Han Industrial Transport Co., Ltd. (Law Firm Lee & Lee, Attorneys Ba-won, Counsel for the defendant-appellant)

Head of Geumcheon Tax Office

Seoul Administrative Court Decision 2009Guhap21345 Decided September 24, 2009

June 24, 2010

1. The defendant's appeal is dismissed.

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

1. Purport of claim

The Defendant’s imposition of value-added tax of KRW 40,286,710 on June 2, 2008 against the Plaintiff and the imposition of KRW 12,256,770 on September 5, 2008 against the Plaintiff shall be revoked in entirety.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

The following facts may be acknowledged as either in dispute between the parties or in accordance with Gap evidence Nos. 4, 5, and Eul evidence Nos. 1, 2, 5, and 8, based on the whole purport of the pleadings:

A. In accordance with Article 106-4(1) of the former Restriction of Special Taxation Act (amended by Act No. 8827 of Dec. 31, 2007; hereinafter “former Restriction of Special Taxation Act”), the Plaintiff Company, a general taxi transport business entity, declared and paid value-added tax by reducing 50% of the amount of each of the tax payable as follows. The head of Geumcheon-gu Seoul Metropolitan Government inspected the Plaintiff Company’s scheduled and fixed portion of the tax payable for January 2007, and the actual use of the amount of the tax reduced for February 2007, and notified the Defendant that the Plaintiff Company failed to use part of the amount of the reduced tax as follows.

The amount of tax reduced or exempted in the classification of votes contained in the main sentence of this Article (won) for the first term of 207 (26,241,560 0 26,241,560) for the second term of 207 (24,594,594,530, 253, 880 4,340,650,650 for the second term of 207 (25,558,630 16,092,480, 466,150 for the second term of 207

B. Based on the content of notification, the Defendant notified the Plaintiff Company of the correction and notification of the amount of value-added tax of KRW 40,286,710 (including additional tax) as of June 2, 2008, and the amount of value-added tax of KRW 12,256,70 (including additional tax) as of September 5, 2008 as of September 5, 2008, on the ground that the Plaintiff Company did not use the reduced amount of value-added tax within six months from the expiration date of the due date of return and payment of value-added tax (hereinafter collectively referred to as the “instant disposition”).

C. On August 29, 2008 and November 24, 2008, Plaintiff Company filed an appeal with the Tax Tribunal on the instant disposition, but the Tax Tribunal dismissed the said appeal on April 28, 2009.

2. Whether the disposition is lawful;

A. The parties' assertion

(1) Plaintiff

The Plaintiff Company used the reduction amount of value-added tax for the first and final portion for the period of January 2007 and the estimated amount of value-added tax for the second period by either directly paying to an employee or using it for improvement of treatment.

(2) Defendant

If the amount of value-added tax reduced is included in the basic pay, it shall be stated in the expenditure account that enables workers to grasp the total amount of expenditure. If the amount is used for improvement of treatment, it shall be decided autonomously by workers. The amount of use claimed by the Plaintiff Company is not recognized as used pursuant to Article 106-4(2) of the former Restriction of Special Taxation Act. Furthermore, the amount of value-added tax reduced shall be used within six months from the end of the due date of the return and payment of value-added tax. Since the Plaintiff Company used it after the due date, it cannot be viewed as using it pursuant to Article 106-4(2) of the former Restriction of Special Taxation Act

(b) Fact of recognition;

The following facts are not disputed between the parties, or are recognized by Gap evidence 6 through 8, Gap evidence 10 through 13, and Gap evidence 15 (including each number), and the testimony of non-party 1 and non-party 2 of the first instance trial witness in consideration of the whole purport of the pleadings.

(1) Implementation of the VAT reduction and exemption system for general taxi transport business entities

(A) After the amendment of the Regulation of Tax Reduction and Exemption Act by Act No. 4952 on August 4, 1995, with respect to general taxi transport business operators under the former Automobile Transport Business Act (repealed by the Enforcement of the Passenger Transport Business Act), 50/100 of the amount of the value-added tax was reduced, the Minister of Construction and Transportation sent a letter to instruct and supervise the relevant business operators and relevant organizations to use the reduced tax amount due to the reduction and exemption of value-added tax for the improvement of poor treatment of taxi drivers through consultation between labor and management, taking into account that the purpose of the amendment is to support the reduced tax amount due to the reduction and exemption of value-added tax to be used for the improvement of poor treatment of taxi drivers.

