Seoul Administrative Court 201Guhap6776 ( October 14, 2011)

Seocho 2010west 1674 ( November 25, 2010)

In case of credit card sales, it is difficult to consider that the service charges were not separately stated, and that the service charges were included in the gross income.

It is difficult to regard that the service charges or service charges are not stated separately from the value of supply in credit card sales slip, and the customer may directly pay to female employees. It is difficult to deem that the total amount of the service charges in 2007 confirmed by the credit card sales slip includes the service charges or service charges to female employees.

2011Nu27621 Revocation of the imposition of global income tax

Shin XX

Head of Eastern Tax Office

Seoul Administrative Court Decision 2011Guhap6776 decided July 14, 2011

July 10, 2012

August 17, 2012

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 KRW 000 on September 1, 2009 against the Plaintiff on September 1, 2009 is revoked.

1. Global income tax:

The following facts are acknowledged in light of the overall purport of the arguments in Gap evidence Nos. 1, 3 through 7, 12, Eul evidence Nos. 1 through 3, 7, and 8 (including paper numbers):

[1]

0 The plaintiff operated respectively an entertainment tavern with the mutual key point(f) of 'xx' on the 1st floor of the building located in Jongno-gu Seoul Metropolitan City, Jongno-gu 88, and 'OO' on the 2nd floor of the above building(hereinafter referred to as the "the entertainment tavern of this case'), and a mutual entertainment tavern of 'Ynoo' on the 1st floor of the building located in the same 92nd floor.

0 The Plaintiff reported the global income tax base for 2007, and reported the gross income amount to 000 won (000 won for the total income of the instant entertainment tavern) and necessary expenses to 000 won (00 won for the necessary expenses of the instant entertainment tavern).

[2]

0 The Defendant, on September 25, 2009, notified the Plaintiff of KRW 000 global income tax amounting to 2007, on the ground that the Plaintiff’s 00 won, which was reported as necessary expenses for the entertainment tavern of this case, was not verified objectively, and that it did not recognize it as necessary expenses and notified the Plaintiff of KRW 000 global income tax amounting to 2007 (hereinafter “the first disposition”).

0 The plaintiff raised an objection against the original disposition on December 10, 2009 to the defendant.

O The Defendant, on December 14, 2009, recognized necessary expenses not recognized as above, KRW 000,000 paid by credit card commission, etc. as necessary expenses, and corrected the Plaintiff’s comprehensive income tax attributed to 2007 as KRW 000 (hereinafter “instant disposition”).

0. On February 26, 2010, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but the appeal was dismissed on November 25, 2010.

2. The plaintiff's assertion

In the instant disposition, KRW 000,000, out of KRW 000, which had not been recognized as necessary expenses in the initial disposition, was recognized as necessary expenses and eventually not recognized as necessary expenses (=000 won - 000 won). Such KRW 000, which was paid by the Plaintiff to female employees of the instant entertainment tavern in 2007, constitutes necessary expenses.

Since the instant entertainment drinking club is a place of business for entertainment drinking club business with entertainment entertainment reception workers, service fees for female employees who are entertainment entertainment entertainment entertainment entertainment entertainment entertainment entertainment entertainment workers occur inevitably, and even if the Plaintiff had a considerable number of female employees as entertainment reception workers due to the injury of the employees of the instant entertainment drinking club, which should be kept and managed in accordance with the Enforcement Rule of the Food Sanitation Act, it is confirmed that the Plaintiff had been employed as entertainment reception workers. As to the total amount of 00 won of the above fees, the Plaintiff submitted income data collection table, business income withholding receipt and business income payment report to the head

Therefore, the instant disposition that did not recognize 000 won as necessary expenses is unlawful.

3. Related statutes and burden of proof;

(1) Article 19(2) of the Income Tax Act (amended by Act No. 8825 of Dec. 31, 2007) which was in force in 2007 provides that the amount of business income shall be the amount calculated by deducting the required expenses from the total amount of income in the corresponding year, and (1) Article 55(1) of the Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20516 of Dec. 31, 2007) and Article 55(1) of the same Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 20516 of Dec. 31, 2007) provide that the "expenses corresponding to the total amount of income" as

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

4. Facts of recognition;

The following facts are acknowledged in light of the above evidence and the overall purport of the arguments in the statements in Gap evidence Nos. 18 through 29, 31, Eul evidence Nos. 4 and 9 (including additional numbers):

[1]

The ratio of credit card sales to the sales of the instant entertainment tavern in 0207 was about 96.7%, but the Plaintiff did not separate service charges to female employees from the credit card sales slip.

