National High Court Decision 2009J1566 (Law No. 9.16, 2009)

It shall not be excluded from the tax base solely on the fact that service fees are separately entered in sales slips.

Service charges refer to the amount paid in cash directly by the customer to the employees who have actually provided the service or the amount of the service charges paid in addition to the service charges by the customer as the service charges, and then paid to the employees who have actually provided the service charges, and the payment of the service charges shall not be deemed to be the service charges.

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

1. The plaintiff's claim is dismissed.

2. The plaintiff shall bear the litigation costs.

The Defendant’s imposition of each of the dispositions listed in attached Form 1 against the Plaintiff on December 10, 2008 shall be revoked.

1. Details of the disposition;

A. From September 1, 2003, the Plaintiff is a business entity that operated an entertainment restaurant (hereinafter “instant business establishment”) under the trade name, i.e., ○○○○○-dong 534-2, ○○○○○-dong 534-2.

B. Around September 2008, the director of ○○ Regional Tax Office conducted a tax investigation on the instant place of business, and confirmed that the Plaintiff treated KRW 6,225,366,800 as the service fees for credit card sales slips and reported the omission from the income amount, and notified the Defendant as the taxation data.

C. The defendant confirmed that 6,587,773,800 won was excluded from the tax base of value-added tax and special consumption tax, based on the result of self-inspection of the amount falsely appropriated as service charges among the above taxation data notified on December 10, 2008 and the amount of entertainment and food costs in December 2004. The defendant notified the plaintiff of 836,601,830 won of value-added tax (from February 2, 2004 to July 2008), special consumption tax and individual consumption tax (from December 2004 to July 2008), 762,627,420 won of education tax (from July 2008 to July 2008), 196,510,570 won of value-added tax and special consumption tax (hereinafter referred to as "the disposition of this case").

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on March 9, 2009, but the Tax Tribunal dismissed the appeal on September 16, 2009.

[Ground of recognition] Evidence Nos. 1, 2, 3-1, 2, and 2-1, 2-2, and 2-1, and the purport of the whole pleadings

2. Whether the dispositions of the instant case are legal.

A. The plaintiff's principal

1) The entertainment workers employed at the instant workplace are independent business operators who are paid service charges from customers in return for attracting, managing, and providing services, such as mental care, not only the employees employed by the Plaintiff, and the Plaintiff received payment by separating and indicating service charges from the main agent and service charges, as well as business income tax on the service charges of the entertainment workers and paid to the tax authorities. As such, the amount of service charges paid to the entertainment employees should be excluded from the tax base of value-added tax, special consumption tax, etc., but the instant disposition of taxation based on the calculation of the tax base is unlawful.

2) During that period, the Plaintiff has withheld and paid business income tax on service charges from the contact employees working in the instant workplace, and the pertinent tax authority did not raise any objection to this, so the practice that the Plaintiff does not impose value-added tax and special consumption tax on the service charges of the contact employees was established. The instant disposition violates the non-taxation practice, the good faith principle, and the principle of no speech.

(b) Related statutes;

Attached Form 3 is as shown in the relevant statutes.

(c) Fact of recognition;

1) The Plaintiff is a business entity that operates the instant business in the instant place of business by providing customers with entertainment, place, liquor, etc. at the instant place of business, and by allowing guest employees to attract customers in the instant place of business and provide customers with various convenience.

2) The contact employees of the instant business place are in charge of the provision of alcoholic beverages to their customers with their own customers, the provision of Doing and other services. With respect to the customers who did not find a specific contact employee and found the instant business place, the contact employees provided the above services by the sequences.

3) The Plaintiff issued credit card sales slips, irrespective of the customer’s intent, to customers who pay by credit card, with separate main and service fees, and the ratio of salary feed compared to the sales on credit card sales slips (total principal and salary fees) was not fixed to 31.0% to 4.8% of sales (attached Form 2).

4) However, the note that the note that the Plaintiff kept and used in the instant workplace was written only by the State, and that the said note included service charges to the entertainment employees.

5) The contact employees at the instant workplace have been paid from the Plaintiff’s account manager the amount calculated by settling accounts after the closing of business hours each day under a prior agreement to receive an amount equivalent to 30% of the sales amount without receiving a separate fixed benefit from the Plaintiff.

6) From the first to the second period of 2008 ( July 2008), the amount that the Plaintiff did not report as the amount of service fees for credit card sales slips employees, out of the amount of income accrued from the business of the instant place of business, shall be as indicated in the column of service fees among the attached Form 2's sales and service fees details. The Plaintiff considered the amount equivalent to the above service fees as the business income of each of the relevant service employees, and paid the business income tax at the competent tax office through withholding at the competent tax office.