(B) After that, Article 106-4(2) of the Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004, effective January 1, 2005, newly established the provision that "the value-added tax reduction amount shall be used for the improvement of treatment and welfare of general taxi drivers as prescribed by the Minister of Construction and Transportation." The Minister of Construction and Transportation, under the title "the Guidelines for the Use of the Amount of Tax Reduction and Exemption (the Ministry of Construction and Transportation guidelines of April 2005, hereinafter "the Guidelines for the Use of the Amount of Tax Reduction and Exemption")", "the taxi transportation business entity shall use the full amount of the amount of the value-added tax reduction for the purpose of improving treatment and welfare of employees, and shall pay it in cash to employees under the pretext of basic pay, allowances, etc., and shall provide guidance to enable the representatives of workers and employers to autonomously determine the method and timing of cash payment between them, and notify it to the local government, the National taxi transportation business association, etc.

(2) Progress of agreement between the Plaintiff Company and its labor union

(A) Current status of trade unions

Around the mid-190s when the system to reduce the value-added tax on taxi transportation business entities was implemented, a trade union organized by employees who drive a company or taxi was divided into the Korea taxi trade union affiliated with the Korea Federation of taxi trade unions (hereinafter referred to as the “Korea Federation of taxi trade unions”) and the Seoul High Military Trade Union (hereinafter referred to as the “regional trade union”). A regional trade union was divided into the National taxi trade union affiliated with the Korea Federation of taxi trade unions (hereinafter referred to as the “regional trade union”). As the number of units of employment increases after the increase in the number of units of employment, the labor union of the Plaintiff company was affiliated with the regional trade union, but around 1997, the labor union of the Plaintiff company changed its affiliation to the private housing.

(B) the Wage Agreement, 1995

1) On September 22, 1995, the former Seoul District Office concluded a wage agreement in 1995, stating that the monthly wage amount from September 22, 1995 to 697,513 won shall be increased from 630,000 won to 697,513 won, but the increased amount includes 34,328 won out of value-added tax reduction amount.

2) On December 31, 1995, the Seoul taxi business council and the regional trade union delegated by 16 transportation companies, including the Plaintiff Company, raised basic pay and allowances in concluding the wage agreement in December 31, 1995, and calculated the direct benefit portion of the value-added tax reduction and exemption (However, the wage agreement did not specify specific amount reflected in the wage), and the indirect benefit portion specified in the Addenda that the business entity utilizes it to promote the welfare of its members.

3) Meanwhile, the case of applying for arbitration of labor disputes (95 disputes 126,128) commenced as the collective bargaining to conclude the wage agreement between five companies and regional trade unions established under the regional trade union was not concluded in 1995. The Seoul Special Metropolitan City Regional Labor Relations Commission on January 5, 1996 includes 67,513,00 won of basic salary and allowances according to the wage agreement in 1995. The regional trade union also includes the amount equivalent to the value-added tax reduction (i) monthly wage in 697,941 won and 730,52 won in 732,61 won in 195; (ii) monthly wage in 646,707 and 3250 won in 19 in 195; (iii) increase in the amount of value-added tax in 325,000 won in 20,000 won in 25,000 won in 325,000 won in 25,00 won in 38.

(C) the Wage Agreement, 1996

On November 4, 2006, the Seoul taxi business council and the regional trade union delegated by 21 transportation companies including the Plaintiff company (including companies that were subject to arbitration award among them), concluded the wage agreement in November 1996, which included the amount of direct benefit of value-added tax reduction and exemption as well as the amount of basic wage and allowance in the wage agreement in 1995 (Provided, That the wage agreement did not specify specific amount reflected in the wage), and the amount of indirect benefit was specified in the Addenda that the business owner uses it to promote the welfare of its members, and the transportation companies agreed to deposit the welfare fund of KRW 400,000 per month with the association expenses in order to improve the welfare of its members.

