[1] The legal nature of additional dues on refund under Article 52 of the Framework Act on National Taxes (=legal interest)

[2] In a case where an unlisted corporation conducts a revaluation of assets to list its stocks, and the tax authorities cancel the revaluation of assets after paying the revaluation tax, whether additional dues on refund occur (negative)

[1] The refund of national tax constitutes "illegal gains" which are received or held by the State without any legal cause even if the tax liability does not exist from the beginning or is extinguished thereafter, and the refund amount calculated by multiplying the amount of refund by the fixed rate during the period stipulated in Article 52 of the Framework Act on National Taxes is interest on unjust enrichment. Thus, additional refund of national tax is not independent of the refund amount, but has the nature of legal interest on refund claim and obligation.

[2] In a case where the tax authority should refund the revaluated tax already paid by an unlisted corporation by implementing a revaluation of assets in order to list stocks, and cancelling the revaluation of assets after paying the revaluation tax, the disposition of imposition of revaluation tax is based on the Regulation of Tax Reduction and Exemption Act, which is legitimate, and is not illegal retroactively to the time of payment after cancelling the revaluation. Thus, with respect to the revaluated tax held by the tax authority from the day after the date of payment to the date of cancellation of the revaluation, the legal principles on national tax refund and the refund of refund of national taxes stipulated in Articles 51 and 52 of the Framework Act on National Taxes cannot be applied

[1] Article 52 of the Framework Act on National Taxes / [2] Articles 51 and 52 of the Framework Act on National Taxes, Article 30 of the Enforcement Decree of the Framework Act on National Taxes, Article 56-2 (1) of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4285 of Dec. 31, 190) (current deletion)

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Han-sung, Attorneys Lee Jong-soo et al., Counsel for plaintiff-appellant)

ZEEX Co., Ltd. (PPP Law Firm, Attorneys Yu-soo et al., Counsel for the defendant-appellant)

Head of the District Tax Office

June 24, 2008

1. The Defendant’s disposition of imposing additional dues of KRW 15,311,945,50 against the Plaintiff on May 19, 2006, which exceeds KRW 15,173,801,727, shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the costs of lawsuit, 90% is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

The Defendant’s disposition of imposing additional dues of KRW 15,311,945,550 against the Plaintiff on May 19, 2006 shall be revoked.

1. Details of the imposition;

A. The Plaintiff, established on May 19, 1967, conducted a revaluation of assets under the premise that the stocks are listed pursuant to Article 56-2 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4285 of Dec. 31, 1990; hereinafter the same shall apply) on October 1990, as an unlisted corporation engaged in the manufacture, export and import business, etc. of petroleum and petrochemicals including crude oil, natural gas, and ELP, etc., and calculated the revaluation spread (hereinafter “the revaluation spread of this case”) and revaluation tax as an asset revaluation tax, and did not impose revaluation tax (hereinafter “the revaluation spread of this case”) under Article 56-2 of the former Corporate Tax Act (amended by Act No. 4285 of Dec. 31, 1990; hereinafter “the previous revaluation spread”) on December 28, 1990; and did not impose revaluation tax (hereinafter “the previous revaluation spread”).

B. However, as seen in the relevant Acts and subordinate statutes, the Plaintiff, despite the fact that the listing period of stocks has been finally extended by December 31, 2003 as the Act on the Regulation of Tax Reduction and Exemption and the Enforcement Decree thereof prescribing special cases concerning revaluation at the time of disclosure of the company has been amended several times, was finally extended by December 31, 2003, the Plaintiff revoked the re-evaluation of the assets on December 30, 203 (hereinafter “instant re-evaluation”).

C. On April 16, 2004, the Defendant, upon ex officio cancelling the imposition of revaluation tax of this case, paid the Plaintiff the amount of 15,35,490,890 won for the refund of April 29, 2004 by adding the amount of 15,35,490,890 won to the above national tax refund for each business year as of April 29, 2004, as the Plaintiff filed a return and payment along with the tax base return for corporate tax for the business year including the date of cancelling the revaluation as a result of the revocation of revaluation of this case pursuant to Article 23(2) of the Addenda of the Regulation of Tax Reduction and Exemption Act (No. 4285, Dec. 31, 190). The Plaintiff’s voluntary evaluation profits under the Corporate Tax Act were added to the Plaintiff’s income for the business year from 190 to 199 to 190,190 to 190 to 3190,1994).

