Whether a tax invoice received from an enterprise which was accused of by data is a processed tax invoice.

Since there is a lack of evidence to prove that the tax invoice was prepared falsely without real transaction, or that the purpose of purchase and the other party to payment are false, the imposition of corporate tax and the notice of change in the amount of income on the premise that the tax invoice in this case is false shall be unlawful

Article 13 of the Corporate Tax Act

1. The Defendant’s imposition of KRW 19,706,510 of corporate tax for the business year 2003, July 10, 2006 against the Plaintiff and the imposition of KRW 55,000,000,000 as of July 1, 2006 shall be revoked in entirety.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

The following facts are either disputed between the parties, or acknowledged by the whole purport of the pleadings in each entry of Gap evidence 1 through 3, Gap evidence 2, Eul evidence 1 through Eul evidence 5:

A. The Plaintiff is a company engaged in the manufacture, sale, and various incidental businesses of PVC. On June 24, 2003, the Plaintiff received a tax invoice of KRW 50 million (hereinafter “instant tax invoice”) from 00,000,000 in supply value from ○○○ HybS Co., Ltd. (after ○○○ HybS, the name was changed; hereinafter “○ ○○ HybS”), and filed a tax invoice of KRW 50,000,000 in supply value (hereinafter “instant tax invoice”). After reporting the value-added tax for the first period of 203 and corporate tax for the 2003 business year, the amount of the said tax invoice was deducted as tax deduction

B. As a result of the tax investigation conducted on ○○○○○○ Hyb S, the head of ○○ Tax Office issued a processing tax invoice of KRW 3,424,329,00 in total to 13 companies from the taxable period of the value-added tax in January 2003 to the taxable period of the value-added tax in February 2, 2004, and confirmed that he received the processing tax invoice of KRW 1,571,635,00 in total without real transactions, and notified the Defendant of the pertinent matters as data to the investigation agency.

C. The Defendant determined on July 1, 2006 that the instant tax invoice was received without real transaction based on the taxation data that was received. Therefore, on July 1, 2006, the Defendant disposed of the amount of the instant tax invoice as the bonus of the Plaintiff’s representative, and notified the Plaintiff of the change in the amount of income. On July 10, 2006, the Defendant issued a revised notice of KRW 8,121,500, and KRW 19,705,510, which was the corporate tax for the business year 2003.

D. On September 11, 2006, the Plaintiff asserted that the instant tax invoice was authentic, and filed an objection against the Defendant on September 11, 2006, but was dismissed on October 31, 2006, and the Plaintiff appealed to the National Tax Tribunal on December 27, 2006, but was dismissed on February 16, 2007 (the date of service of the written decision was February 21, 2007).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant tax invoice is not processed since it was actually delivered by the Plaintiff to implement the subcontracted construction work. Therefore, the instant tax assessment disposition and the notice of change in the amount of income, which were conducted on the premise thereof, are all unlawful.

B. Determination

(1) The issues of the instant case

The key issue of the instant case is whether the instant tax invoice is a processed tax invoice issued without real transaction.

(2) Facts of recognition

The following facts may be acknowledged by comprehensively taking into account the following facts: Gap evidence 3 through Gap evidence 6, Gap evidence 10, Eul evidence 5, Eul evidence 6, Eul evidence 1 through 4, Gap evidence 7-1, Eul evidence 7-2, Eul evidence 8-1, Gap evidence 11, part of Eul evidence 11, Eul evidence of Lee ○○'s testimony.

(A) From February 2, 2003 to June 2, 2003, the Plaintiff was awarded a subcontract for the construction of balcony heading on the ○○○-dong reconstruction apartment located in ○○○-dong, ○○○○-dong.

(B) The Plaintiff was supplied the glass necessary for the said construction from ○○○○ HybS (at that time, the representative director’s branch office was ○○ DobS). Although ○○ DobS decided to perform the construction of the glass originally supplied to the Plaintiff over 11 floors, the Plaintiff actually did not complete the construction of only nine floors, and did not complete the construction of the remaining two floors.

(C) In early 2003, 003 ○○○○○○○ was holding 12.17% of the shares, 35% of the shares, 15% of the shares of Y○○○○○○, and Y○○○○ was holding shares on behalf of ○○○○○’s wife, and 37.83% of the shares, which are credit bad at the time) and ○○○○○ owns 37.83% of the shares. Thereafter, ○○ became the largest shareholder by taking over part of the shares of Y○○, Y○○, and ○○○○○○, and the name of the company was changed to ○○○○○○○○○’s representative director on December 29, 2003.

