National Tax Service Review Income 2010-0130 (201.04.04)

Although not notifying in advance the tax items, etc. subject to the tax investigation, it is not likely to have an impact on the illegality of the disposition.

A taxpayer shall be notified of the tax items, etc. 10 days prior to the commencement of the investigation: Provided, That where it is deemed that the prior notification could not achieve the purpose of the investigation due to destruction of evidence, etc., the prior notification may be omitted, but the prior notification was not given to the Plaintiff prior to the commencement of the investigation, but the procedural defect may not be deemed as serious as affecting the illegality of the disposition of this case.

2010Guhap15972 Revocation of Disposition imposing aggregate land tax, etc.

right XX

Head of the Suwon Tax Office and one other

August 30, 2012

September 20, 2012

1. All of the plaintiff's claims are dismissed.

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

On May 3, 2010, the head of Suwon Tax Office imposed global income tax of 000 won on the Plaintiff for the year 2001, and the head of Suwon Tax Office imposed global income tax of 000 won on the Plaintiff on May 4, 2010, respectively, the imposition of value-added tax of 200 won for the second period of 201 against the Plaintiff shall be revoked.

1. Details of the disposition;

A. On October 2001, the Plaintiff sold to KimA the 1,708.05 square meters of the total floor area of the building and the 1,708.05 square meters of the building site in Suwon-si, Suwon-si, 2001 (hereinafter “instant real estate”). On October 30, 2001, the Plaintiff filed a global income tax and value-added tax return with the sales value of the instant real estate as 00 won.

B. Since then, KimA sold the instant real estate to a third party, on August 12, 2002, the transfer value of the instant real estate was KRW 000, and the acquisition value was KRW 000.

C. The Defendants determined that the Plaintiff sold the instant real estate to KimA in KRW 000 after undergoing a tax investigation with the Plaintiff, and notified the Plaintiff on March 26, 2009 that the Plaintiff would impose global income tax for 2001 and value-added tax for the second period of 2001. The Plaintiff filed a request for pre-assessment review on March 11, 201, but the request was dismissed.

D. On May 3, 2010, the director of the Suwon Tax Office having jurisdiction over the Plaintiff’s domicile imposed global income tax of 000 won on the Plaintiff in 2001, and the director of the tax office having jurisdiction over the Plaintiff’s business place impose on the Plaintiff KRW 000 of the value-added tax for the second period of 2001 on the Plaintiff on May 4, 2010. On June 21, 2010, the Plaintiff filed a request for review against the Plaintiff on the ground that the request for review was dismissed on September 7, 2010, the Plaintiff filed the instant lawsuit on November 16, 2010.

[Ground of recognition] Facts without dispute, Eul evidence Nos. 1 and 2, purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) Each of the dispositions of this case is unlawful, since the tax investigation of the plaintiff was conducted in the following manner, and its illegality is serious.

① Although the Plaintiff filed a request for pre-assessment review to select the Plaintiff as a subject of tax investigation, the Plaintiff did not file a request for review of tax propriety before February 9, 2009.

② On January 15, 2009, the Suwon Tax Office requested the Central Regional Tax Office to conduct an investigation into KimA, but the Central District Tax Office conducted an investigation into the Plaintiff, other than KimA, and conducted an illegal reinspection.

③ On February 9, 2009, in violation of Article 81-7 of the Framework Act on National Taxes and Article 21(1) of the Regulations on the Management of Investigations, the Central and Regional Tax Office immediately started a tax investigation without giving prior notice to the Plaintiff.

④ The Central Regional Tax Office extended the period of investigation without obtaining the approval of the Taxpayer Protection Committee. Without lawful approval procedures, the Ministry of Strategy and Finance asked the Plaintiff’s spouse, other than those subject to investigation, about details of financial transactions, and infringed the Plaintiff’s right to disclose

(2) The sale and purchase contract, the transfer value of which is 000, submitted by KimA, shall not be deemed a real sales contract in light of the following: (a) the sales and purchase contract for the real estate at the time of the contract; (b) the officially announced price of the real estate at the time of the contract; (c) the omission of the contract date; and (d) the actual payment of the intermediate payment, which is the difference between KimA and the part payment claimed by the Plaintiff, is not indicated in the contract; (b) there is insufficient grounds to deem that the Plaintiff was actually paid KRW 00,000, which is the difference between KimA and the part payment claimed by the Plaintiff; and (c) the Plaintiff’s signature on the relevant documents, such as the sales and sale contract (Evidence No. 11) and the intermediate payment receipt (Evidence No. 15), and LeeB’s letter (Evidence No. 14