D. On July 9, 2004, the Plaintiff filed a national tax adjudication with the National Tax Tribunal seeking revocation of the corrective disposition, such as corporate tax, etc. on April 16, 2004 by the Defendant. The National Tax Tribunal decided to revoke the portion of the penalty tax of this case on May 10, 2005.

E. However, on March 22, 2006, the Ministry of Finance and Economy expressed its view that the additional dues (15,311,945,554 won excluding 43,545,36 won during the period from April 1, 2004 to April 29, 2004) shall be fully recovered, and accordingly, on May 19, 2006, the Defendant issued a notice of imposition of additional dues of KRW 15,35,490,890,151,315,545,50 (hereinafter “instant additional dues”) to collect the instant additional dues from the Plaintiff on December 31, 2004 (hereinafter “instant disposition of imposition”).

[Ground of recognition] Facts without dispute, Gap 1 through 5 evidence, Gap 6-1, 2, Eul 1 through 5 evidence, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) Plaintiff

(A) The refund of the revaluated tax amount resulting from the revocation of revaluation of this case is in accordance with Article 52 subparagraph 1 of the Framework Act on National Taxes (cancellation of the report that served as the basis of the payment after payment). Thus, the initial date of the additional refund of this case should be the day following the date of payment.

(B) The instant case does not fall under the refund of national taxes due to the amendment of the law and does not fall under the category of Article 52 subparagraph 5 of the Framework Act on National Taxes, but is not subject to the application of Article 52 subparagraph 5 of the same Act. Since assets revaluation tax refund and additional corporate tax are completely different from the legal nature and the grounds for imposition, it is unreasonable to calculate

(C) Therefore, even though the initial date of the instant additional dues ought to be seen as the day following the date of payment of revaluation tax of this case, the Defendant’s disposition of this case, which reported otherwise, was unlawful.

(2) Defendant

(A) Since the imposition of revaluation tax in this case is lawful, Article 52 Subparag. 1 of the Framework Act on National Taxes cannot be applied. The Defendant’s ex officio revocation of the imposition of revaluation tax in this case due to the amendment of relevant Acts and subordinate statutes, such as the Act on Regulation of Tax Reduction and Exemption, which provides for special cases concerning asset revaluation after lawful payment. Thus, the national tax refund constitutes Article 52 Subparag.

(B) Until the revocation of revaluation occurs, the Defendant cannot be deemed to have any legal ground for holding the revaluated tax of this case. Thus, additional additional dues on refund cannot be paid from the day following the date of payment of revaluation tax of this case.

(C) Since the corporate tax, etc. and the revaluation tax are closely related to the refund of the revaluated tax paid while imposing the corporate tax reduced or exempted on the same asset revaluation margin, if the additional tax, etc. cannot be collected by the deadline for filing the corporate tax base and the tax amount on December 31, 2003, which belongs to the same asset revaluation margin, it is natural that the additional refund amount equivalent to the period for which the corporate tax and other additional tax are not collected is not added to the refund of the revaluation tax already paid for the same asset

(D) Therefore, the Defendant’s disposition of this case rendered to refund the refund of the refund of this case erroneously refunded based on the date following the date of the payment of revaluation tax of this case as the initial date.

B. Relevant statutes

[Attachment 2] The entry is as follows.

(c) Markets:

(1) As to the holding of the revaluated tax amount by December 30, 2003

(A) The national tax refund constitutes “illegal enrichment” that is either received or held by the State without any legal cause despite the absence of any tax liability from the beginning or the lapse of such tax liability. As such, additional dues for refund calculated by multiplying the refund amount by the prescribed rate under Article 52 of the Framework Act on National Taxes is an interest on unjust enrichment. Thus, additional dues for refund are not independent of the refund amount, but has the nature of legal interest on refund claims and obligations (see Supreme Court Decision 2001Da60767, Jan. 11, 2002, etc.).