(d) any subsequent wage agreement;

The Plaintiff Company has determined whether to reflect the amount of value-added tax reduced or exempted or the method of using the amount of value-added tax reduced or exempted as a result of the wage agreement between the Seoul Taxi Business Association and the local trade union every year, and concluded an individual wage agreement with the Plaintiff Company

(E) Agreement and implementation between the Plaintiff Company and the Trade Union

1) The agreement of November 14, 2006

When the conclusion of a wage agreement was delayed due to disputes over whether the basic pay includes the amount of value-added tax reduction of 34,328 won in accordance with the wage agreement in 1995 between the private housing and the Seoul taxi business association in around 2006, the Plaintiff Company agreed on November 14, 2006 and the labor union of the Plaintiff Company in relation to the amount of value-added tax reduction of 33,000 won for each worker temporarily from November 2006 to June 2007. However, on or before November 2006, the Plaintiff Company agreed on the result of negotiations on the amount of tax reduction of 34,328 won in the wage agreement and the amount of value-added tax reduction of 207 by a superior organization in accordance with the wage agreement in 2007.

2) The agreement of November 1, 2007

On November 1, 2007, the Plaintiff Company agreed to pay KRW 500,000,000 from the value-added tax reduction portion for the first year in 2007 to December 31, 2008 between the Plaintiff Company and the Plaintiff Company by adding 50,000 won per worker to the previous wage, with respect to the value-added tax reduction amount for the period from November 2007 to March 2009.

3) The Agreement of June 20, 2008

On June 20, 2008, the Plaintiff Company agreed with the Plaintiff Company’s trade union in addition to the agreement on November 1, 2007 as follows.

(1) In principle, full cash shall be paid for the amount of value-added tax reduced from January 2, 2007 to December 2008.

② The Plaintiff Company has paid the abated value-added tax under the Restriction of Special Taxation Act, but on November 1, 2007, the labor-management council agreed to pay 50,000 won per employee per month during the period from January 2007 to December 2008 in order to have the date of payment of the abated value-added tax which has been paid until the date of payment of the abated value-added tax. However, the difference is deemed to have been partially included in the indirect cost, the welfare welfare interest fund and the wage of members.

(3) During the agreement period, no civil or criminal liability for the request for the reduction of value-added tax shall be charged, and labor and management shall faithfully perform the agreed matters.

(4) The effects of this Agreement shall be retroactive to November 1, 2007.

4) Implementation of agreements

The Plaintiff Company paid 50,000 won per worker to the individual in accordance with the agreement of November 1, 2007 and June 20, 2008.

(f) In calculating the amount of value-added tax reduced by the Plaintiff company, the Defendant deemed to have not been used within six months from the end of the reporting and payment period for the portion scheduled for the first period of January 2007; the amount used shall be deemed to have been zero won for the portion scheduled for the first period of January 2007; the amount of 14,717,625 won shall be directly paid to workers on three occasions every month from November 2007 to January 2008; and the amount deemed to have been paid for additional money due to disposable expenses, etc. shall be deemed to have been KRW 20,253,880; the amount used shall be deemed to have been paid to workers on three occasions from February 208 to April 208; the amount deemed to have been paid to employees on three occasions from 16,092,480 won to 208.208.208.

C. Relevant statutes

It is as shown in the attached Form.

D. Determination

(1) Whether the Plaintiff Company used the entire amount of value-added tax reduced for the first and last year portion and the second period portion for the improvement of treatment and welfare for the Plaintiff Company’s employees

(A) In full view of the details of the wage agreement in 195, 1996, the details of the arbitration award between the Plaintiff company and the Plaintiff company’s trade union at the time the aforementioned system was implemented, the Plaintiff company did not clearly state whether the amount of value-added tax reduction of KRW 34,328 was included in wages. However, even if the Plaintiff company agreed to pay the amount of value-added tax reduction of KRW 50,000 for each employee from November 207 to March 2009, the difference between the amount of value-added tax reduction and value-added tax reduction of KRW 10,000 for each employee was paid to the Plaintiff company including the amount of wages, etc., the amount of value-added tax reduction of KRW 20,000 for each employee and the amount of tax reduction of value-added tax paid to the Plaintiff company for 10,000,0000 for 20,0000,0000,000 per previous 20,000.

