Cho Jae-2018- Daejeon-2266 (Law No. 19, 2018)

The fact that the relevant criminal judgment has become final and conclusive does not constitute the grounds for ex post facto request for correction.

The key issue of the related criminal judgment is whether the defendant's crime of embezzlement is established, so it cannot be viewed that there was a judgment corresponding to the ground for subsequent claim for correction under Article 45-2 (2) 1 of the Framework Act on National Taxes.

Request for correction, etc. under Article 45-2 of the Framework Act

Daejeon District Court 2018Guhap10252 Revocation of Disposition rejecting a rectification of global income tax

○ ○

○○ Head of tax office

July 18, 2019

August 22, 2019

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s refusal to correct the global income tax of KRW 750,562,560 (including additional tax of KRW 276,722,560) accrued to the Plaintiff on January 24, 2018 shall be revoked.

1. Details of the disposition;

A. On July 14, 2010, AA and BB (hereinafter referred to as “AB, etc.”) sold a building on the ground of the Daejeon ○○-dong (hereinafter referred to as “instant real estate”) to a school foundation (hereinafter referred to as “CCA”) and deposited 1.4 billion won (hereinafter referred to as “the instant money”) from CCA as a provisional contract deposit with a national bank account (hereinafter referred to as “the account used by AA”) in the name of the DD management office.

B. After the instant money was deposited in full on the same day as the check and was transferred to the account in the name of the EEEE Co., Ltd. (hereinafter “EEE”), the said money was withdrawn on July 28, 2010 by the full check and transferred to the account in the name of the Nonghyup Bank in the name of the EEEE Co., Ltd. (hereinafter “EE”), the said money was transferred to the account in the name of the Nong Bank ○○ branch account in the name of the Plaintiff via the Plaintiff.

C. With respect to the above flow of the check, the ○○○ Regional Tax Office requested EE, GGG, and the Plaintiff to submit a statement of financial transaction explanation. Accordingly, the JJ explained that the manager of EE received a payment receipt from AA and FF, and the Plaintiff from AA on the face of face to the Plaintiff. The GG representative III explained that the Plaintiff, a broker for the sale and purchase of the instant real estate, received a payment receipt from the Plaintiff, who is a driving range located in Busan ○○-dong, Busan, ○○○○○○○ (hereinafter “○○○”). The Plaintiff explained that “The Plaintiff received the instant real estate as a sales intermediary payment from the Plaintiff, a broker for the sale of the instant real estate.”

D. ○○○ Director of the Regional Tax Office notified the Defendant of the taxation data that the Plaintiff did not receive the instant money as a sales intermediary fee in relation to the transfer of the instant real estate, but did not file a comprehensive income tax return thereon.

E. On December 1, 2014, the Defendant decided and notified the Plaintiff of the global income tax of KRW 750,562,560 (including additional tax of KRW 276,722,560) for the year 2010 (hereinafter “instant taxation”). The Plaintiff paid KRW 350,562,560 on December 29, 2014, and KRW 400,000 on March 2, 2015.

F. HH was found guilty of violating the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement), including the instant money, and was sentenced to three years of imprisonment with prison labor for the following reasons: (a) HH and public prosecutor respectively appealed from around 1981 to around 2003; (b) but not listed on the register of theCCA while performing a practical role as the president, general manager of the financial affairs, personnel affairs, administrative affairs, etc.; and (c) while keeping compensation money for the expropriation of theCCA on February 2, 2017, HH was paid to the seller at an opportunity to purchase the instant real estate and embezzled KRW 2 billion in the manner of returning the money to the seller; and (b) was sentenced to imprisonment with prison labor for the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement District Court Decision 2016Da1888); and (c) the appellate court reversed the judgment of the first instance court and the lower court’s final judgment on June 23, 2017.

G. On December 4, 2017, the Plaintiff filed a request for correction with the Defendant to the effect that the instant money was not reverted to the Plaintiff by the relevant criminal judgment, and that the tax base and tax amount of the instant taxation should be corrected to zero won. However, on January 24, 2018, the relevant criminal judgment did not constitute the grounds for filing a subsequent request for correction under the Framework Act on National Taxes, and thus, rejected the said request for correction (hereinafter “instant refusal disposition”).

