Daegu District Court 2015Guhap22938 (2016.02)

Cho High 2015Gu463 (Law No. 115, 2015)

Time when necessary expenses of global income tax accrue

When a customs refund is collected and paid from a customs office, the global income tax corresponding to the increased income shall be refunded to the plaintiff as a customs refund is added to the total income under the principle of substantial taxation.

Article 39 of the Income Tax Act shall be the year to which total income and necessary expenses are reverted.

2016Nu4608 Disposition of revocation of refusal to correct global income tax

IsaA

BB Director of the Tax Office

Daegu District Court Decision 2015Guhap22938 Decided December 09, 2016

December 09, 2016

2017.01.06

1.The judgment of the first instance, including a claim modified in the trial, shall be modified as follows:

A. The plaintiff's main claim is dismissed.

B. On September 2, 2014, the Defendant’s rejection disposition on the part exceeding KRW 31,314,653 of global income tax for the year 2009, and the rejection disposition on the part exceeding KRW 42,248,261 of global income tax for the year 2010 shall be revoked.

2. 1/5 of the total litigation costs is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

1. The purport of the claim (the plaintiff added the primary purport of the claim to the plaintiff while reducing the claim in accordance with the defendant's reduction and correction disposition, etc.)

A. The primary claim: The Defendant’s rejection of the Defendant’s request for correction against KRW 40,061,416 out of the global income tax reverted to year 2011, which occurred on September 2, 2014 (the Plaintiff’s request for correction as of November 24, 2016 appears to be erroneous).

(b) Preliminary claim: It is set forth in subparagraph 1-b) of the text;

2. Purport of appeal

A. Plaintiff: The part of the judgment of the first instance court against the Plaintiff is revoked. The Defendant’s rejection disposition against the Plaintiff regarding the claim for rectification of global income tax for the year 2009 to 2011, which was made against the Plaintiff on September 2, 2014 (see, e.g., Supreme Court Decision 2009Do3149, Sept. 3, 2014)

B. Defendant: The part against the Defendant in the judgment of the first instance is revoked, and the Plaintiff’s claim corresponding to the revoked part is dismissed.

1. Details of the disposition;

A. The Plaintiff was an individual entrepreneur, who was operated from September 15, 1990 to September 30, 201, for the purpose of closing his/her business, from September 15, 201. From 2009 to September 30, 201, the Plaintiff refunded a total of KRW 183,925,220 (including KRW 51,652,120 + KRW 57,695,90 + KRW 74,57,110 for the year 2011 + KRW 74,57,110) to global income tax (including KRW 40,820, KRW 549 for the year 2009, KRW 520, KRW 590 for the year 2010, KRW 59, KRW 5100 for the year 201, KRW 510, KRW 6316, KRW 2015).

B. As a result of the customs investigation conducted in 2014, the head of D customs office confirmed that the Plaintiff was unfairly refunded customs duties even though he/she did not correspond to the producer of the exported goods, and on June 19, 2014, the customs collector collected the Plaintiff KRW 248,494,810 [209 KRW 50,518,360 [30,5143,400 + additional dues 20,374,960 + additional dues 20,374,960 + KRW 57,695,90 + Additional dues 33,092,040 + Additional dues 33,092,040 + Additional dues 107,18,420 won + Additional dues 107,102,100 won + 371,201.31,201.

C. On July 11, 2014, the Plaintiff submitted to the Defendant a written request for correction of the tax base and tax amount (hereinafter “instant request for correction”) stating that KRW 248,494,810,000,000 in the instant surcharge is included in the necessary expenses in 2011 and is sought to refund KRW 63,423,262, global income tax, but the Defendant notified the Defendant of the refusal of the instant request for correction on September 2, 2014, on the ground that the necessary expenses are the taxable period to which the date on which the expense becomes final belongs.

D. On November 25, 2014, the Plaintiff asserted that the global income tax should be calculated by deducting the pertinent customs refund from the total amount of income in each taxable period from 2009 to 2011. Accordingly, the Plaintiff asserted that KRW 17,441,249 out of the global income tax for the year 2009, the global income tax for the year 2010, and KRW 23,361,846 in the global income tax for the year 201, should be refunded to the Plaintiff respectively. However, on May 11, 2015, the Tax Tribunal dismissed the Plaintiff’s claim on the ground that the instant penalty surcharge should be included in the necessary expenses for the taxable period to which the date of additional collection belongs.

