Ulsan District Court-2016-Guhap6515 (20 April 20, 2017)

Amount subject to additional tax due to regular documentary evidence shall be the value of supply that does not include value-added tax.

It is against the principle of proportionality to impose penalty tax on non-value added tax for non-taxable portions related to the corporate tax base, and it is against the principle of proportionality to impose penalty tax on regular documentary evidence.

Article 76 of the Corporate Tax Act

2017Nu21524 Revocation of Disposition of Corporate Tax Imposition

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00. Head of tax office

June 21, 2017

August 9, 2017

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant imposed corporate tax of KRW 13,726,680 on the Plaintiff on March 3, 2016 and imposed corporate tax of KRW 22,802,240 on the Plaintiff on July 1, 2016 and imposed corporate tax of KRW 31,20,290 on the Plaintiff on July 1, 2016, respectively.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Quotation of judgment of the first instance;

The reason why the court is to use this case is as stated in the reasoning of the judgment of the court of first instance, except for adding the following judgments to the defendant's grounds for appeal. Thus, this case is cited in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Determination on addition

A. Summary of the grounds for appeal by the defendant

The main purpose of Article 76 (5) of the Corporate Tax Act is not only the corporate entrepreneur but also all other types of business partners. Nevertheless, the court of first instance interpreted the above provision on the premise that the other party to the transaction is limited to the corporate entrepreneur, and excessively narrow the meaning of "amount received differently from the fact".

B. The judgment of this Court

1) Additional tax, etc. which is not received as a regular disbursement document

A) Article 76(5) of the Corporate Tax Act (hereinafter “instant legal provision”) has jurisdiction over the place of tax payment.

Where a corporation (excluding corporations prescribed by Presidential Decree) is supplied goods or services with a business operator prescribed by Presidential Decree in connection with a business and fails to receive evidentiary documents falling under any of the subparagraphs of Article 116 (2) or receives false evidentiary documents, the head of a tax office shall provide that the amount calculated by adding an amount equivalent to 2/100 of the amount received differently from the fact to the corporate tax, except in cases where the proviso to the same paragraph is applied.

B) The term "business operator prescribed by Presidential Decree" in the legal provisions of this case (hereinafter referred to as "business operator") means a corporation, ② a business operator under Article 3 of the Value-Added Tax Act (hereinafter referred to as "business operator" means a person who supplies goods or services independently for business regardless of whether the business purpose is profit-making or not, and includes both an individual, a corporation, an unincorporated association or foundation, or any other organization), ③ a business operator under Article 1-2 (1) 5 of the Income Tax Act (referring to a resident who has business income, and a resident means a resident who has a domicile in Korea or has a domicile in Korea for at least 183 days) and a non-resident, etc. who has income under subparagraphs 3 and 5 of Article 119 of the same Act (see Articles 120 (3) and 15

C) "Evidence documents under any subparagraph of Article 116(2)" among the legal provisions of the instant case (hereinafter referred to as "Evidence documents") refers to ① Credit card sales slips, ② Cash Receipts under the Specialized Credit Financial Business Act, ③ tax invoices under Article 32 of the Value-Added Tax Act, ④ tax invoices under Article 121 of the Corporate Tax Act and Article 163 of the Income Tax Act.

2) Whether the transaction partner’s tax base calculation is considered as value-added tax

A) Article 14(1) of the Corporate Tax Act provides that income of a domestic corporation for each business year shall be the amount calculated by deducting the total amount of losses incurred during the pertinent business year from the total amount of earnings accrued during the pertinent business year, and Article 18 Subparag. 5 of the same Act provides that the amount of output tax of value-added tax shall not be included in gross income when calculating the income amount of a domestic corporation for each business year. On the other hand, under Article 21 of the Corporate Tax Act, input tax of value-added tax shall, in principle, not be included in deductible expenses in calculating the income amount of a domestic corporation for each business year, but the amount of tax exempted from value-added tax or in other cases prescribed by Presidential Decree is exceptionally included in deductible expenses. However, the issue in calculating the corporate

