendment of the Act after lawful payment, ③ the day following the enforcement date of the Act in case of a national tax refund due to the amendment of the Act, ④ in case of a refund due to erroneous return or correction due to the income tax, the Corporate Tax Act, the Value-Added Tax Act, the Individual Consumption Tax Act, the Liquor Tax Act, or the Traffic, Energy and Environment Tax Act, and the day after 30 days from the date of report (if the date of report is before the statutory filing date, the statutory filing date in case of a refund of the amount of tax refund due to a decision made without filing the tax return).

C) Therefore, the initial date of calculating additional dues due to the revocation of the disposition of revaluation tax in this case shall be determined by any of the subparagraphs of Article 52 of the Framework Act on National Taxes, and it is reasonable to determine additional dues pursuant to Article 52 subparagraph 1 of the same Act for the following reasons.

① First, the revaluation of this case does not constitute a revaluation under the Assets Revaluation Act retroactively to the time of revaluation, even though it was not the act itself due to the Plaintiff’s stock listing, and as a result, the imposition of the revaluation tax of this case was deemed to be unlawful from the beginning. Since the Defendant revoked this ex officio on the same grounds, the national tax refund of this case constitutes “national tax refund due to correction or cancellation of the return or imposition, which served as the basis of the payment after the payment,” under Article 52 subparag. 1 of the Framework Act on National Taxes. This constitutes “national tax refund due to correction or cancellation of the return or imposition, which served as the basis of the payment after the payment” of the national tax refund as mentioned above. This is clear that the Plaintiff, after the Plaintiff’s stock listing, deemed the revaluation of this case as the gross income for 1990 business year when the revaluation was invalidated, not for 204 business years when the pertinent revaluation was invalidated, and it is apparent that the Defendant imposed penalty tax on

② As seen earlier, Article 52 of the Framework Act on National Taxes classifys the initial date of additional dues as five points. It is evident that the national tax refund of this case does not fall under refund due to reduction of or exemption from national taxes (Article 3) or refund due to correction (Article 6) or refund due to the source quota (Article 7) according to the filing of tax refund pursuant to individual Acts and subordinate statutes. Moreover, the national tax refund of this case is due to the Plaintiff’s failure to list stocks within the time limit prescribed by the relevant Acts and subordinate statutes, and it does not fall under subparagraph 5 (Article 56-2(1) of the former Regulation of Tax Reduction and Exemption Act and the Enforcement Decree thereof, even if the Plaintiff did not list stocks within two years from the revaluation date prescribed by the proviso of Article 56-2(1) of the former Regulation of Tax Reduction and Exemption Act, and thus, it cannot be deemed that the national tax refund of this case is due to the amendment of the relevant Acts and subordinate statutes).

③ As seen below, additional dues are corresponding to the additional dues collection system for taxpayers in arrears, as a system for compensating for the legal interest and amount equivalent to the national tax refund by the State. On the other hand, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, additional taxes under tax law are administrative sanctions imposed as prescribed by the Act, in principle, if a taxpayer violates all kinds of obligations, such as a return and tax payment, without justifiable grounds, it can be imposed if only the requirements for imposing additional taxes are satisfied, and no taxpayer’s intentional intent or negligence shall be considered separately. Provided, That Article 48(1) of the Framework Act on National Taxes amended by Act No. 8139 of Dec. 30, 2006, which provides that the latter part of Article 5 of the Enforcement Decree of the Framework Act on National Taxes provides that the relevant additional taxes shall not be imposed if there are justifiable grounds for the taxpayer’s failure to perform its obligations, and that it is unreasonable to expect the taxpayer to fulfill its obligations, and that it is unreasonable to impose additional taxes on the taxpayer by analogy 205.

④ Fourth, a national tax refund constitutes a “illegal enrichment” which is received or held by the State without any legal cause despite the absence of any tax liability from the beginning or the lapse of such tax liability, and additional dues on refund claims and obligations have the nature of legal interest rate (see, e.g., Supreme Court Decision 2001Da60767, Jan. 11, 2002). Therefore, according to the legislative theory, the initial date of national tax refund is otherwise determined depending on the good faith and bad faith of the State that is a beneficiary under the Civil Act, or cases where the tax authority is deemed to have a cause attributable to the taxpayer, such as foreign legislation cases, and where the taxpayer is deemed to have a cause attributable to the tax authority. In the former case, it is desirable that the tax authority should add additional dues on refund from the date following the date when the tax liability becomes known to the existence of the national tax refund. However, Article 52 subparag. 1 of the current Framework Act does not stipulate it separately. 52 of the Enforcement Decree of the Framework Act on National Taxes, even if the initial date of the National Tax refund was corrected or cancelled.

3) Ultimately, the instant disposition with a different purport is unlawful.

3. Conclusion

If so, the plaintiff's claim is reasonable and acceptable.