(B) Judgment on the defendant's assertion

The Defendant asserts to the effect that: (a) the Plaintiff Company cannot be deemed to have paid monthly wages to its employees during the pertinent taxable period in accordance with the wage agreement in 1995, including the amount of value-added tax reductions of KRW 34,328 per month during the pertinent taxable period; (b) if monthly wages were included in the amount of value-added tax reductions of KRW 34,328 per month during the pertinent taxable period, the Plaintiff Company would have paid to its employees more amount than the amount of tax reductions; and (c) the Plaintiff Company's employees filed a lawsuit claiming the amount of value-added tax reductions against the Plaintiff Company and rendered a favorable judgment, and thus, the Plaintiff Company did not fully pay the amount of value-added tax reductions.

① Under the wage agreement in 1995, the Plaintiff Company shall pay at least 13,112 won per month to its employees, or 44,852 won per month, which was concluded by the Seoul taxi Business Council with the regional trade union. It is reasonable to view that the subsequent wage agreement including the wage agreement in 1996 which was concluded by the company which was subject to the arbitration award, included the amount of value-added tax in the amount of 34,328 won per month pursuant to the standards for the former branch of Seoul District Office and the arbitration award in 1995, including the above amount of value-added tax. The Plaintiff Company’s assertion that the amount of value-added tax that was to be included in the amount of wages under the wage agreement in 195 is not included in the wage reduction in the amount of 3-year 19-year 16-year 20-year 16-year 16-year 20-year 16-year 20-year 16-year 201.

② Examining the arguments in light of the health care unit, the evidence adopted earlier, and the overall purport of oral argument, the sum of the improvement costs (at least 13,112 won per month), the improvement costs for the welfare (payment in 400,000 won per month at the branch of a trade union), the improvement costs for the treatment paid by the Plaintiff company to its workers including wages, and the improvement costs paid by the agreement on November 1, 2007 and June 20, (which may vary depending on whether only the individual worker has been employed) appears to be similar to or little than the reduced tax amount. As such, the Defendant’s assertion on a different premise is without merit.

③ According to the evidence No. 22, No. 18, and No. 24 of the Plaintiff Company’s assertion, the Plaintiff Company’s claim for the reduction of value-added tax was rendered on Apr. 16, 2010 (Seoul Southern District Court 2009 Ghana 141172) from the scheduled date of February 2004 to the final date of February 2, 2008, which was brought by seven employees of the Plaintiff Company against the Plaintiff Company (Seoul Southern District Court 2009Gabu District Court 20172), and the Plaintiff Company filed an appeal and filed an appeal to recognize the fact that the appeal is currently in progress. However, the fact of the recognition alone alone is insufficient to support that the Plaintiff Company used both the reduced value-added tax amount for the first and final period of January 200 and the estimated value-added tax amount for the second period for the improvement of treatment and welfare of taxi transport employees.

(2) Whether the Plaintiff Company’s use under Article 106-4(2) of the former Restriction of Special Taxation Act can be seen as the amount of value-added tax reduced which was used six months after the expiration of the due date for the return

As seen earlier, the Plaintiff Company used the whole and part of the estimated amount of value-added tax for the year 2007 and the estimated amount of tax for the year 2007 after six months from the end of the due date of the return and payment of value-added tax. However, the Plaintiff Company did not use the reduced amount of value-added tax for the year 2007 portion as the payment amount, payment time and payment method were determined and used according to the result of wage negotiations by higher organizations, but it did not use the reduced amount of value-added tax because such negotiation was not concluded. However, the Plaintiff Company agreed on the use of the reduced amount of value-added tax for the year 2007 portion as of November 1, 2007 and June 20, 2008 through individual negotiations with the Plaintiff Company and the Plaintiff Company did not wait for the result of negotiations, and later made payment to its employees as seen above by the above agreement.

As above, there are circumstances to consider that the Plaintiff Company’s failure to use the amount of value-added tax reduced in 2007 within six months from the end of the due date of the return and payment of value-added tax is due to the delay in both the negotiations between the higher employers’ association and the labor union and the Plaintiff Company and the individual negotiations with the labor union. For this reason, the Plaintiff Company’s agreement that the portion to be used after six months from the due date of the return and payment of value-added tax should be deemed to have been paid retroactively. As such, even if the Plaintiff Company used the amount of value-added tax reduced after six months from the due date of

E. Sub-committee

Ultimately, the defendant's disposition of this case is unlawful and revoked.

3. Conclusion

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

[Attachment Form 5]

Judges Ko Young-han (Presiding Judge)