With respect to withholding income tax on female employees of the instant entertainment tavern in 0207, the data collection sheet, business income withholding receipt and business income payment statement (Evidence A No. 4 and 12) have been prepared as of February 28, 2008. The above documents are not signed or sealed by the collector (report) and there is no recipient, etc. of the competent tax office. In addition, the amount deposited by business income earner listed in the above documents is not confirmed from the computerized data of the National Tax Service.

[2]

0. On March 9, 2009, the defendant sent a guide to the plaintiff on March 9, 2009 to submit books and evidential data to the plaintiff by September 13, 2009, when investigating the appropriateness of the plaintiff's report of simple book-keeping according to the guidelines for inspection of persons subject to simple book-keeping by the director of the Seoul Regional Tax Office.

On September 28, 2009, the Plaintiff filed a report on the performance of withholding taxes, stating 00 won in total, and 6,849,810 won in total, to the head of the relevant tax office having jurisdiction over the entertainment tavern in this case, for the female employees of the instant entertainment tavern in 2007.

0. The Plaintiff did not pay the prescribed source income tax at the time of filing the above report on the performance of withholding tax, and on November 6, 2009, the Plaintiff received the payment notice from the head of the final tax office on November 30, 2009 on the said income tax, but did not pay it. The Plaintiff paid it on June 4, 2012 in the course of litigation.

0. On December 23, 2009, the Plaintiff attended the deliberation of the National Tax Examination Committee by the Defendant, and submitted to the female employees of the instant entertainment tavern a copy of the paper register stating the date of their employment, the date of severance, position and name, address, resident registration number, and the details of transfer on and after February 9, 2009, a copy of the deposit passbook stating the details of transfer after February 9, 2009, and a copy of the business book (Evidence 7) in 2007 stating the sales details by the business day of the instant entertainment tavern and the examples of the female employees.

[3]

0 The Plaintiff asserted that 6 persons, including AA, BB, ParkCC, MaximumD, and E, were female employees of the entertainment bars of this case in 2007. The above 6 persons had worked at a business establishment, such as AA, BB,CC, DD, E, Ynomine, Ynomine, and Snmine in 2007.

A business owner of the 0th place of business reported on the performance of income tax withheld in 2007 with respect to service fees for the said 6 persons, and YYNou-ju places among the said places of business are entertainment taverns operated by the Plaintiff separately from the instant entertainment tavern.

5. Determination

The circumstances examined in light of the above facts of recognition and relevant statutes are as follows.

[1]

(1) Article 127(1)3 of the Income Tax Act, which was in force in 2007, provides that a person who pays "amount of income from business income as prescribed by the Presidential Decree" should withhold income tax.3)

Article 184 (1) 4 of the Enforcement Decree of the Income Tax Act provides that the business income subject to withholding is "income generated from the supply of services under Article 12 (1) 4 and Article 12 (1) 13-5 of the Value-Added Tax Act", and 6, however, the "income generated from the supply of services under Article 35 (1) 1 (f) (6) of the Enforcement Decree of the Value-Added Tax Act" is excluded (Article 2).

The services under Article 35 subparagraph 1 (f) of the Enforcement Decree of the Value-Added Tax Act excluded as above are 'competing loans and dancing services similar thereto'.

According to the above provisions, even if the Plaintiff pays service fees or service fees to female employees who provide entertainment loans, dances, and similar services in the instant entertainment tavern, the Plaintiff is not obligated to withhold income tax.

The sales ratio of credit card sales among the sales ratio of the instant entertainment tavern in 2007 is about 96.7%. According to the Plaintiff’s assertion, if the customer pays the payment by credit card from the entertainment tavern in the instant case, the Plaintiff withdrawn it in cash and paid a fee to female employees.

However, there is no evidence to acknowledge cash withdrawal as alleged by the Plaintiff, and the copy of the deposit passbook submitted by the Plaintiff is written with the details of transfer after February 9, 2009, and since service charges or fees may be paid directly by the customer to female employees, it is difficult to view that the service charges or fees for female employees were included in the total amount of the income of the instant entertainment tavern as confirmed by the above credit card sales.