H. The Plaintiff appealed and filed a request for a tax trial on April 20, 2018, but was dismissed on July 19, 2018.

[Reasons for Recognition] A without dispute, A1, 4-8 (including branch numbers, if any; hereinafter the same shall apply), B1-8, the purport of the entire pleadings

2. Summary of the parties' arguments

A. The plaintiff

As long as it is confirmed through a final and conclusive criminal judgment that HH embezzled the instant money, the Plaintiff shall be deemed not to have received the instant money. As such, the relevant criminal judgment constitutes grounds for subsequent correction under Article 45-2(2)1 of the Framework Act on National Taxes. Therefore, the instant rejection disposition based on a different premise is unlawful.

B. Defendant

The relevant criminal judgment is not a civil judgment, but merely a determination on whether HH’s crime of embezzlement is established. Since an individual transaction surrounding the ownership of the instant money in the process of a trial, such as where HH both led to embezzlement, etc. while having led to the confession of embezzlement, etc., the individual transaction surrounding the ownership of the instant money is not treated transparently, it is difficult to deem that the instant money belongs to HH or was not attributed to the Plaintiff by the relevant criminal judgment. Ultimately, the relevant criminal judgment cannot be deemed to be a final judgment that determines the tax base of the instant taxation and the basis for calculating the amount of tax, and thus does not constitute grounds for filing a subsequent claim for rectification as prescribed in Article 45-2(2)1 of the Framework Act on National Taxes.

3. Relevant statutes;

The entries in the attached statutes are as follows.

4. Whether the rejection disposition of this case is illegal

A. Relevant legal principles

Article 45-2 (2) of the Framework Act on National Taxes (hereinafter referred to as the "Act") provides that "any person who has filed a tax base return by the statutory due date of return, or who has received the decision of the tax base and amount of national taxes, may request the decision or rectification within three months from the date on which he/she becomes aware that the cause has occurred if a cause falling under any of the following subparagraphs has occurred." The first declaration, decision or correction (hereinafter referred to as "the first declaration, etc.") provides that "if any transaction or act, etc. which is the basis of calculating the tax base and amount of taxes, becomes final and conclusive as different by a ruling (including reconciliation and other acts having the same effect as the judgment) in the lawsuit against it.

The purpose of the ex post facto request for correction is to expand the protection of taxpayers’ rights by allowing taxpayers to file a request for reduction of their tax base and amount of tax when there occurs any change in the basis for calculating the tax base and amount of tax due to the occurrence of a certain later cause after the establishment of the tax liability. In this context, the term “when the transaction, act, etc., as provided for in Article 45-2(2)1 of the Act becomes final and conclusive to be different by a judgment in a lawsuit against it” refers to the case where a dispute over the transaction, act, etc., which served as the basis for calculating the tax base and amount of tax after the first declaration, arises and the existence or existence of such transaction, act, etc. or legal effect thereof becomes final and conclusive to be different by a judgment in the lawsuit against it.

In light of the language and legislative intent of the above provision, where there is a judgment confirming transaction or act, etc. which is the basis of calculating the tax base and the amount of tax in the initial return and determination, it shall be deemed a ground for filing a subsequent request for correction under Article 45-2 (2) 1 of the Act, barring any special circumstance. The mere fact that a taxpayer can contest the details that became final and conclusive in the judgment as the ground for filing a request for correction in ordinary cases under each subparagraph of Article 45-2 (1) of the Act can not be excluded from the legitimate later request for correction by the taxpayer (see, e.g., Supreme Court Decision 2017Du41740, Sept. 7, 201

(b) Whether a criminal judgment can be included in the "judgment determined by the grounds for later filing a claim for correction pursuant to Article 45-2 (2) 1 of the Act;

1) In a case where the existence or legal effect of a transaction, act, etc., which is the basis of calculating the tax base and the amount of tax, can be determined not only by a civil judgment involving a taxable object subject to private transaction, but also by a criminal judgment, it may constitute a judgment which is the ground for a subsequent request for correction as prescribed in Article 45-2(2)1 of the Act. Specific reasons are as follows.