E. Meanwhile, around August 2016, the Defendant, ex officio, who had been pending in the trial, corrected the Plaintiff’s 23,361,846 of the global income tax for the year 201, and refunded the said amount to the Plaintiff.

[Reasons for Recognition] Unsatisfy, entry in Gap evidence 1 to 6, 9 (including a branch number), pleading

The purport of the whole

2. Relevant statutes;

The entries in the attached Table-related statutes are as follows.

3. Determination on this safety defense

A. The defendant's assertion

At the time of filing the instant claim for rectification, the Plaintiff merely filed a correction order for global income tax for the year 201 to the Defendant, and did not file a request for rectification for global income tax for the year 2009 and 2010. Therefore, the Plaintiff’s refusal disposition against such global income tax may not be deemed to exist. Therefore, the Plaintiff’s claim for revocation of the instant claim for revocation of the rectification order for global income tax for the year 2009 and 2010, which does not exist

B. Determination

(4) As seen earlier, the Plaintiff’s request for correction was made for the following reasons: “The Plaintiff’s request for correction of the tax base and the amount of tax on global income to the Defendant at the time of filing the request for correction; the Plaintiff’s request for correction of the tax base and the amount of tax on global income for 20 years after filing the request for correction; the Plaintiff’s request for correction of the tax base and the amount of tax on global income for 20 years after filing the request for correction to the Defendant; the Plaintiff’s request for correction of the tax base and the amount of tax on global income for 20 years after filing the request for correction to the Defendant; the Plaintiff’s request for correction of the tax base and the amount of tax on global income for 10 years after filing the request for correction to the Defendant; the Plaintiff’s request for correction of the tax base and the amount of tax on global income for 20 years after filing the request for correction to the Defendant; and the Plaintiff’s request for correction of the tax base and the amount of tax on global income for 2 years after filing the request for correction.

4. Judgment on the merits

A. As to the main claim

1) The plaintiff's assertion

The amount equivalent to the instant surcharge is deemed necessary expenses. Considering the purport of the General Rule 39-05 of the Income Tax Act and the substance over form principle, etc., deeming the entire amount of the instant surcharge as necessary expenses for the year 201 when the Plaintiff closed down, the rectification of the tax base and the amount of tax for the year 2011 should be made. As such, it is unlawful to deny the Defendant’s request for rectification as to KRW 40,061,416 (the amount of the initial claim for correction as KRW 63,423,262 corrected ex officio by the Defendant, 23,361,846) of the global income tax for

2) Determination

Article 27 (1) of the Income Tax Act provides that "the amount to be included in the necessary expenses when calculating the amount of business income shall be the sum of expenses corresponding to the total amount of income in the relevant taxable period and which is generally accepted as ordinary expenses." As seen thereafter, the collection charge of this case only constitutes grounds for post-issuance correction under Article 45-2 (2) of the former Framework Act on National Taxes and cannot be viewed as the expenses corresponding to the total amount of income in each taxable period of 2009 to 2011. Thus,

B. As to the conjunctive claim

1) The plaintiff's assertion

Inasmuch as the collection of this case constitutes grounds for follow-up rectification under Article 45-2(2) of the former Framework Act on National Taxes and Article 25-2 of the Enforcement Decree of the same Act, the determination of tax base and tax amount should be made by deducting the amount equivalent to the annual refund for 2009 and the annual refund for 2010 from the total amount of income in the relevant taxable period. Therefore, it is unlawful for the Defendant to refuse the Plaintiff’s request for correction of KRW 17,41,249 from among the global income tax for 2009 reverted to the Plaintiff’s global income tax for 209.

2) Determination

A) Whether the collection of this case constitutes grounds for subsequent correction

(1) Article 45-2(2) of the former Framework Act on National Taxes provides that "a person who has filed a tax base return by the statutory deadline for filing the tax return or who has received the determination of the tax base and amount of national tax may request the determination or correction within two months from the date on which he/she becomes aware of the occurrence of the cause, regardless of the period stipulated in paragraph (1)." Subparagraph 2 provides that "where there is a decision or correction to change the ownership of the income or other taxable object to a third party," and subparagraph 5 provides that "where the cause prescribed by Presidential Decree arises after the statutory deadline for filing the national tax return expires due to any cause similar to those stipulated in subparagraphs 1 through 4 of subparagraph 5, and Article 25-2 of the Enforcement Decree of the Framework Act on National Taxes delegated by Article 45-2(2)5 of the former Framework Act on National Taxes provides that "in filing the first return, determination or correction under subparagraph 1, the validity of the transaction office or act, etc. related to the calculation of the tax standard and amount, and the permission or other disposition is cancelled."

