[1] The legal nature of the duty payment notice in a case where the tax authority issues a tax payment notice after adding additional dues to the amount of tax reported by the tax authority on the ground that the taxpayer does not fulfill his liability to pay taxes in the form of tax return, and the legal nature of the duty payment notice, and in a case where the tax authority provides guidance for the increase of the amount of tax reported by the tax authority after filing the initial return, whether the duty

[2] In a case where the act of filing a return of tax base, etc. in a tax return method is automatically null and void, and whether the tax authority’s disposition of collection and imposition of additional tax on the premise that there is a tax liability finalized thereby is unlawful (affirmative)

[1] Article 45 of the Framework Act on National Taxes / [2] Article 63(1) of the former Restriction of Special Taxation Act (amended by Act No. 6538 of Dec. 29, 2001), Article 63(1) of the former Restriction of Special Taxation Act (amended by Act No. 6762 of Dec. 29, 2002), Articles 1 and 13 of the Addenda (amended by Act No. 6762 of Dec. 29, 2001)

[1] Supreme Court Decision 91Nu13113 delivered on April 28, 1992 (Gong1992, 1766) Supreme Court Decision 94Nu910 delivered on February 3, 1995 (Gong195Sang, 1178)

ASEAN Co., Ltd. (Law Firm LLC, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Head of the tax office;

Seoul High Court Decision 2012Nu12251 decided July 19, 2013

The part of the judgment of the court below concerning the disposition of collecting corporate tax and the disposition of imposing additional tax for unfaithful payment is reversed, and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined.

1. As a matter of principle, taxes in the method of tax payment are determined by the taxpayer’s own determination of tax base and amount and specifically by filing a tax return. Therefore, even if the tax authority imposed a tax payment notice by adding additional tax to the amount of tax reported by the taxpayer on the ground that the taxpayer fails to fulfill his/her tax liability, this is merely a mixture of a disposition of collection ordering the performance of tax obligation confirmed by the return, and a disposition of imposition and collection of additional tax thereon, and a disposition of collection thereof (see Supreme Court Decisions 91Nu1313, Apr. 28, 1992; 94Nu910, Feb. 3, 1995). Furthermore, even if the taxpayer filed a revised return following the guidance for the increase in the amount of tax reported by the tax authority after filing the initial return, the tax payment notice on the increased portion does not become a tax disposition to correct the increase, not a simple collection disposition.

On the other hand, if the filing of a return on a tax base, etc. is conducted without any legal basis and rationality, as in the case where the filing of a return on a tax base, etc. is conducted without any legal ground, it shall be deemed that the defect is serious and clear. Therefore, the filing of a return shall be deemed to be null and void as a matter of course. Therefore, the tax authority’s disposition of collection and imposition of additional

2. Review of the reasoning of the lower judgment and the evidence duly admitted by the lower court reveals the following: (a) Plaintiff’s revised return on corporate tax for the business year 2006 and the Defendant’s duty payment notice

A. On July 6, 2001, the Plaintiff transferred its head office and factory facilities in Jongno-gu Seoul Metropolitan Government to Jeonbuk-si. Accordingly, the Plaintiff was subject to reduction or exemption of corporate tax for the business year from 2001 to 316,492,138 won in total pursuant to Article 63(1) of the former Restriction of Special Taxation Act (amended by Act No. 6538, Dec. 29, 2001; hereinafter “former Special Taxation Act”) that prescribes the reduction or exemption of corporate tax for small and medium enterprises located outside the Seoul Metropolitan area.

B. After that, the Plaintiff moved its head office to Jongno-gu Seoul Metropolitan Government on April 6, 2006, the director of the Seoul Regional Tax Office announced the Plaintiff on a revised declaration stating that “The Plaintiff is subject to the former Restriction of Special Taxation Act (amended by Act No. 9671 of May 21, 2009) due to the relocation of the head office as above, the Plaintiff is obligated to pay the corporate tax already reduced or exempted and the amount equivalent to the interest accrued therefrom as corporate tax for the business year 2006.”

C. Around October 2008, the Plaintiff filed the first revised return on corporate tax for the business year 2006 with the Defendant, and additionally paid the amount calculated by deducting the amount of special tax reduction and exemption for the small and medium enterprises that the Plaintiff could have been reduced and exempted pursuant to Article 7 of the former Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004) from the total of 316,492,138 won of the amount of corporate tax reduction and exemption for the business year 2001 through 2004, and the amount calculated by adding the amount of interest equivalent to 170,357,814 to the corporate tax for the business year 2006.

D. On April 14, 2010, the director of the Seoul Regional Tax Office announced the Plaintiff that “The special tax reduction or exemption for small and medium enterprises shall not apply after the lapse of the exclusion period for imposition with respect to the corporate tax for the business year 2001 through 2002.” Thus, at the time of the first revised return, the head of the Seoul Regional Tax Office notified the Plaintiff that “the portion equivalent to the special tax reduction or exemption amount for small and medium enterprises as at the time of the first revised return shall be excluded from the deducted amount for the business year 2001 through 2002, and then another revised return shall be made again.” Accordingly, on April 14, 2010, the Plaintiff filed a second revised return stating that the Defendant would increase the corporate tax amount 200,226,675 won for the business year 206

E. Accordingly, on June 11, 2010, the Defendant served a notice of tax payment of KRW 200,226,675 as principal tax for the business year 2006, which was increased according to the second revised return, and KRW 70,039,290 as additional tax for unfaithful payment of corporate tax (hereinafter “instant notice”).

