[1] Whether an act of a sports gambling business operator providing customers with an opportunity to participate in gambling through an information and communications network building system, etc. and receiving money as a price for such offer is subject to value-added tax (affirmative)

[2] In a case where the Defendant et al. was indicted for violating the Act on the Aggravated Punishment, etc. of Specific Crimes on the Aggravated Punishment, etc. of Specific Crimes on the ground that he/she evaded value-added tax by opening and operating a private sports gambling website that issues and sells similar sports betting tickets in collusion with the Defendant et al. without filing a report on sales with the competent tax office, the case holding that the Defendant constitutes a transaction subject to value-added tax on the grounds that

[3] In a case where the Defendant et al. were indicted for violating the Punishment of Tax Evaders Act by evading the comprehensive income tax by failing to file a return on the income generated in the course of opening and operating a private sports gambling website with the competent tax office, the case holding that the crime of tax evasion does not affect the establishment of the crime of tax evasion even if the initial disposition of tax evasion was corrected due to the occurrence of a subsequent cause for tax evasion, such as confiscation or collection, after the payment deadline

[1] Article 1(1)1 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) provides that “the supply of goods or services” shall be subject to value-added tax, and Article 1(2) provides that goods shall be “any tangible goods and intangible goods having property value” and Article 1(3) provides services as “all services and other acts having property value other than goods.”

Value-added tax is a tax imposed on the value-added tax that is created in all stages of production, provision, or distribution of goods or services. Therefore, value-added tax is a principle when the value-added is distributed for goods or services that are newly created.

Gambling is to decide the acquisition and loss of property by taking the property from one another and depending on the incidental circumstances or circumstances. Therefore, gambling is not a general creation of value added tax, and it is not subject to value added tax.

However, in the event that gambling business is conducted, if the customer’s money paid falls under the price for the goods or services provided by the business operator, not merely a money for gambling, it is subject to value-added tax. Therefore, in a case where a sports gambling business operator provides customers with an opportunity to participate in gambling and receives money in return for such offer, even if the act promotes speculation, it constitutes a supply of goods or services with property value, and thus, it should be subject to value-added tax.

[2] In a case where Defendant et al. was indicted for violating the Act on the Aggravated Punishment, etc. of Specific Crimes by evading value-added tax by opening and operating a private sports gambling website in collusion with the Defendant et al. to issue and sell similar sports betting tickets without filing a report thereon at the competent tax office, the case holding that the Defendant is subject to value-added tax on the grounds that: (a) the Defendant issued and sold similar sports betting tickets; (b) the Defendant was operating an Internet site by means of paying prize money to the purchaser of similar sports betting tickets; (c) the Defendant did not directly take property between the purchaser of similar sports betting tickets and the purchaser of the betting tickets; and (d) the Defendant was paid a price for the issuance and sale of similar sports betting tickets; and (e) the acquisition and loss of property was determined by the incidental sports betting result only between the purchaser and the purchaser of similar sports betting tickets; and (b) in light of the fact that the Defendant was given an opportunity to receive the winning money by issuing

[3] In a case where the Defendant et al. were indicted for violating the Punishment of Tax Evaders Act by evading the comprehensive income tax by failing to file a return with the competent tax office on the income generated in the course of opening and operating the private sports gambling Internet site, the case affirming the judgment below convicting the Defendant of the charges on the ground that the first disposition of tax evasion does not affect the establishment of the crime of tax evasion even if the initial disposition of tax evasion was corrected upon the occurrence of a follow-up cause of confiscation or the execution of additional collection after the payment deadline, on the grounds that the comprehensive income tax, which is a tax return method

[1] Article 1(1)1 and (2) (see current Article 4 subparag. 1), and (3) (see current Article 2 subparag. 2) of the former Value-Added Tax Act (Amended by Act No. 9915, Jan. 1, 2010); Article 9(1)3 (see current Article 3(1) and (6) of the former Punishment of Tax Evaders Act (Amended by Act No. 9919, Jan. 1, 201); Article 1(1)1 (see current Article 4 subparag. 1) and (2) (see current Article 2 subparag. 1) and (3) (see current Article 2 subparag. 2) of the former Punishment of Tax Evaders Act; Article 9(1)3 (see current Article 3(1) and (6) of the former Punishment of Tax Evaders Act (Amended by Act No. 9915, Jan. 1, 201); Article 30 of the Criminal Act; Article 1(1)2 subparag. 1 (3) of the former Punishment of Tax Evaders Act (see current Article 9(10)

[1] Supreme Court Decision 2004Du13288 decided Oct. 27, 2006 (Gong2006Ha, 2021)

Defendant

Defendant

Law Firm Dadam, Attorney Kim Do-pool

Seoul High Court Decision 2016No2040 decided November 17, 2016

The appeal is dismissed.