Meanwhile, according to Articles 51(1) and 52 of the Framework Act on National Taxes and Article 30 of the Enforcement Decree of the same Act, the head of a tax office shall immediately determine the amount of national tax paid by a taxpayer as a national tax, additional dues, or expenses for disposition on default, if there is an erroneous payment, excess payment, or refundable amount, among the amounts paid by a taxpayer as a national tax, additional dues, or expenses for disposition on default, and at the time when the national tax refund is appropriated or refunded. The aforementioned erroneous payment means the amount of tax paid or collected, notwithstanding the absence of a return (in the case of a tax return) or a disposition on imposition (in the case of a tax imposition) which serves as the basis of the payment or collection, or the immediate invalidity of a tax, the amount of tax paid or collected, and the amount of tax reduced wholly or partially by the revocation or revision thereof means the amount of tax paid or collected at the same time as the national tax refund becomes final and conclusive under Article 88 of the Framework Act on National Taxes and the amount of tax refunded at the same time as the tax return becomes final and conclusive under the law or other tax laws.

(B) In the instant case, ① The instant disposition imposing revaluation tax under the Assets Revaluation Act is based on the main sentence of Article 56-2(1) of the Regulation of Tax Reduction and Exemption Act, and was lawful, but the Plaintiff had reported and paid corporate tax, etc. pursuant to Article 23(2) of the Addenda by revoking the instant revaluation. However, aside from the occurrence of the issue of refund of revaluation tax, it cannot be deemed that the previous disposition imposing revaluation tax has a legal effect retroactively illegal. In addition, inasmuch as the duty of taxation and liability relationship becomes null and void upon the fulfillment of the cancellation condition (see Article 147(2) of the Civil Act), the Defendant’s imposition of revaluation tax under the Assets Revaluation Act cannot be deemed unlawful or retroactively based on Article 5(1) of the Framework Act on National Taxes (i.e., the payment of revaluation tax at the time of the instant declaration or erroneous determination after the fulfillment of the condition of revaluation under the Framework Act on National Taxes). Therefore, it cannot be deemed that the Plaintiff’s imposition of revaluation tax at the time of the instant declaration or erroneous determination under the Framework Act is unlawful or retroactive payment.

(C) Ultimately, the amount of revaluation tax of this case, which the defendant held until December 30, 203, does not constitute “amount overpaid or erroneously paid or overpaid,” and cannot be deemed as having been refunded under the tax law until December 30, 203. As to the possession of revaluation tax of this case by December 30, 2003, the legal principles on the refund of national taxes and the refund of additional refund of national taxes under Articles 51 and 52 of the Framework Act on National Taxes cannot be applied (where unjust enrichment is not established, additional refund, which is interest on unjust enrichment, cannot be deemed to accrue). Accordingly, the plaintiff’s assertion based on the premise that Article 51 and subparagraph 1 of Article 52 of the Framework Act on National Taxes is applicable until December 30, 2003, is without merit).

(D) In addition, the fact that the Defendant failed to calculate the initial date of the additional dues from the day following the payment date is due to the fact that the unjust enrichment was not established until December 30, 2003, and thus, the corporate tax was not collected. Therefore, the assets revaluation tax additional dues are completely different from the corporate tax and the legal nature and grounds for imposing corporate tax; however, the Defendant’s failure to collect corporate tax from the day following the payment date does not have any reason to claim this part of the Plaintiff’s assertion, as long as the initial date of additional dues is not calculated from the day after the payment date, solely on the ground that the Defendant

(2) As to the holding of the revaluated tax amount of this case since December 31, 2003

(A) Meanwhile, since December 31, 2003, the amount of revaluation tax of this case held by the Defendant constitutes “the amount of tax to be refunded to the tax-related Acts because it was lawfully paid but there was no justifiable reason to hold by the State thereafter,” and thus, notwithstanding the tax liability previously existed, the State constitutes “illegal gains held without any legal reason.” Thus, an additional refund for unjust enrichment, which is a statutory interest rate for unjust enrichment, is created, shall be determined by Article 56-2 of the Regulation of Tax Reduction and Exemption Act, Article 23(2) of the Addenda of the Regulation of Tax Reduction and Exemption Act (amended by Act No. 4285 of Dec. 31, 190), Article 138 of the Enforcement Decree of the same Act, etc.