(3) Around August 2002, when KimA reported the transfer income tax of the real estate of this case, the Defendants made each of the dispositions of this case from around 2002 to 2010, which was more than five years from the date on which the pertinent national tax could be imposed, even though they could have investigated and corrected the actual transaction price. Accordingly, each of the dispositions of this case was made after the expiration of the exclusion period of imposition.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) Whether a tax investigation by the Plaintiff is lawful

(A) Facts of recognition

The following facts may be acknowledged in light of Gap's evidence Nos. 4, 5, 6, 8, 9, 10, 13, 20, 21, 22, Eul's evidence Nos. 16, 19, 18, and 20 (including branch numbers; hereinafter the same shall apply) and the purport of the whole pleading in the testimony of a witness transferred to the witness.

① After KimA’s report of transfer income tax, the director of the Central Regional Tax Office of China reported the transfer income tax to KRW 000,000, the value of the instant real estate on the balance sheet of the global income tax return for the year 2001 of KimA, and the acquisition value was KRW 000,000, and the indirect investigation of transfer income tax against KimA was conducted from December 5, 2007 to December 27, 2007 on the ground that there was a suspicion of excessive appropriation. As a result, on December 27, 2007, the acquisition value of the instant real estate was deemed as KRW 00, and notified the head of the Suwon

② Around October 2008, the head of the Suwon Tax Office requested the Plaintiff to submit explanatory data on the transfer price of the instant real estate, and accordingly, the Plaintiff submitted explanatory data. On November 7, 2008, the Suwon Tax Dispute Advisory Committee, which conducted an investigation into the Gimwon Tax Office with explanatory data submitted by the Plaintiff, decided to “decision according to the result of the investigation,” and accordingly requested the Central Regional Tax Office to present its opinion.

③ On December 18, 2008, the mid-term regional tax office made the first investigation to the head of the Suwon District Tax Office on December 18, 2008, that the investigation is conducted only with the documents submitted by KimA and the Plaintiff, who is the person subject to investigation, and that it is impossible to determine the authenticity of the supporting documents submitted by the Plaintiff and the actual transaction price. As such, in the Suwon Tax Office having jurisdiction over the Plaintiff’s domicile, the head of the competent regional tax office made a reply that the investigation should be conducted by selecting the Plaintiff as the person subject to investigation,

④ On January 15, 2009, the head of the Suwon District Tax Office requested the Central Tax Office to verify the acquisition value of KimA on the grounds that KimA is the Plaintiff’s counterpart to the regional tax office, and accordingly, the Central District Tax Office selected the Plaintiff as the subject of a partial investigation to verify the sale price of the instant real estate and made an investigation into the Plaintiff from February 9, 2009 to February 23, 2009. However, the Central District Tax Office extended the period of investigation by March 23, 2009 on the grounds that the transaction period has elapsed for a considerable time to find financial transaction data after the lapse of the time of investigation (the Plaintiff signed and sealed an application for extension of the period of investigation on the last day of February 2009), and after completing the investigation into the Plaintiff, the Central District Tax Office notified the Plaintiff of the sale price of the instant real estate as KRW 00 won.

⑤ On March 26, 2009, the head of the Suwon Tax Office notified the Plaintiff of the notice of taxation that the global income tax for the year 2001 and the second half-year value-added tax for the year 2001 according to the above findings.

④ As to this, the Plaintiff filed a request for pre-assessment review on April 28, 2009, the Plaintiff re-audited the sale price of the instant real estate from January 21, 2010 to February 1, 2010, and as a result, the transfer price of the instant real estate was 000 won including value-added tax on the building. As to this, the Plaintiff filed a request for pre-assessment review on March 11, 2010, but the said request was rejected.

(B) Determination

1) Based on the above facts of recognition, the plaintiff's assertion (1) to 4 is judged in order.

