[1] Where a corporation is found not to be subject to a retroactive deduction of losses after the corporate tax was refunded pursuant to Article 72 of the former Corporate Tax Act, whether the head of the tax office having jurisdiction over the place of tax payment may seek a return of unjust enrichment against the erroneously refunded refund amount by civil procedure (negative)

[2] Whether a decision to refund losses under the former Corporate Tax Act constitutes an administrative disposition (affirmative), and whether the tax authority should cancel the decision to refund losses ex officio in order to compulsorily collect the tax amount refunded by mistake or excessive refund of losses (affirmative)

[1] Where a corporation is found not to be a corporation subject to a retroactive deduction of losses after receiving corporate tax refunded by a retroactive deduction of losses under Article 72 of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006), the head of the tax office having jurisdiction over the place of tax payment can only collect the refundable tax amount erroneously refunded under Article 51(7) of the former Framework Act on National Taxes (amended by Act No. 8139 of Dec. 30, 2006), and may not seek a return of unjust enrichment by means of civil procedure.

[2] Retroactive deduction of losses under the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006) is a system specifically recognized for a certain small or medium enterprise for the purpose of tax policy, and the head of the competent tax office, upon the taxpayer’s application, determines the amount of tax to be refunded by determining whether the occurrence of losses carried forward, etc. and whether the procedural requirements are met, and the taxpayer’s claim for refund can only be confirmed. Thus, a decision to refund losses by retroactive deduction of losses constitutes an administrative disposition that directly affects the taxpayer’s rights and duties. Therefore, the tax authority may enforce tax refund by mistake or excessive refund against the taxpayer only after the revocation

[1] Article 51(7) of the former Framework Act on National Taxes (amended by Act No. 8139 of Dec. 30, 2006), Article 72 of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006), Article 741 of the Civil Act / [2] Article 51(7) of the former Framework Act on National Taxes (amended by Act No. 8139 of Dec. 30, 2006), Article 72 of the former Corporate Tax Act (amended by Act No. 8141 of Dec. 30, 2006), Article 2(1)1 of the Administrative Litigation Act

[2] Supreme Court Decision 2000Da25590 decided Oct. 27, 2000 (Gong2000Ha, 2406)

Korea

CC Development Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Cho Il-young et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2012Na60499 decided May 24, 2013

The judgment of the court of first instance is reversed, and the lawsuit of this case is dismissed. All costs of the lawsuit are assessed against the plaintiff.

Judgment ex officio is made.

1. Article 51(7) of the former Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006; hereinafter the same) provides that “In cases where the director of a tax office claims the return of the amount already appropriated or paid as a result of the revocation of the determination of national tax refund, the provisions of the National Tax Collection Act’s notification, demand and disposition on default shall apply mutatis mutandis.” This is a special procedure for restitution so that the tax office can efficiently collect the amount of tax erroneously refunded or overpaid by granting both the authority to determine the existence or amount of national tax in relation to the case of erroneous refund or excessive refund of national tax and the authority to enforce compulsory collection in cases of absence of voluntary performance.

In light of such provisions, legislative purport, etc., where a corporation which received corporate tax by a retroactive deduction of losses under Article 72 of the former Corporate Tax Act (amended by Act No. 8141, Dec. 30, 2006; hereinafter the same) is found not to be a corporation subject to retroactive deduction of losses, the head of the tax office having jurisdiction over the place of tax payment can only collect the erroneously refunded refunded refunded tax amount in accordance with Article 51(7) of the former Framework Act on National Taxes and may not seek a return of unjust enrichment by means of civil procedure.

On the other hand, a retroactive deduction of deficit under the former Corporate Tax Act is a specially recognized system for a certain small or medium enterprise for the purpose of tax policy, and the head of the competent tax office, upon the taxpayer’s application, determines whether the occurrence of deficit brought forward, etc., and the procedural requirements are met, and determines whether the amount of refund is met, and the taxpayer’s claim for refund can be claimed (see Supreme Court Decision 2000Da25590, Oct. 27, 200). Thus, the determination of a retroactive deduction of deficit constitutes an administrative disposition as an act of the tax authority that directly affects the taxpayer’s rights and obligations. Therefore, the tax authority can collect tax amount erroneously refunded or overpaid against the taxpayer only after the revocation of the decision

Nevertheless, under the premise that the court below may seek the return of tax refund erroneously refunded or excessively refunded by means of a claim for return of unjust enrichment in civil procedure, the court below held that the taxpayer gains benefits without any legal ground, regardless of whether the above decision was revoked ex officio by the tax authority, and therefore, the defendant should return the amount equivalent to the amount refundable to the plaintiff as unjust enrichment. In so doing, the court below erred by misapprehending the legal principles on the requirements for the claim for return of retroactive deduction of deficit under the former Corporate Tax Act and the method of exercising such claim, thereby affecting the conclusion of the judgment.

2. Therefore, without further proceeding to decide on the respective grounds of appeal by the plaintiff and the defendant, the judgment of the court below is reversed. Since this case is sufficient for the court to directly render a judgment, the judgment of the court of first instance is revoked and the lawsuit of this case is dismissed. The total costs of the lawsuit are to be borne by the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee In-bok (Presiding Justice)