Seoul Central District Court 201 Gohap76360 ( October 24, 2013)

Multi-level marketing salespersons shall bear the liability to pay the value-added tax to be registered pursuant to Article 7 (6) of the former Enforcement Decree of the Value-Added Tax Act

A multi-level marketing operator who is a multi-level marketing operator shall report to the head of the competent tax office, and the multi-level marketing business operator shall be liable to pay the value-added tax, and the tax on the method of tax return shall not be automatically void unless there is a significant and obvious defect

Article 2 and Article 5 of the former Value-Added Tax Act

2013 or 2009848 Return of overpaid or erroneously paid taxes

1.KoreaA 2. Gimb

Korea

Seoul Central District Court Decision 201Gahap76360 Decided May 24, 2013

August 20, 2013

August 29, 2013

1. The plaintiff (appointed party)'s appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff (Appointed Party).

"Cancellation of the judgment of the first instance. The defendant shall revoke the judgment. The defendant shall pay to the plaintiff (designated parties, hereinafter referred to as the "Plaintiffs") and the appointed parties the amount stated in the column for the list of claims in the annexed sheet of claims, and from January 1, 2006, 6% per annum from the date of delivery of the copy of the application for modification of the purport of the claim and the cause of the claim in this case until the date of delivery of the copy of the application for modification, and 20% per annum from

1. Basic facts

The following facts are not disputed between the parties, or can be acknowledged in full view of the purport of the whole pleadings in each of the statements in Gap 2-1, 2, 3, 4-1, 4-2.

A. On October 30, 2003, "CCC Co., Ltd., a door-to-door Sales Company (hereinafter referred to as "CCC") is a company established to run a business related to DDR (hereinafter referred to as "DDR"), a multi-level marketing company." (b) DDR established six branches, including Gangnam-gu, Busan, Gwangju, Incheon, Daejeon, Daegu, and Daegu, and operated 62 centers across the country. CCC operated D's branch offices and centers, and did not have a separate branch office and center, based on the results of the purchase of goods. The two companies maintained and managed the organization of the sales division through the organization relationship with the sales division.

C. On the basis of a prospectus or a basic lecture distributed at the headquarters by each center, the CCC recruited new sales clerks by holding a business explanation meeting to those invited by its sales clerks, and the Plaintiffs and designated parties have been employed as the sales clerks of the CCC.

D. DCC mainly sold health food, etc. because its sales amount is limited to not more than 1.3 million won according to the laws and regulations related to multi-level marketing business, and CCC, which had no such restriction, sold high-priced silver, dubine machinery, multi-family appliances, etc. The sales price of the goods sold by CCC was only 1.16% of the sales price. CCC’s sales price was only 11.16% of the sales price, and CCC’s sales price did not have any particular interest in the performance, quality, or price of the goods purchased. In general, most of the sales clerks did not individually select the goods in ordering the sales price of the goods, but did not mean the amount of the goods invested by them to the head of the Center, etc., taking into account the investment amount. Meanwhile, CCC did not have any particular import personnel other than the sales of the goods.

E. Since then, upon suspending the payment of the CCC’s allowance to the salesperson around 2007, some sales clerks of CCC filed a complaint for fraud, etc. Around June 2007, 2007, the CCC was detained on the charge of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Fraud) and the Door-to-Door Sales Act and violating the Door-to-Door Sales Act. On October 30, 2007, the Seoul Central District Court was sentenced to nine years of imprisonment and five years of imprisonment, respectively. The above judgment was all dismissed by the E, 2007No2567 (Seoul High Court Decision 2008Do2236) and the final appeal (Supreme Court Decision 2008Do2236).

F. Meanwhile, on the other hand, at around 2005, CCC reported and paid value-added tax for the first period of 2005 and the second period of 2005 to the tax authority from April 2006 to April 2007, each of the value-added tax was reported and paid to the tax authority during the period from January 2006 to January 2007, but on March 16, 2009 after March 16, 2009, it merely took the form of sale and purchase of goods to attract investment funds without the actual transaction of the goods and thus does not constitute the supply of goods under the Value-Added Tax Act. The tax authority filed a claim for correction against the tax authority for the total OOO won among the value-added tax for the period from January 2006 to January 2007 and for the period from January 2005 to the estimated amount of value-added tax for 205 to January 2005.

G. Accordingly, the pertinent tax authority imposed a disposition rejecting CCC’s request for correction on the ground that both the tax authority and the pertinent tax authority filed a request for correction of value-added tax for the total amount of value-added tax for the period of January 2005 and the period of February 2005 were three years, and that CCC’s request for correction of the total amount of value-added tax for the total amount of value-added tax from January 2006 to January 2007 constitutes subject to taxation pursuant to Articles 6 and 1 of the Value-Added Tax Act (hereinafter “each rejection disposition of this case”), and that CCC’s request for correction of the total amount of value-added tax for the total amount of value-added tax for the total amount of the value-added tax purchased goods from January 2006 to January 207, 2007 constitutes a multi-level marketing salesperson’s request for correction. However, CCC’s request for adjudication on each of the instant rejection disposition, which is not a multi-level marketing salesperson’s supply of goods.

