Additional Tax Rate for Additional Tax Rate Assessment

In light of the legal principles as seen earlier, the grounds alleged by the Plaintiff are insufficient to deem that there exists justifiable grounds for omitting filing a return of value-added tax base, solely on the grounds alleged by the Plaintiff.

Article 11 of the Value-Added Tax Act [Application of Zero Tax]

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of value-added tax (additional tax) for the second period portion of 2003 against the Plaintiff on May 1, 2006 and the first period portion of 2004 value-added tax (additional tax) for the first period of 203,889,880 shall be revoked.

1. Details of the disposition;

The following facts shall not be disputed between the parties, or may be acknowledged by taking into account the whole purport of the pleadings as a whole in each entry of Gap evidence 1 through 4, Eul evidence 1-1, and Eul evidence 2:

A. The Plaintiff, a business operator engaged in wholesale, trade, etc. with the trade name, ○○○○○○○○○, Seoul, and entered into an agreement with the importer during the value-added tax period from 2003 to 1st, 2004 (a contract that receives an amount equivalent to 5% of the export amount as a brokerage fee) and exported textile products equivalent to 940,666,000 won in the name of the Plaintiff (=2, 2003 + KRW 530,87,000 in the second half, 203 + KRW 409,789,000 in the first half, 204).

B. However, during each of the above taxable periods only 46,762,00 won (=26,834,000 won for February 2, 2003 + 19,928,000 won for January 1, 2004) paid by the Plaintiff in relation to the above exports during each of the above taxable periods, the Plaintiff filed a zero tax base for value-added tax.

C. The Defendant, on May 1, 2006, deemed that the value-added tax base return was omitted in filing a value-added tax base return on the export face value-added tax return for the second period of 2003 and the second period of 504,043,000 + KRW 389,861,000, which was reported by the Plaintiff at KRW 940,66,000 for export face value-added tax base of KRW 46,762,00 for the first period of 204,000 for the year of 203 and KRW 3,889,880 for the first period of 204 (hereinafter “instant disposition”).

D. On June 8, 2006, the Plaintiff filed a request for review with the Commissioner of the National Tax Service against the instant disposition, but the Commissioner of the National Tax Service rendered a decision to dismiss the said request on May 7, 2007.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff’s omission in filing a return did not intend to evade taxes as a zero-rate tax base for value-added tax, and was due to the Plaintiff’s error in business of a tax accountant delegated with all tax returns by the Plaintiff, and there is a justifiable reason to be exempted from the zero-rate tax return tax.

B. Relevant statutes

[Valued Tax]

Article 11 (Application of Zero Tax Rate)

(1) zero tax rates shall apply to the supply of goods or services falling under any of the following subparagraphs:

1. Exported goods;

Article 21 (Settlement and Correction)

(1) The head of a district tax office having jurisdiction over a place of business, the Commissioner of the competent Regional Tax Office or the Commissioner of the National Tax Service shall determine or correct the tax base of value-added tax or tax amount

1. Where the final tax return is not filed;

2. Where there are any mistakes or omissions in details of the final tax return;

3. Where the list of the total tax invoice by buyer or the total tax invoice by buyer is not submitted in the final tax return, or all or part of the submitted list of the total tax invoice by buyer is not entered or

4. Where there is a possibility of evading the value-added tax due to the causes as determined by the Presidential Decree other than subparagraphs 1 through 3.

Article 22 (Additional Tax)

(7) Where the tax base to which the zero-rate tax rate applies is not reported under Article 18 (1) and (2) (proviso) or 19 (1), or the reported tax base falls short of the tax base to be reported, an amount equivalent to 1/100 of the unreported tax base (where the returned tax base is short of the one to be reported, the deficient tax base) shall be added

C. Determination

(1) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under tax law is an administrative sanction imposed under the conditions as prescribed by individual tax law in cases where a taxpayer violates various obligations, such as the timing prescribed by the law and tax payment, without justifiable grounds, and the taxpayer’s intent or negligence is not considered. On the other hand, such a sanction cannot be imposed in cases where a taxpayer has justifiable grounds for not being able to prove his/her duty, such as where there are circumstances where it is unreasonable for the taxpayer to have been unaware of his/her duty, or where it is unreasonable for him/her to expect the fulfillment of his/her duty (see Supreme Court Decision 95Nu10181, Nov. 14, 1995).

(2) In light of the legal principles as to the grounds for exemption of additional tax as seen earlier, it is difficult to deem that the grounds alleged by the Plaintiff alone constitute justifiable grounds for omission in filing a value-added tax base return. Therefore, the Plaintiff’s assertion cannot be accepted.

3. Conclusion

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