(D) The director of the tax office of ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ was convicted of a charge, and was prosecuted for 168,40,000 won in total from October 30, 200 to May 29, 2004, and was sentenced to a suspended sentence for 168,40,000 won for a false tax invoice from October 30, 2003 to December 31, 204. As a result of the investigation, ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ was sentenced to a suspended sentence for 120,200,000 won for a false tax invoice issued from October 30, 2003 to December 30, 2006.

(E) Around 2003, ○ General Construction issued one promissory note (i.e., one’s own 03510810) and delivered it to the Plaintiff. The Plaintiff endorsed and delivered it to ○○○. The Plaintiff again endorsed and delivered it to ○○○○, who is the chief of the management department of ○○ glass Co., Ltd.

(3) Relevant statutes

It is as shown in the attached Table related statutes.

(4) Determination

(A) In the administrative litigation seeking the revocation of a taxation disposition on the grounds of illegality, the tax authority has the burden of proving the legality of the taxation disposition and the existence of the taxation requirement fact, and thus, the tax authority should bear the burden of proving necessary expenses, which are the basis of the determination of taxable income. However, insofar as there are special circumstances such as where the tax invoice on some of the expenses reported by the taxpayer was proved to be false without real transactions, the tax authority can reasonably present data, such as books and evidence, regarding the fact that such expenses have been actually paid, and where there are special circumstances, such as the purpose of the tax obligor’s assertion and the case where the other party to the payment was proved to be false (see Supreme Court Decision 2005Du16406, Apr. 14, 2006).

(B) There is insufficient evidence to acknowledge that the instant tax invoice was prepared in falsity without real transactions, or that the purchase purpose alleged by the Plaintiff and the other party to the payment were false.

(C) Rather, in full view of the following circumstances acknowledged by the aforementioned facts, ① the Plaintiff was given a subcontract for Changho Construction from February 2003 to June 2, 200, and then again subcontracted to ○○○○○○○○○○○○○○ Construction, which is part of its sub-subcontract, and thus, it is naturally anticipated to pay the construction cost. ② The face value of promissorysory notes (Evidence A6) issued by the Plaintiff to ○○○○○○○○○○○○○ Construction, which is KRW 5 million, is less than KRW 5,00,000,000 in total. Meanwhile, ○○○○○○○ Construction, which was subject to the instant sub-subcontract, did not complete a part of the said sub-subcontract, and thus, it appears that it would rather be natural to reduce the remuneration corresponding to the said sub-subcontract’s non-subcontract. ③ Although the said promissory notes were sold to ○○○○○○○○, which is a de facto shareholder of the said ○○○○○○○.

(D) Therefore, the instant tax disposition based on the premise that the instant invoice is a false invoice and the instant notice of change in the income amount is unlawful.

3. Conclusion

The plaintiff's claim is justified and accepted.

(Related Statutes)

Corporate Tax Act

Article 13 (Tax Base) The tax base for corporate tax on income for each business year of a domestic corporation shall be the amount obtained by deducting the amount and income under each of the following subparagraphs in sequential order within the scope of income for each business year:

1. The amount of losses incurred during each business year within the five years prior to the first day of the current business year which were not thereafter deducted in the tax base;

2. Non-taxable income under this Act and other Acts; and

3. Amount of income deduction under this Act and other Acts.

Article 14 (Income for Each Business Year)

(1) The income of a domestic corporation for each business year shall be the total amount of losses incurred during the business year deducted from the total amount of earnings during the business year.

(2) The amount of losses of a domestic corporation for each business year shall be the total amount of earnings during the business year deducted from the total amount of losses incurred during the business year.

Article 19 (Scope of Deductible Expenses)

(1) Deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of a corporation, excluding return of capital or financing, disposition of surplus funds, and what is provided for in this Act.

(2) The losses under the provisions of paragraph (1) shall be losses or expenses generated or spent in connection with the business of a corporation which are generally accepted as normal or directly related to profit, except as otherwise prescribed by this Act and other Acts and subordinate statutes.

(3) Matters necessary for the scope and types of losses under the provisions of paragraphs (1) and (2) shall be prescribed by Presidential Decree.

Article 66 (Settlement and Correction before Amendment by Act No. 705 of December 30, 2003)

(1) Where any domestic corporation fails to report pursuant to Article 60, the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall determine the tax base and tax

(2) Where a domestic corporation files a report under Article 60 in any of the following cases, the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and

1. Where there are errors or omissions in the contents of the report;

In filing a report on the tax base of corporate tax on income for each business year pursuant to the provisions of Article 60 or in determining or revising the tax base of corporate tax pursuant to the provisions of Article 66 or 69, the amount included in gross income shall be disposed of as bonus, dividend, other outflow from the company, internal reservation, etc. according to the person to whom it belongs as prescribed by Presidential Decree