A) Article 45-2(2)1 of the Act only provides that “a judgment on a lawsuit related thereto is rendered without specifying the type of a lawsuit on the grounds of a subsequent claim for correction,” but does not limit the type of the judgment to a civil judgment. Such a form of provision is different from that of Article 26-2(2)1 of the Act, which provides for special cases concerning the limitation period for the imposition of national taxes, as one of the reasons under Article 26-2(2)1 of the Act, which provides that “a decision or final judgment on a lawsuit under the Administrative Litigation

B) Although the criminal judgment focuses on the main issue in determining the existence of a criminal fact, in a case where the issue as to the establishment of a criminal fact overlaps with or is in a deep relation to the recognition of facts relating to the requirements for taxation, assessment basis or assessment of tax amount, the judgment on the establishment of a criminal fact in the grounds of the criminal judgment refers to determining differently the basic facts relating to the assessment of tax base or tax amount of taxation disposition.

C) The circumstance that no transaction or act exists or there is a ground for invalidation exists, is inherent or original from the time of the act, and only through civil judgment, the absence or invalidation of the act is not formed or created. Likewise, in a criminal judgment, the absence or invalidation of any transaction or act, which serves as the basis for calculating the tax base and the amount of tax, may be actively determined through factual basis, which serves as the basis for determining the establishment of a crime recognized in the criminal judgment.

2) Therefore, in accordance with the legal principles as seen earlier, a criminal judgment also created a dispute over transactions, acts, etc., which served as the basis for calculating the tax base and the amount of duty after the first declaration, etc. was made, and ② The existence of such transactions, acts, etc. or their legal effects are confirmed to be different by a judgment in criminal proceedings pertaining thereto, and ③ the first declaration, etc. cannot be maintained properly, barring special circumstances, constitutes “a judgment, which is the ground for requesting subsequent correction as stipulated in Article 45-2(2)1 of the Act.”

However, the criminal judgment should be careful in order to hold a criminal judgment as a result of a criminal trial where a prosecutor and the defendant are both parties, unlike the civil judgment where the substance of the transaction is identified through pleadings as a result of a dispute over the existence or validity of the transactional act between the parties to the transaction or the transactional act which forms the basis of the tax base and the amount of tax, and in that the transaction or act is not directly subject to lawsuit as to the existence or validity of the transaction or act, it should be determined that the criminal judgment constitutes a judgment which is the ground for ex post facto request for correction as prescribed in Article 45-2 (2) 1 of the Act. In other words, in order to determine whether the criminal judgment is established, on the premise that the objective fact recognized through a criminal judgment clearly stated the facts related to the taxation requirements, tax base and the calculation of tax base or amount of tax for the taxation disposition which is the basis of the request for correction, and it can be said that the transaction or act has become final and conclusive to the extent that there is no possibility to dispute between the parties.

C. Whether the relevant criminal judgment constitutes “a judgment,” which is the ground for filing a subsequent request for correction under Article 45-2(2)1 of the Act, in relation to the instant taxation disposition

1) On the following grounds, the fact that the relevant criminal judgment became final and conclusive cannot be deemed as having rendered a judgment constituting the grounds for filing a subsequent claim for correction as to the instant taxation disposition under Article 45-2(2)1 of the Act.

A) The key issue of the instant criminal judgment focuses on whether HH (Defendant) who was in a position to keep the instant money for the CCA is embezzlement by embezzlement. In other words, the relevant criminal judgment did not determine whether the instant money belongs to any person under civil law, namely, whether the instant money belongs to a seller, such as AA, and the Plaintiff pursuant to the arrangement to pay good offices fees, in order to embezzled the instant real estate from AA, etc., the CCA entered into a so-called business contract, and the amount equivalent to the instant money, out of the difference between the actual purchase price and the amount paid, should be deposited into the agricultural cooperative account used by the FF, and then again, the fact that HH deposited the instant money into the agricultural cooperative account in the name of ESF used by the FF.