(B) Although the Defendant asserts that Article 52 subparag. 5 of the Framework Act on National Taxes should apply to the initial date of its commencement, the Defendant’s refund of the revaluated tax of this case is not due to the occurrence of the fact of revoking the revaluation of this case, but due to the amendment of the law, it cannot be deemed that the initial date of commencing the refund of national tax due to the amendment of the law in Article 52 subparag. 5 of the Framework Act on National Taxes is directly applied to the refund of national tax

However, Article 52 of the Framework Act on National Taxes does not stipulate the procedures for refund of national tax and additional dues for which a tax payer's claim for refund has already become final and conclusive, but the claim for refund is not finalized only by the decision of the additional payment on the refund of national tax under the above provision (see Supreme Court en banc Decision 88Nu6436 delivered on June 15, 1989). Thus, as in this case, the amendment of the Acts and subordinate statutes extending the deadline for stock listing as in this case, and where additional dues have been incurred due to the cancellation of revaluation in this case, it is reasonable to apply Article 52 subparagraph 5 of the Framework Act on National Taxes by analogy to the date following the date when the cause occurs by analogy of Article 52 subparagraph 5 of the same Act.

(3) Conclusion

Based on the above legal principles and factual relations, the amount of the additional dues of this case, which the defendant has a legitimate authority to hold, is KRW 15,173,801,727 ( KRW 15,311,945,50-138,143,823) as stated in attached Form 1, and thus, the amount of KRW 15,173,801,727 of the disposition of this case is lawful, and the excess amount is unlawful.

3. Conclusion

Therefore, the plaintiff's claim is justified within the above scope of recognition, and the remaining claims are justified, and it is decided as per Disposition by the assent of all participating Justices.

[Attachment 2] Relevant Statutes: (Omission)

Justices Kim Jong-young (Presiding Justice)

1) Under-reported additional tax on corporate tax from 1990 to 1999: KRW 6,215,104,071; KRW 79,538,025,168; KRW 85,753,129,240; KRW 293,130,416; and KRW 28,97,472 of the unpaid additional tax on special rural development tax for the business year 1994; hereinafter “instant additional tax”).

2) Article 51(7) of the Framework Act on National Taxes provides that when the chief of a tax office claims the return of the amount already appropriated or paid as the determination of national tax refund (the determination of national tax refund is included in the determination of national tax refund) is revoked, the provisions of the National Tax Collection Act’s notification, demand and disposition on default shall apply mutatis mutandis. In light of the purport of the above provision, the instant disposition on imposition

3) Therefore, if the State does not have any legal basis for holding the amount of tax, additional dues equivalent to the interest on the national tax refund may not be deemed to accrue (see Supreme Court Decision 97Nu17674 delivered on September 21, 199).

4) From that time, due to the contingency of the revocation of the instant revaluation, the possession of the revaluated tax is merely a loss of legal cause, and cannot be deemed as a violation of the statute or an unlawful disposition by the Defendant.

5) The initial date of additional dues under Article 52 of the Framework Act on National Taxes can be deemed as a special rule on “the scope of return of unjust enrichment” under the Civil Act, and it cannot be deemed as a special rule on “illegal enrichment”. If there is no tax obligation originally imposed, if there is no additional dues under the tax law, the additional dues cannot be levied, as in the absence of unjust enrichment, if no additional dues are established.

In this regard, Article 52 Subparag. 5 of the Framework Act on National Taxes is applied mutatis mutandis, and thus, cannot be deemed as a violation of the principle of no taxation without law.