B) Article 19(2) of the Income Tax Act provides that the amount of business income shall be the amount obtained by deducting necessary expenses incurred therein from the amount of gross income in the pertinent taxable period. Article 26(9) of the same Act provides that the amount of the output tax of value-added tax shall not be included in the amount of gross income in calculating the amount of income in the relevant taxable period. On the other hand, when calculating the amount of income in the relevant taxable period, the input tax of value-added tax shall not be included in the necessary expenses in principle, but the amount of the value-added tax exempted or paid by the simplified taxable person in other cases prescribed by Presidential Decree is exceptionally included in the necessary expenses.

C) According to Article 29(1) and (3) of the Value-Added Tax Act, the tax base of value-added tax on the supply of goods or services shall be the aggregate of the supply values of goods or services supplied in the pertinent taxable period. In this case, the value-added tax shall be included in the value-added tax, including all the monetary values received from the person who receives the goods or services. Meanwhile, Article 63(1) of the Value-Added Tax Act provides that the tax base of a simplified taxable person shall be the aggregate of the supply values in the relevant taxable period. However, under Article 36(1) of the Value-Added Tax Act, where a simplified taxable person supplies goods or services, he/she shall issue receipts, instead of issuing a tax invoice (the receipt shall be written on the consideration for supply under Article 73(7) of the Enforcement Decree of the Value-Added Tax Act) as prescribed by Presidential Decree, if the other party is a simplified taxable person.

D) Ultimately, value-added taxes cannot affect the assessment of the assessment standard of the business entity, unless there are special circumstances.

3) Whether the value of supply and the value-added tax are separately indicated in the regular disbursement document

It is the transaction reality that the credit card sales slips separately indicate the value of supply and value-added tax. In addition, according to the National Tax Service's notice on the matters to be observed by the cash receipts business operators under Article 126-3 (6) of the Restriction of Special Taxation Act, Article 121-3 (3) of the Enforcement Decree of the same Act, and Article 121-3 (3) of the Enforcement Decree of the same Act, the value of supply and value-added tax must be separately indicated on cash receipts (However, if a person is not the person subject to classification of simplified taxable persons and value-added tax, no separate indication is made). In addition, according to Article 32 (1) of the Value-Added Tax Act, the tax invoice shall be stated separately from the value of supply and value-added tax, and Article 163 of the Enforcement Decree

4) Determination

The amount of value-added tax, whether the other party to the transaction is a corporation or an individual entrepreneur, shall not affect the assessment of the tax base of the other party, unless there are special circumstances.

The documentary evidence of expenditure indicates the value of supply and value-added tax separately. Therefore, it is reasonable to view that the main purpose of the legal provision of this case is to disclose the value of supply of goods or services in order to foster the other party’s tax base.

In addition to the above circumstances, Article 76 (9) 4 (e) of the Corporate Tax Act stipulates that where a receipt is issued in the name of a person who is not the supplier of goods or services and is actually supplied with a receipt under the name of a person who is not the supplier of the goods or services, an amount calculated by adding an amount equivalent to 2/100 of the value of supply shall be collected as corporate tax. In the case of a receipt, an additional tax is imposed based on the value of supply. Article 18 (1) of the Framework Act on National Taxes stipulates that a taxpayer's property right should not be unfairly infringed in light of equity in taxation and the purpose of the pertinent provision. In other words, the defendant asserts that the legal provision of this case requires the National Tax Service to impose the additional tax on the basis of the value of supply, including value-added tax, but in practice, considering that there are many cases where the National Tax Service imposed the additional tax on the legal provision of this case based on the value of supply, the "amount not received or differently received" in the legal provision of this case refers to the value of supply.

3. Conclusion

If so, the plaintiff's claim shall be accepted with due reason, and the judgment of the court of first instance is just as it is, and the defendant's appeal is dismissed.