3. We examine the grounds of appeal regarding the revocation of imposition of principal tax.

The Plaintiff sought revocation of the portion exceeding the amount of the first revised return, on the premise that the instant duty payment notice constitutes a disposition to rectify corporate tax for the business year of 2006 by adding the amount of the first revised return to the amount of the first revised return.

In regard to this, the lower court determined that the portion of the principal tax of the instant tax payment notice, among the instant tax payment notice, becomes final and conclusive as the tax liability for the increased amount of tax due to the Plaintiff’s second revised return, is merely a collection disposition ordering the Defendant to implement the said notice, and does not constitute a disposition for imposition, and that the second revised return cannot be viewed differently on the ground that there were circumstances leading to the Seoul Regional Tax Office’s guidance for revised return, and thus, the part seeking revocation of the principal tax imposition of the instant tax,

In light of the circumstances surrounding the duty payment notice of this case, the above determination by the court below is that the second revised tax return constitutes a revised tax return pursuant to Article 45 of the Framework Act on National Taxes, and therefore, the part concerning the principal tax of the tax payment notice of this case concerning the amount of the principal tax determined by the revised tax return constitutes a collection disposition ordering the payment of the amount of tax. However, as seen earlier, since the second revised tax return becomes null and void as seen earlier, it cannot be recognized that the tax liability becomes final and conclusive, but it is reasonable to conclude the judgment by the court below that the tax payment notice of this case does not constitute a disposition imposing the principal tax of this case in light of the aforementioned legal principles. Therefore, contrary to the allegations in the grounds of appeal, the judgment by the court

4. As to the part of the claim for revocation of imposition of additional corporate tax, we examine ex officio prior to the judgment on the grounds of appeal.

(a) Article 63 of the former Coordination Special Act provides, “If a national who operates a business with factory facilities in the Seoul Metropolitan Area and for which two years have passed since its establishment relocates the entire factory facilities to an area outside the Seoul Metropolitan area (if the head office or main office is located in the Seoul Metropolitan area, limited to the case where the relevant head office or main office is also relocated) under the conditions as prescribed by the Presidential Decree, and starts the business not later than December 31, 2003, the amount equivalent to 100/100 of the income or corporate tax shall be reduced for the taxable year whereto belongs the date of the transfer, and for the taxable year ending within three years after the beginning of the following taxable year, for the taxable year whereto belongs the date of the transfer, and for the taxable year ending within five years thereafter, the amount equivalent to 50/100 of the income or corporate tax shall be reduced or exempted; and

Article 63 of the Restriction of Special Taxation Act (amended by Act No. 6538, Dec. 29, 2001; hereinafter “amended by Act No. 6538”) provides, “Where a small or medium enterprise subject to reduction or exemption under paragraph (1) falls under any of the following subparagraphs, the amount of tax calculated as prescribed by the Presidential Decree shall be paid as income tax or corporate tax at the time of filing a tax base return for the taxable year in which such a cause occurred,” and subparagraph 3 provides, “where a factory producing the same products as those produced at the factory relocated under paragraph (1) is installed or its head office is installed within the Seoul Metropolitan area during the period of reduction or exemption under paragraph (1), the provisions of paragraph (3) provide, “The provisions of Article 40(2) concerning the amount of interest added shall apply mutatis mutandis to the case where the income tax or corporate tax reduced or exempted under paragraph (1) is paid pursuant to paragraph (2).” However, the Addenda of the amended Act provides, “from 10th to 31st day” or 16th day of the amendment.

Therefore, in a case where the tax reduction or exemption under Article 63 (1) of the former Special Assistance Act was made by relocating a factory or head office to an area outside the Seoul Metropolitan area before January 1, 2002, the amended Special Assistance Act was enforced, the additional collection provision of this case shall not apply even if the head office is newly established and relocated within the Seoul Metropolitan area during the said tax reduction or exemption period.

B. Examining the aforementioned facts in light of the aforementioned legal principles and related provisions, the provision on additional collection cannot be applied to the Plaintiff, which transferred the head office and factory facilities to an area outside the Seoul metropolitan area on July 6, 2001 prior to the enforcement of the amended special law, and exempted corporate tax for the business year 201 through 2004 pursuant to Article 63(1) of the former Special Provision of the Act. Therefore, on the premise that the provision on additional collection of this case applies to the Plaintiff, the return of the second revised return of the Plaintiff, who filed a return on the increase of corporate tax for the business year 2006 without any legal basis and rationality, was filed without any legal basis and rationality, and thus, the defect is serious, and it shall be null and void as a matter of course.

Therefore, among the notice of tax payment of this case, the main collection disposition of corporate tax premised on the confirmation of tax liability by the second revised return and the disposition imposing additional tax on the plaintiff, which is premised on the existence of corporate tax liability under the additional collection provision of this case, shall be deemed unlawful.

C. Nevertheless, the lower court determined that both the disposition of collecting corporate tax and the disposition of imposing additional tax on the tax payment notice based on the premise that the instant additional collection provision is applied to the Plaintiff and the Plaintiff’s secondary revised return is lawful. In so determining, the lower court erred by misapprehending the legal doctrine on the scope of application of the instant additional collection provision and the invalidation of the corporate tax return, thereby adversely affecting the conclusion of the judgment

5. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the part of the judgment of the court below concerning the disposition of collecting principal tax and imposing additional tax for unfaithful payment is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The remaining grounds of appeal are dismissed. It is so decided as per Disposition by the assent

Justices Kim Chang-suk (Presiding Justice)