2) First, as to the assertion ① The Plaintiff’s selection of the Plaintiff as the subject of tax investigation was conducted by filing a transfer income tax report with the Central Tax Office on August 12, 2002 by the Jung-gu Regional Tax Office, and as a result, an indirect investigation of transfer income tax on KimA was conducted. As a result, the acquisition value of the instant real estate was investigated at KRW 000, and accordingly, it was caused by the director of the Central Regional Tax Office’s notification of taxation data to the head of the competent Regional Tax Office

Next, regarding the assertion, the Health House and the Suwon Tax Base Advisory Committee requested the Central Tax Office to conduct a verification investigation on the acquisition value of KimA pursuant to Article 81-4 (2) 2 of the Framework Act on National Taxes on the grounds that KimA is the Plaintiff’s counterpart to the transaction. In order to verify the sale price of the real estate of this case, the Central Tax Office selected the Plaintiff as a person subject to a partial investigation on the part of an individual entrepreneur and conducts a tax investigation to verify the transaction price of the real estate of this case, and thus, the

(3) On the following argument, according to Article 81-7(1) of the Framework Act on National Taxes, where a tax official conducts a tax investigation, he/she shall notify the taxpayer subject to the investigation of the details of the investigation at least 10 days prior to the commencement of the investigation, and where it is deemed that the purpose of the investigation cannot be achieved due to destruction of evidence, etc. if a prior notification is made, he/she may conduct an investigation without prior notification. According to the above facts of recognition, a mid-term regional tax office did not notify the Plaintiff of the tax items, etc. subject to investigation prior to the commencement of the tax investigation, but such procedural defect does not seem to have

Finally, according to the above evidence, the Central Tax Office extended the investigation period against the plaintiff through legitimate procedures, such as approval for extension of investigation period, and it can be acknowledged that the plaintiff and his spouse were inquired of financial transaction details through legitimate internal approval, and the reason why the plaintiff's right to information disclosure and access was infringed in the course of the tax investigation against the plaintiff cannot be viewed as a ground for illegality of each disposition of this case, separate from taking measures such as requesting information disclosure based on the public institution's law on the disclosure of information.

3) Therefore, the Plaintiff’s assertion that each of the dispositions of this case is unlawful is without merit, since the tax investigation of the Plaintiff is unlawful in the process.

(2) Actual transfer value of the instant real estate

(A) Facts of recognition

① A real estate sales contract (hereinafter “00 won contract”) stating that the Plaintiff sells the instant real estate to KimA for the purchase price of KRW 000 (the purchase price of KRW 000, the remainder amount of KRW 000) exists. Of the remainder amount, the contract deposit column is stated as KRW 000, and the Plaintiff’s seal is affixed on that side, and the contract date column is public column. Meanwhile, the above contract is written as KRW 125-2, the address of KimA is written as KRW 125-2, the seller, buyer, and broker column, and the signature and seal of this date is written as KRW 1.2.2.2.2.2.2.2.2.2.2.3.2.2.2.2. the remainder amount of the contract is written as “the Government bank” and “the Bank” as “the Bank of Korea’s bill and note by December 14, 201.”

② The Plaintiff’s real estate sales contract (hereinafter referred to as “00 won contract”) stating that the Plaintiff sells the instant real estate to KimA at KRW 000 (the down payment of KRW 000, intermediate payment of KRW 000, and the remainder of KRW 000,000), the contract date is October 9, 2001, and KimA’s address is KRW 110,000,000 for both sides. The seller and the buyer’s column are affixed with the seal of the Plaintiff and KimA, but the seal of the Plaintiff and KimA’s seal is affixed to the intermediary column. In addition, the special agreement states that KRW 523,200,000,000 and KRW 1679,31,000,000 among the remainder, the remainder of the value-added tax is paid by the Bank prior to February 14, 201.

③ On October 22, 2001, the Plaintiff issued a receipt to KimA, to the effect that he received KRW 000 as an intermediate payment of the instant real estate, and on October 30, 2001, the Plaintiff received KRW 000 as the remainder of the instant real estate (Evidence 15).

④ On September 24, 2002, 2002, the Plaintiff and KimA traded the instant real estate as its intermediary. The Plaintiff and KimA prepared a written confirmation confirming that the sales amount was KRW 000, and separately, KimA paid KRW 000, value-added tax on the building to the Plaintiff, and that the receipt of value-added tax was not issued separately.

(5) The flow of funds relating to receipt of the purchase price.

6) At the time of the conclusion of the instant sales contract, KimA had owned the building located in Suwon-si 125-2, Suwon-si, and had resided therein. However, at the time of the conclusion of the instant sales contract, KimA transferred the building to 110, in order to construct the building by purchasing the land located in XX 72-5, the land located in Yongsan-si 72-5.

