Busan High Court 2015Nu21162 ( March 24, 2015)

Cho High Court Decision 2013 Deputy 4157 (2014.03)

If a tax invoice was received by borrowing the name, it shall constitute a false tax invoice.

If a new factory building is built under his/her own name, if he/she obtains a new construction permit under another person's name in order to avoid development charges to be borne, it shall constitute a false tax invoice.

Tax amount paid under Article 17 of the Value-Added Tax Act

2015Du50122 ( December 23, 2015)

1. One other

Head of North Busan District Tax Office

Busan High Court Decision 2015Nu21162 Decided July 24, 2015

December 23, 2015

The part of the judgment of the court below imposing the penalty tax on illegal underreporting and the penalty tax on illegal excess refund is reversed, and that part of the case is remanded to Busan High Court.

All of the appeals by the plaintiff Gangnam-○○ and the remaining appeals by Kim○-○ are dismissed.

The costs of appeal by the Plaintiff ○○ are assessed against the Plaintiff ○○.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Article 16(1)2 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) provides for the registration number of a person to whom a tax invoice is to be supplied as one of the requisite entry items. The latter part of Article 17(2)2 provides that an input tax amount shall not be deducted from the output tax amount in cases where the whole or part of the necessary entry items under Article 16(1)1 through 4 are not entered or differently entered from the fact in the tax invoice issued. Meanwhile, Article 60(2)2 of the former Enforcement Decree of the Value-Added Tax Act (wholly amended by Presidential Decree No. 24638, Jun. 28, 2013) provides that an input tax amount shall not be deducted from the output tax amount in cases where the requisite entry items of a tax invoice issued under Article 16 are erroneous, but the relevant tax invoice is confirmed as the requisite entry or other voluntary entry item in the relevant tax invoice.

Based on evidence, the lower court determined that: (a) Plaintiff Gangnam ○ operated a manufacturing business of steel structure and a real estate rental business under the trade name of “○○ Industries”; (b) Plaintiff Gangnam ○○, a member of its own trade name, operated a wholesale business of industrial products and steel structure manufacturing business; and (c) Plaintiff Gangnam ○, a member of its own name, entered into a new construction contract for the construction of the instant factory building with ○○ Construction Co., Ltd. (hereinafter referred to as “○○ Construction”) on December 28, 2011 in order to avoid development charges to be imposed upon the construction of the instant factory in its name; (c) Plaintiff Gangnam ○ and its other business partners entered the supply number of the instant factory building into a new construction contract with ○○○ Construction Co., Ltd. (hereinafter referred to as “○○ Construction”); and (c) it constitutes a false tax invoice that stated in Article 27 subparag. 16, 378, 323-4 of the former Enforcement Decree of the Value-Added Tax Act (hereinafter referred to as “the instant tax invoice”).

Examining the record in light of the aforementioned provisions and relevant legal principles, the lower court did not err in its judgment by misapprehending the legal doctrine regarding the interpretation of the latter part of Article 17(2)2 of the former Value-Added Tax Act.

2. Regarding ground of appeal No. 2

A. Article 47-3(2)2 of the former Framework Act on National Taxes (amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) provides that in cases where the payment of value-added tax, etc. is underreported or overreported due to fraud or other unlawful act prescribed by Presidential Decree (hereinafter “unlawful act”), Article 26-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 11873, Jun. 7, 2013; hereinafter the same) provides that the aggregate of the amount equivalent to 40/100 of the aggregate of the amount of unlawfully underreported paid tax and the amount of unlawfully refunded refunded tax and the amount equivalent to 10/100 of the amount of general underreported refunded tax shall be the penalty tax, and Article 12-2(1) of the Enforcement Decree of the Framework Act on National Taxes provides that “an act falling under any of the subparagraphs of Article 3(6) of the Punishment of Tax Evaders Act shall be any of the following acts, making it impossible or remarkably difficult to collect taxes or receive documents.”

B. The lower court determined that the Defendant’s imposition of the penalty tax for illegal underreporting and the penalty tax for illegal excess refund on the ground that: (a) the filing of the final return and the application for refund of value-added tax for the second period portion of the second period of 2012 was false evidence or false documents was made and received; and (b) the filing of the final return and the application constitutes “a case where the value-added tax was underreported or the refund amount was overreported due to an unlawful act under Article 47-3(2)2 of the former Framework Act on National Taxes; and

C. However, such judgment below is hard to accept for the following reasons.

If a taxpayer receives a tax invoice different from the fact and receives a deduction or refund of an input tax amount, such an act constitutes “in cases where a taxpayer underreporting the amount of the tax of the value-added tax, etc. or underreporting the amount of the tax payable by an unlawful act under Article 47-3(2)2 of the former Framework Act on National Taxes,” the taxpayer should be aware that, in addition to recognizing that the taxpayer is entitled to a deduction or refund of the input tax amount under a tax invoice different from the fact, the taxpayer should be aware that the taxpayer would be entitled to a deduction or refund of the amount of the input tax, other than the amount of the output tax on the tax invoice, by filing a return or payment of the tax base and the amount of the value-added tax, or by filing a request for correction after filing a return or payment on the whole amount of the output tax on the tax invoice, thereby resulting in a decrease in the national tax revenue (see Supreme Court Decision 2014Du11

Examining the reasoning of the lower judgment and the record, Plaintiff Kim ○ alleged that the amount equivalent to the input tax amount reported as the subject of deduction and refund under the instant tax invoice was paid to ○○ Construction. Accordingly, the lower court deliberated upon whether Plaintiff Kim ○○○, excluding the output tax amount under the instant tax invoice, declared and paid the tax base and tax amount of value-added tax, or declared and paid the entire output tax amount under the instant tax invoice, and subsequently exempted the liability to pay value-added tax on the instant tax invoice by filing a request for correction, thereby evading the liability to pay the input tax amount under the instant tax invoice by either filing a tax return or filing a request for correction, etc., and thereby making it known that Plaintiff Kim ○ would result in the reduction of the national tax revenue.

Nevertheless, without further examining these points, the lower court determined that the imposition of the illegal under-reported penalty tax and the illegal excess over-reported penalty tax was lawful for the reasons stated in its reasoning. In so doing, the lower court erred by misapprehending the legal doctrine on the requirements for imposing the illegal under-reported penalty tax and the illegal excess over-reported penalty tax under Article 47-3(2)2 of the former Framework Act on National Taxes, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation contained

3. Conclusion

Therefore, the part of the judgment of the court below imposing the penalty tax on an illegal underreporting and the penalty tax on an illegal excessive refund is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The appeal by the plaintiff Gangwon-○ and the remaining appeals by the plaintiff Kim○○ are all dismissed. The costs of appeal by the plaintiff Gangwon-○ are assessed against the plaintiff Gangwon-○○. It is so decided as per Disposition by the assent of all participating Justices