In a case where a taxpayer undergoes a false certification and underreporting the tax base but did not know that the certification was false, whether it constitutes “a case of underreporting the tax base by an unjust means” (negative), and whether the case where a taxpayer did not know that the tax base was false by gross negligence (negative) / In a case where a taxpayer received a “illegal tax invoice” different from a supplier under a tax invoice and an actual supplier and received input tax deduction or refund, requirements to constitute “a case of underreporting the tax base by an unjust method” under Article 47-3(2)1 of the former Framework Act on National Taxes

In light of the language, structure, etc. of the relevant provisions under Article 47-3(2)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011; hereinafter “former Framework Act on National Taxes”), even if a taxpayer received false certification and underreporting the tax base, if the taxpayer did not know that he/she received false certification, it does not constitute “where he/she underreporting the tax base by improper means” and the taxpayer did not know that he/she was underreporting the tax base by gross negligence. Moreover, in order for the taxpayer to constitute “where he/she underreporting the tax base by improper means” as stipulated under Article 47-3(2)1 of the former Framework Act on National Taxes to constitute “where he/she received the input tax deduction or refund,” such act should be deemed to constitute “where he/she underreporting the tax base by improper means” under Article 47-3(2)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 3, 201).

Articles 47-2(2), 47-3(2)1, 47-5(1), and 48(1) of the former Framework Act on National Taxes (Amended by Act No. 11124, Dec. 31, 2011); Article 27(2)3 (current deleted) and 6 (current deleted) of the former Enforcement Decree of the Framework Act on National Taxes (Amended by Presidential Decree No. 23592, Feb. 2, 2012);

Current Metal Co., Ltd.

Head of the tax office

Busan High Court Decision 2013Nu3085 decided July 18, 2014

The part of the judgment of the court below concerning the imposition of unfair under-reported additional taxes is reversed, and that part of the case is remanded to Busan High Court. The remaining appeals are dismissed.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

Based on the adopted evidence, the lower court acknowledged the facts as indicated in its reasoning, and determined that the instant tax invoice, which was delivered by the Plaintiff operating a non-ferrous metal wholesale business, etc. from Pungdong Co., Ltd. during the 1st VAT taxable period of 2011, constituted a “unlawful tax invoice” written differently between the supplier and the actual supplier on

In light of the relevant legal principles and records, the above fact-finding and judgment of the court below are just, and contrary to what is alleged in the grounds of appeal, there is no violation of the principle of free evaluation of evidence.

2. Regarding ground of appeal No. 2

If a supplier and an actual supplier are different, an input tax amount under a tax invoice may not be deducted or refundable unless there is any special circumstance that the person who received the tax invoice was unaware of the fact that the supplier was unaware of the nominal name of the tax invoice. Furthermore, the fact that the person who received the tax invoice was not negligent in not knowing the above nominal name should be attested by the party who asserts the deduction or refund of the input tax amount (see Supreme Court Decision 2002Du2277, Jun. 28, 2002, etc.).

The lower court, based on the circumstances indicated in its reasoning, determined that the evidence submitted by the Plaintiff was insufficient to deem that the Plaintiff was unaware of, or was unaware of, the fact that the Plaintiff was unaware of the name.

In light of the above legal principles and the records, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of the legal principles as to "trade party with no fault or negligence" subject to the deduction of input tax amount under the Value-Added Tax Act,

3. As to the third ground for appeal

A. Article 47-3(2)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011; hereinafter the same) provides that an amount equivalent to 40/100 of the amount calculated by multiplying the amount of tax payable by the calculated tax by the ratio of the amount equivalent to the underreported tax base to the amount of tax base in an unjust manner shall be added to, or deducted from, the amount of tax payable. In addition, Article 47-2(2) of the former Framework Act on National Taxes defines the meaning of “an unjust method” as “an act prescribed by Presidential Decree, in violation of the duty to report the tax base or amount of national tax, on the basis of the concealment or pretending of all or part of the fact that serves as the basis for calculating the tax base or amount of national tax,” and Article 27(2)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 23592, Feb. 2, 2012) provides that a taxpayer may receive any false or fraudulent method from,

On the other hand, Articles 47-5(1) and 48(1) of the former Framework Act on National Taxes stipulate that where a taxpayer fails to pay a national tax by the due date under the tax-related Acts without justifiable grounds, or the paid tax falls short of the payable tax amount, an additional tax shall be imposed.

B. In light of the circumstances stated in its holding, the lower court determined that the imposition of the instant unfair under-reported additional tax and the additional tax for unfaithful payment is lawful on the ground that the Plaintiff’s issuance of the instant tax invoice and the Plaintiff’s return and payment of value-added tax after deducting the input tax amount constituted “an unjust method” under Article 47-3(2)1 of the former Framework Act on National Taxes, and that it is difficult to deem that the Plaintiff had justifiable grounds for failing to fulfill his liability for value-added tax payment.

C. Examining the above provisions and relevant legal principles and records, the lower court’s determination that the disposition of imposing an additional tax for unfaithful payment is lawful is justifiable, and contrary to what is alleged in the grounds of appeal, the lower court did not reveal specific grounds of appeal.

D. However, it is difficult to accept the part of the lower judgment’s unfair underreporting penalty for the following reasons.

(1) In light of the language, structure, etc. of the relevant provisions, such as Article 47-3(2)1 of the former Framework Act on National Taxes, even if a taxpayer received a false certification and under-reported a tax base, if the taxpayer did not know that the tax base was received by false certification, it cannot be deemed that the taxpayer did not know that the taxpayer was false by gross negligence. Moreover, in cases where a taxpayer received a different tax invoice from a supplier on the relevant tax invoice and an actual supplier and received a deduction or refund of an input tax amount, the taxpayer would have to be aware that the taxpayer would have received a deduction or refund of an input tax amount in an unjust manner, in addition to the awareness that the taxpayer would have received a deduction or refund of an input tax amount by a false tax invoice, not only should the taxpayer be aware that the taxpayer would have received a deduction or refund of an input tax amount by filing a return or payment of a value-added tax amount other than the output tax amount on the relevant tax invoice, or by filing a request for correction after filing a return or payment of the entire amount of output tax on the tax invoice.

(2) Examining the reasoning of the lower judgment and the record, the Plaintiff asserted that the Plaintiff was unaware of the fact that the instant tax invoice was different from the fact, and that the Plaintiff paid an amount equivalent to the input tax amount deducted under the instant tax invoice to the Republic of Korea. As such, the lower court deliberated upon whether the Plaintiff was aware of the fact that the instant tax invoice was different from the fact, and whether there was a perception that the Plaintiff would result in a decrease in the national tax revenue by evading the liability to pay the value-added tax under the instant tax invoice by either filing a return or payment of the tax base and the amount of tax payable by the Plaintiff, excluding the output tax under the instant tax invoice, or filing a request for correction after filing a return or payment on the entire output tax amount under the instant tax invoice, and subsequently, having determined whether the imposition of the unfair under-reported additional tax was legitimate.

E. Nevertheless, without examining these points, the lower court determined that the imposition of the unfair under-reported additional tax was lawful for the reasons stated in its reasoning. In so doing, the lower court erred by misapprehending the legal doctrine on the requirements for imposing the unfair under-reported additional tax as provided by Article 47-3(2)1 of the former Framework Act on National Taxes, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal

4. Conclusion

The part of the judgment of the court below concerning the imposition of unfair under-reported additional taxes shall be reversed, and that part of the case shall be remanded to the court below for a new trial and determination. The remaining appeals shall be dismissed. It is so decided as per Disposition by the assent of all participating Justices

Justices Kim Yong-deok (Presiding Justice)