B) Even in view of the factual basis that the instant money was paid as a brokerage fee under the transaction or act that served as the basis for calculating the tax base and the amount of tax for the instant taxation, namely, the instant money was paid to the Plaintiff pursuant to the transaction arrangement agreement between AA, etc. and the Plaintiff, the conclusion that the instant money was ultimately granted to GG operated by III is still likely to still be concluded that the crime of embezzlement of HH is established. In other words, it cannot be readily concluded that the facts acknowledged in the relevant criminal judgment and the fact that the instant money was legally reverted to the Plaintiff in order to support the establishment of the crime of embezzlement of HH is impossible.

C) The relevant criminal judgment does not seem to be the result of a dispute arising out of a dispute arising between the Plaintiff and related parties, including AA, about whether the Plaintiff has a contractual right to hold the instant money. In addition to the aforementioned circumstances, it is difficult to deem that the agreement between the Plaintiff and related parties, including AA, to pay the instant money to the Plaintiff as a commission for good offices to the extent that there is no room for dispute between the Plaintiff and the Plaintiff and the Plaintiff, or that it is invalid as a false

2) Even if the relevant criminal judgment recognized that there was a collusion between HH and the Plaintiff to vest the instant money in the first place, and thus, the said judgment practically led to the existence of only the instant money to HH, namely, the fact that the instant money belonged to only the instant HH. In short, even if it has the meaning of confirming facts that are incompatible with the underlying facts that are the basis for taxation of the instant taxation disposition, the Plaintiff’s filing of a request for correction of the instant taxation disposition on the grounds that the relevant criminal judgment became final and conclusive in the instant case contradicts the purport of the subsequent claim for correction, and thus, there is a special circumstance that should not be considered as the grounds for filing a request for correction.

A) As seen earlier, the system of ex post facto request for correction is intended to expand the relief of taxpayers’ rights by allowing taxpayers to file a request for reduction by proving the relevant facts in a case where there is a change in the tax base and the basis for calculating the amount of tax due to the occurrence of a certain later cause after the establishment of the tax liability. Therefore, even in a case where the ground for ex post facto request for correction is a criminal judgment, ① a person who filed a request for correction actively created a valid transaction or act, which is the basis of taxation, for the purpose of committing a crime, aiding and abetting a crime, or concealing criminal proceeds, beyond simply having been aware of the fact that the transaction or act becomes null and void or null and void from the beginning at the time of taxation, and ② a criminal judgment recognizing the establishment of a crime that is incompatible with the appearance thereof became final and conclusive. ③ In such a case where special circumstances are acknowledged, such as the lapse of the limitation period for imposing tax on a taxpayer without such appearance, and thus the State’s request for correction cannot realize the same amount of tax claim from the true taxpayer.

B) The Plaintiff received the instant taxation is due to the Plaintiff’s intentional appearance by submitting to the ○○○ Regional Tax Office a false financial transaction statement that the Plaintiff acquired in order to conceal the fact that HH embezzled embezzled the instant money. Meanwhile, the global income tax and additional tax imposed on the Plaintiff on the ground that the Plaintiff obtained income equivalent to the instant money, based on the Plaintiff’s global income tax and additional tax were all borne by HH.

C) However, the Plaintiff asserted that the instant money was not attributed to himself/herself, on the ground that the embezzlement of HH was found guilty through the relevant criminal judgment, and claiming a subsequent rectification of the instant taxation disposition by asserting that the said money was not attributed to himself/herself, the Plaintiff’s claim for a subsequent rectification of the instant taxation disposition by asserting that the Plaintiff denied the instant taxation disposition by the tax authority trusted in the appearance formed by its own cause attributable to himself/herself, and thus, it is unreasonable to deem the Plaintiff to be entitled to seek a refund of the tax

D) In the instant case where the limitation period of imposition of taxes on HH is deemed to have already lapsed (Article 26-2(2)5 of the Act), if the Defendant received the Plaintiff’s request for correction based on the relevant criminal judgment, it may result in an unfair loss of the State’s taxation rights as a result of the formation of a false transaction appearance between the parties and the subsequent correction on the ground thereof.

5. Conclusion

The plaintiff's claim is dismissed on the ground that it is without merit.