(2) On the other hand, Article 127 (1) 7 of the Income Tax Act provides that a person who pays "income from service fees as prescribed by the Presidential Decree" must withhold income tax, 7).

Article 184-2 subparag. 28 of the Enforcement Decree of the Income Tax Act provides that the amount of service fees to be withheld as above refers to service fees where an entrepreneur who operates an entertainment tavern under Article 1(4)9 of the Special Consumption Tax Act provides the service and enters the service fees of a person who provides the service under Article 35 subparag. 1(f)(10) of the Enforcement Decree of the Value-Added Tax Act, in a invoice, tax invoice, receipt, sales slip, etc. separately from the value of supply (limited to the case where the service fees are not appropriated as his own income) and the amount of service fees separately entered exceeds 20/100 of the value of supply.

According to the above provisions, the Plaintiff is liable to withhold income tax in the event that the Plaintiff entered the service charge separately in the credit card sales slip and did not appropriate the service charge as the Plaintiff’s income.

However, among the sales revenue of the instant entertainment tavern in 2007, a credit card sales gap was about 96.7%, and the Plaintiff did not enter service charges in credit card sales slip separately from the supply price, and the service charges or fees may be paid directly by customers to female employees.

If so, it is difficult to view that the total amount of the entertainment tavern in 2007 as identified by the above credit card sales slip included service charges or service charges to female employees.

[2]

(1) With respect to income tax withholding for female employees of the instant entertainment tavern in February 28, 2008, the data submission table, receipt receipt for business income, and payment record for business income (Evidence A4 and 12) were prepared as of February 28, 2008.

However, the above documents are not signed or sealed by the collector, there is no recipient, etc. of the competent tax office, and the revenue amount of each business income earner stated in the above documents is not confirmed by the computerized data of the National Tax Service.

Therefore, it is difficult to recognize that the Plaintiff’s total revenue amount of the entertainment tavern of this case was included in the service fee or service fee for female employees.

(2) In 2007, the Plaintiff filed a report on the performance of withholding tax on service fees to female employees of the instant entertainment tavern with the head of the relevant tax office.

However, around March 2009, the above report on the performance of withholding tax was submitted on September 28, 2009, after six months passed since the Plaintiff received a request from the Defendant for submission of account books and documentary evidence related to the return of the cross-facebook. The Plaintiff paid the income tax on June 4, 2012 during the lawsuit, where the Plaintiff did not pay the income tax at the time of the submission.

Therefore, it is difficult to recognize that the above report on the performance of withholding tax included service fees or service fees to female employees in the total amount of income of the entertainment tavern of this case reported by the Plaintiff in 207.

[3]

(1) On December 23, 2009, the Plaintiff appeared at the deliberation of the Defendant National Tax Examination Committee, and submitted a copy of the paper register (No. 3) on the instant entertainment tavern and the copy of the business book (No. 7) on the instant entertainment tavern in 2007. In light of the time of submission, it is difficult to recognize that the above documents included a service fee or a commission for female employees in the total amount of income in the year 2007 reported by the Plaintiff, as it is difficult to deem that the above business book file was made normally in business.

(2) It is confirmed that some of the female employees asserted by the Plaintiff to have been paid a fee or a service fee while serving in the instant entertainment tavern, and among those entertainment bars, there are other entertainment taverns operated by the Plaintiff separately from the instant entertainment tavern. According to such circumstances, it is difficult to readily conclude that the Plaintiff’s service fee or service fee claimed by the female employees was paid to the female employees of the instant entertainment tavern.

(3) The Plaintiff submitted a confirmation of the fact that the Plaintiff received service fees or service fees (Evidence A to No. 13 through No. 17) from the instant entertainment tavern in the form of evidence. However, the said confirmation document should be submitted in the first instance trial, and in light of the form and content of the statement, it appears that the Plaintiff’s seal was only obtained from the female employees in the text prepared by the Plaintiff, and it is difficult to find that the said confirmation document contains the total income amount of the instant entertainment tavern reported by the Plaintiff in the year 2007, including the service fees or service fees for female employees.

6. Conclusion

Therefore, the Plaintiff’s assertion that the Plaintiff’s fee for female employees of the instant entertainment tavern in 2007 cannot be deemed as necessary expenses for global income tax belonging to the Plaintiff in 2007. Thus, the instant disposition that was not recognized as necessary expenses is lawful.

Therefore, the plaintiff's claim seeking the cancellation of the disposition of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.