7) On March 20, 2009, the Plaintiff prepared a confirmation document stating that “The Plaintiff sold the instant real estate to the KimA on October 10, 2001 and the sales contract of KRW 000 is the actual contract” (No. 5-1).

[Reasons for Recognition] Each of the statements in Gap evidence Nos. 11, 19 Eul, 5, 11, 12, 13, 14, and 17, witness KimA, and Lee B's testimony and the purport of the whole pleadings

(B) Determination

1) In full view of the above recognized facts and the following circumstances revealed therefrom, it is reasonable to view that the actual sale price of the instant real estate is KRW 000, and the sales contract of KRW 000 was made for the purpose of reporting to the tax office under an agreement with KimA.

① Although the Plaintiff asserts that the sales contract was forged, it is difficult to view that the above contract was forged solely on the grounds that the date of the contract became a public space or that the address of KimA stated in the buyer column was entered differently from the address indicated in the resident registration. On the contrary, there is no other evidence to acknowledge that the above contract was forged. On the contrary, the above sales contract was made by LeeB, a broker, like each intermediate payment receipt or the sales contract of KRW 000, and the seal affixed on the Plaintiff’s name appears to be the same as the Plaintiff’s seal impression. In light of the contents of the above contract, it is sufficiently recognized that the two parties’ performance details are more specifically stated than the sales contract of KRW 00,00, and that the report on the transaction price at the tax office may be compatible with the existence of the sales contract at the officially announced price, etc., as well as all all other circumstances, including the existence of the original sales contract and the testimony of KimA and LeeB.

② Comprehensively taking account of the details of the capital flow related to the receipt of the purchase price, the Plaintiff and KimA are deemed to have received KRW 000 as a down payment and consistent with the contents of the sales contract, while the remaining receipt that the Plaintiff recognizes as the authenticity is stated as having received KRW 000,000, different from the balance under the sales contract of KRW 000, which the Plaintiff claims as a genuine contract.

③ Although there is no agreement regarding the payment of intermediate payments, it is difficult to conclude that the Plaintiff’s request for the advance payment of part of the remainder in order to repay the secured debt of the right to collateral security established on the instant real estate before the remainder payment date is due under the circumstance that the remainder payment date is less than 20 days from the contract date, and the registration of creation of collateral security established on the instant real estate was cancelled in the name of Suwon National Agricultural Cooperative in Suwonwon, which was established on the instant real estate immediately after the intermediate payment is received

④ Unless there are special circumstances, such as that if a tax authority received a written confirmation from a person liable to pay tax in the course of conducting a tax investigation as a person conducting a specific transaction, it may not readily deny the evidence of the written confirmation, barring any such special circumstance as where the written confirmation was forced against his will or it is difficult to be deemed as a supporting material for the specific facts due to paralysis of its content (see Supreme Court Decision 2001Du2560, Dec. 6, 2002). The Plaintiff, at the time of the tax investigation, prepared a written confirmation that the sales price of the instant real estate pursuant to a sales contract between the Plaintiff and KimA was KRW 00,000 and KRW 00,000, which is recognized as a real contract, and issued it to the Defendant. There is no evidence to deem that the written confirmation was prepared against the Plaintiff’s will.

2) Therefore, this part of the allegation that the actual transfer value of the instant real estate according to a sales contract between the Plaintiff and KimA is not 000 won but 000 won is without merit.

(3) Whether the exclusion period has expired

Article 26-2(1)1 of the Framework Act on National Taxes provides that if a taxpayer evades a national tax, obtains a refund or deduction by fraudulent or other unlawful means, it may be imposed for ten years from the date on which the national tax can be imposed. "Fraud or other unlawful acts" in this context mean fraudulent or other active acts that make it impossible or considerably difficult to impose or collect taxes. As seen earlier, even though the Plaintiff sold the instant real estate to KimA for 00 won, it is deemed that he/she reported and paid global income tax and value-added tax along with a false sales contract stating 00 won for the purpose of paying less global income tax and value-added tax, so long as the Plaintiff reported and paid global income tax and value-added tax to KimA, such act constitutes a fraudulent or other unlawful act to which the exclusion period for 10 years applies, and thus, the Plaintiff’s assertion on this portion is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.