(2) In full view of the following circumstances revealed by the facts and the purport of the entire argument as seen earlier, it is reasonable to view that there exists a ground for ex post facto rectification under Article 45-2(2)2 and 5 of the former Framework Act on National Taxes, and Article 25-2 subparag. 1 of the Enforcement Decree of the Framework Act on National Taxes, due to the Defendant’s imposition of KRW 30,143,40, and KRW 57,695,90, which is a part of the refund in 2009, and KRW 57,695, and KRW 209, and KRW 2010, respectively.

(A) As a result of the decision of collection of this case by D Customs, some of the refund money in 2009, which was initially reported as Plaintiff’s income, and the refund money in 2010, were reverted to the State later. Thus, it is similar to “when a decision to change the ownership of income or other taxable goods to a third party” under Article 45-2(2)2 of the former Framework Act on National Taxes.

(B) The Plaintiff filed a comprehensive income tax return on the aggregate of the total amount of customs duties refunded from D Customs office around 2009 and 2010. Such determination of refund of customs duties by the tax authority constitutes "permission or other disposition of the government office related to the validity of transactions or acts, etc., which served as the basis for calculating the tax base and the amount of customs duties" under Article 25-2 subparagraph 1 of the Enforcement Decree of the Framework Act on National Taxes, and later, "permission or other disposition of the government office" is revoked.

(C) As long as the Plaintiff was additionally collected and paid some of the refund money in 2009 and the refund money in 2010, it accords with the principle of substantial taxation to refund to the Plaintiff the aggregate income tax corresponding to the increased income as the refund money is added to the total income amount.

B) As to the defendant's argument

The Defendant first asserted to the effect that the Defendant’s refusal of the Plaintiff’s request for correction of the instant case is lawful, on the premise that the instant surcharge falls under necessary expenses in 2011, and the year to which the instant surcharge is reverted shall be deemed to be 2014 years to which the date of confirmation belongs.

As seen earlier, in light of the fact that the Plaintiff stated the grounds for filing a request for correction in the “written request for correction of tax base and tax amount at the time of filing the request for correction” as “the change in the amount of income resulting from the collection of a customs refund,” and submitted the receipt, specification, and the list of additional collection in the Korea Customs Service stating the refund amount collected by year as evidential data, it is reasonable to deem that the instant request for correction includes the purport of seeking the correction of tax base and tax amount on the grounds of subsequent correction. Since the tax authority, upon receiving the request for correction, has the duty to investigate and confirm the legitimate tax base and tax amount for each taxable period, even if the Plaintiff claimed for inclusion in necessary expenses at the time of filing the request for correction of this case, the Defendant should also have investigated and confirmed whether the collection of this case constitutes the grounds for subsequent correction. Accordingly,

(c)the amount of legitimate tax;

Therefore, the portion of the claim for correction of this case (which included the purport of the claim for correction of this case in 2009 and 2010 as well as the amount equivalent to the amount of 30,143,400 won and 57,695,90 won out of the amount of refund of 2009 as part of the amount of refund of 2009 and the amount equivalent to the amount of 57,695,90 won is lawful as a subsequent claim for correction under Article 45-2 (2) of the former Framework Act on National Taxes. Thus, the amount equivalent to the above amount of the amount of the additional collection shall be reduced from the amount of global income belonging to each of 2009 and 2010, and accordingly, the amount of the additional collection shall be calculated again as follows.

D) Sub-committee

Therefore, the Plaintiff’s global income tax amount for the year 2009 shall be reduced to 31,314,653 won from 40,820,549 to 31,314,653 won, and the global income tax for the year 2010 to 59,689,510 to 42,248,261 won, respectively. The Defendant’s request for correction for the portion exceeding 31,314,653 won from 40,820,549 of global income tax for the year 2009 to 31,314,653 won from among the Plaintiff’s global income tax for the year 2009 to 59,689,510 of global income tax for the year 2010 to 42,248,261

5. Conclusion

Therefore, the plaintiff's primary claim is dismissed as it is without merit, and the conjunctive claim is accepted as it is with merit, and the judgment of the court of first instance is unfair with a different conclusion, and it is so decided as per Disposition with the decision of the court of first instance, including the changed claim in the trial.