I. On June 4, 2010, the Seoul Administrative Court rendered a lawsuit seeking revocation of the disposition of refusal to request for the correction of value-added tax by the Seoul Administrative Court 2010Guhap23910. The above court accepted the CCC’s claim on February 23, 2012 and rejected the price of the goods subject to the transaction between the CCC and the seller, and the seller resells the goods at a price equivalent to 5% of the price of the goods without acquiring the goods from CCC. In light of the fact that the salesperson and CCC secured a certain amount of allowance exceeding the purchase price for the goods purchased from CCC, the transaction between the salesperson and CCC was conducted in the form of sale to pretend the goods to supply the goods, and its substance is nothing more than the actual monetary transaction that had been subject to value-added tax, and thus, it cannot be deemed that the supply of the goods subject to the initial disposition of refusal to request the correction of value-added tax, and thus, it was unlawful for the tax authority to report the rejection disposition to the CCC’s tax base.

The plaintiffs filed a claim for the return of value-added tax for the year 2005, which was reported and paid by CCC against the defendant. The defendant failed to satisfy the requirements of CCC's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's creditor's right by filing a claim for the return of value-added tax for the amount of value-added tax for the year 2005." However, there is no evidence to acknowledge the defendant's claim, but rather there is a fact that CCC was not subject to a disposition of refusal on the ground that CCC submitted a request for correction

3. Judgment on the merits

A. The assertion

“1) From January 2, 2005 to December 31, 2005, the Plaintiffs entered into a purchase agreement with CCC and DD (hereinafter “CCC, etc.”) and paid the price of goods including value-added tax. CCC, etc., reported and paid value-added tax to the Defendant in relation to the above purchase agreement. However, the above purchase agreement entered into a purchase agreement into a contract with CCC, etc., which only entrusts the sale to CCC, etc. without any actual receipt of the goods at a low price, and only acquires the fees through resale without the delivery of the goods. Thus, the above purchase agreement was an agreement with CCC, etc., which entered in the multi-level marketing business and door-to-door sales business. Accordingly, the above purchase agreement lacks the "supply of goods or services, which are the grounds for the imposition of value-added tax," and thus, the representative director of CCC, etc. is significant and clear, and thus, there is no obligation to return the goods to the Plaintiffs, which are parties to the purchase agreement.

B. Determination

1) As to the main argument

A) Value-added tax is an independent supplier of goods or services on a business basis, and CCC, etc. is obligated to pay the value-added tax, and the Plaintiffs, such as CCC, are not liable to pay the said tax.

B) Since CCC was a multi-level marketing operator who established a multi-level marketing organization and operated a multi-level marketing business, it was actually a multi-level marketing business operator who is obligated to pay value-added tax according to the principle of substantial taxation because it constitutes a multi-level marketing operator who independently supplies goods or services as a multi-level marketing salesperson. The Plaintiffs do not have the duty to file for registration under Article 7 (6) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 19892 of Feb. 28, 2007; hereinafter the former Enforcement Decree of the Value-Added Tax Act), the Plaintiffs are not obligated to file for registration with the head of the tax office having jurisdiction over the multi-level marketing business operator by 105 and 2 months from the date of filing for registration of multi-level marketing business operator under the former Enforcement Decree of the Value-Added Tax Act (amended by Act No. 814 of Dec. 30, 2006).

2) As to the conjunctive argument

Value-added tax is a tax by means of tax return, in principle, a taxpayer’s tax liability is specifically determined by his/her own determination of tax base and amount and does not necessarily become void as a matter of principle unless there is a serious and apparent defect in the taxpayer’s filing act. Here, whether a defect in filing a return falls under the invalidation as a matter of course due to a significant and apparent defect, etc. of the relevant laws and regulations, which serve as the basis for filing a return, shall be determined reasonably by considering the purpose, significance, function, and legal remedies for the defective filing act, etc., and by individually identifying the specific circumstances that may arise from filing a return (see, e.g., Supreme Court Decisions 2006Du644, Jun. 2, 2006; 2009Da11808, Sept. 10,

CCC reported and paid value-added tax while engaging in the door-to-door sales business or multi-level marketing business, and then reported and paid value-added tax from the first half of 2006 to the first half of 2007 among them, asserts that the most investment capital is not subject to value-added tax by attracting the supply of goods, and filed a request for correction with the tax authority on March 16, 2009. On this issue, the tax authority issued a disposition of refusal to request correction on May 12, 2009 by the CCC and issued a decision of rejection on August 7, 2009. However, in the administrative litigation (Seoul Administrative Court 2010Guhap23910) on this issue, the claim of CCC was accepted, and the above judgment becomes final and conclusive. The reason for the judgment of the administrative litigation is that the transaction between CCC and the salesperson took the form of value-added tax for the most sale of goods, and thus, the substance of the transaction can not be seen as being the object of the investment allowance.

However, the following circumstances revealed by the purport of the above facts and arguments are as follows: (a) CCC had a wrong administrative guidance by the tax authority to which the Defendant belongs when it reports and pays the value-added tax for the first period of 2005 and 271 for the Defendant; (b) CCC did not have any tax liability; or (c) CCC did not have any duty to report and pay the value-added tax inevitably to avoid any disadvantage such as criminal charges and additional dues; (c) CCC was able to request correction in accordance with Article 45-2 of the Framework Act on National Taxes regarding value-added tax for the year 2005, but CCC was able to file a request for correction in accordance with Article 45-2 of the Framework Act on National Taxes, but it was not subject to a disposition of refusal of correction or administrative litigation; and (c) in this case, the legal nature of the goods transaction between CCC and the Plaintiffs is not a sale and purchase, but the most serious and apparent monetary transaction (investment contract).

4. Conclusion

Therefore, the plaintiffs' claim of this case shall be dismissed in its entirety due to the lack of the reasons, and the judgment of the court of first instance is just in its conclusion, and the plaintiffs' appeal is dismissed as it is without merit.