7) The Plaintiff has paid the service fees received from the relevant service employees directly to the relevant service employees and received the signature of the service fees payment ledger, and submitted the service fees ledger (Evidence A7) as evidence. However, there is no evidence to deem that the contents correspond to the amount of the service fees separately stated in the credit card sales slip, and there is no document to support that the contents correspond to the amount of the service fees separately stated in the credit card sales slip (Evidence A8), and there is no document to support that the relevant service employees received the service fees (only it is stated as a complex service fee).

8) According to the Plaintiff’s statement (Evidence B No. 1) written at the time of the above tax investigation with respect to the Plaintiff, the Plaintiff responded to the Defendant’s tax investigation in 2005 that “The amount of KRW 500 million was additionally collected as taxes on the excessive appropriation of service fees. However, as it is impossible to file a normal report in light of the operating circumstances of the business establishment, only the amount of service fees has been lowered and the amount of service fees has been appropriated.” The employer’s service fees are classified and settled according to the operating policy of the business establishment without the customer’s request or approval, and they are not the service fees received from the customer, but the amount received by the prior agreement between the business owner and the principal.”

[Ground of recognition] Unsatisfy, Gap evidence 6 through 8, Eul evidence 1 and 3, witness testimony and the purport of whole pleadings

D. Determination

(i)the first proposal;

A) Article 48(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 20929 of Jul. 24, 2008) provides that "the tax base under Article 13(1) of the Value-Added Tax Act includes all gold-on values, regardless of the pretext of the prices, charges, fees, and other services received from a transaction partner," and Article 13(9) of the same Act provides that "if a business operator provides food, accommodation services, or personal services, and the amount of service charges received by an employee (including free-time income earners) along with the price for the provision of the tax invoice, receipt, or credit card sales slip under Article 32-2 of the Act provides that "if it is confirmed that the service charges are paid to the relevant employee, it shall not be included in the tax base: Provided, That the same shall not apply to cases where a business operator separates his/her income from his/her service charges, regardless of the price for his/her service charges, the amount of his/her service charges shall not be included in the tax base.

According to the above provisions, if a business operator enters the credit card sales slip separately from the price for the service of his employee, and the service fee is not included in the tax base of value-added tax and special consumption tax (individual consumption tax), it shall be the amount paid by the customer separately from the price for the service of the business operator, with the intention that the customer would directly belong to the employee who provided the service, for intangible services, such as the speech, friendship, consideration, etc. of the employee who provided the service in connection with the service of the business operator, and the service fee must not be appropriated in his income, and the business operator must deliver the service fee to

B) In light of such legal principles, we will examine whether the instant service charges constitute “service charges of employees” excluded from the tax base of value-added tax and special consumption tax (individual consumption tax).

As seen earlier, the service fees are written separately from the sales slips issued at the instant workplace. However, such circumstance alone cannot be readily concluded as service fees for employees excluded from the tax base.

On the other hand, if the plaintiff does not have objective evidence to acknowledge that the amount stated as service charges on the above credit card sales slip was actually paid to the employee, it is difficult to consider that the plaintiff's testimony on the invoice (Evidence No. 4), Meet New Markets (Evidence No. 5-1 through 3), Meet No. 7, Meet 8 (Evidence No. 8), 7) and Meet Ga's testimony as stated above, as stated in the above Item B, 3, 7) and 8, as well as that there is considerable amount of tax for reasons of excessive payment of service charges in the tax investigation of 205, it is difficult to consider that the plaintiff's average service charges were paid to the employees of the above Meet 3 (No. 4) and other service charges, regardless of the amount equivalent to the service charges stated separately on the credit card sales slip, and that the plaintiff's above service charges were not included in the Meet 5's average service charges paid to the employees of the above Meet 4).

The entertainment workers of the instant workplace are not in the position of an independent business operator, and in substance, they are in the position of the Plaintiff’s employees, and the amount the Plaintiff paid to the entertainment workers is not the amount paid for the service provided by the entertainment workers, but rather the amount paid for the service provided by the entertainment workers, or was distributed profits based on the sales performance. Thus, it cannot be deemed as the “employee’s service fee” that is not included in the tax base of value-added tax and special consumption tax (individual consumption tax).

Therefore, the prior plaintiff's assertion on a different premise is without merit.

(ii) the second light judgment;

In order to establish a non-taxable practice under Article 18(3) of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010), there exists an objective fact that has not been imposed over a considerable period of time, and the tax authorities must be aware that they could impose taxes on the matter, and the above public opinion or intent should be expressed explicitly or implicitly, but in order to establish an implied expression, there must be circumstances that the tax authorities have expressed their intent not to impose taxes on the state of non-taxation for a considerable period of time, unlike a mere omission of taxation (see Supreme Court Decision 97Nu1065, Jan. 21, 200). The Plaintiff’s withholding and payment of income tax on the service charges of the contact employees from the contact employees, and the Defendant did not raise any objection thereto cannot be said to satisfy the above requirements, and rather, the Plaintiff’s assertion that this portion of the income tax was appropriated as the Plaintiff’s income tax in the Defendant’s 205 tax investigation.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.