The grounds of appeal are examined.

1. The part on the violation of the Act on the Aggravated Punishment, etc. of Specific Crimes (Taxes)

A. Determination on the grounds of appeal that gambling income is not subject to value-added tax

(1) Article 1(1)1 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) provides that “the supply of goods or services” shall be subject to value-added tax, and Article 1(2) provides that goods shall be “all tangibles and intangibles having property value” and Article 1(3) provides services as “all services and other acts having property value other than goods.”

Value-added tax is a tax imposed on the value-added tax that is created in all stages of production, provision, or distribution of goods or services. Therefore, value-added tax is a principle when the value-added is distributed for goods or services that are newly created.

Gambling is to decide the acquisition and loss of property by taking the property from one another and depending on the incidental circumstances or circumstances. Therefore, gambling is not a general creation of value added tax, and it is not subject to value added tax (see Supreme Court Decision 2004Du13288, Oct. 27, 2006).

However, in the event that gambling business is conducted, if the customer’s money paid falls under the price for the goods or services provided by the business operator, not merely a money for gambling, it is subject to value-added tax. Therefore, in a case where a sports gambling business operator provides customers with an opportunity to participate in gambling and receives money in return for such offer, even if the act promotes speculation, it constitutes a supply of goods or services with property value, and thus, it should be subject to value-added tax.

(2) The summary of this part of the facts charged found guilty by the lower court is that the Defendant, along with Nonindicted 1, etc., copied the official website of Nonindicted Company 2 and ○○○○○, designated as the seller of sports promotion betting tickets, and opened and operated a private gambling Internet site from October 19, 2008 to April 7, 2009, and did not report and pay value-added tax at the competent tax office for the said period without having registered its business and without having reported and paid the value-added tax at the competent tax office during the said period.

(3) Examining the following circumstances revealed by the reasoning of the lower judgment and the record in light of the legal doctrine as seen earlier, issuing and selling similar sports betting tickets while opening and operating a private gambling website constitutes a transaction subject to value-added tax.

① The Defendant issued and sold similar sports promotion betting tickets and operated the instant website by paying prizes to them who meet the results of sports games with some of the sales proceeds.

② The Defendant did not directly take property and directly participate in gambling with those who purchased similar sports betting tickets, but did not receive any consideration for the issuance and sale of similar sports betting tickets, and only between those who purchased similar sports betting tickets, the Defendant’s acquisition and loss of property was determined by the incidental outcome of sports games.

③ In addition, the money that the Defendant received as consideration for the issuance and sale of similar sports betting tickets was reverted to the Defendant immediately, and the winning money was paid to them that meet the results of sports games, but the purchase price of similar sports betting tickets was not returned.

④ Therefore, the Defendant issued and sold similar sports betting tickets to give the purchaser an opportunity to receive the winning money and was paid the winning money.

(4) In the same purport, the lower court was justifiable to have rendered a conviction on this part of the facts charged. In so determining, the lower court did not err by misapprehending the legal doctrine on whether gambling revenues are subject to value-added tax, contrary

B. Determination on the remaining grounds of appeal

The lower court determined that even if the Defendant, etc. paid a part of the amount of value-added tax evaded after the return and payment deadline of value-added tax, this does not affect the establishment of the crime of tax evasion, apart from the fact that this constitutes the grounds for sentencing consideration, and that such circumstance alone does not readily mean that the prosecutor’s arbitrary exercise of authority to prosecute the Defendant, thereby remarkably deviating

Examining the reasoning of the lower judgment in light of the relevant legal doctrine and the evidence duly admitted by the lower court, such determination is justifiable. In so determining, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on whether the crime of tax evasion was established due to a subsequent cause, the abuse of authority to institute a prosecution, the principle

2. Violation of the Punishment of Tax Evaders Act

Article 3 (5) 2 of the Punishment of Tax Evaders Act provides that the act of tax evasion in the form of tax return and payment reaches the number of tax evasions upon the expiration of each tax return and payment period.

The lower court found the Defendant guilty of this part of the facts charged on the ground that it did not affect the establishment of the crime of tax evasion even if the initial disposition of tax evasion was corrected due to the occurrence of a follow-up cause of confiscation or the execution of additional collection after the payment deadline, as the amount of tax evasion was derived from the act of tax evasion upon the expiration of the tax return and the payment deadline.

Examining the reasoning of the lower judgment in light of the relevant legal doctrine and the evidence duly admitted by the lower court, such determination is justifiable. In so determining, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on whether the crime of tax evasion was committed due to subsequent causes, such as confiscation and collection, and the abuse of the right

3. Conclusion

The Defendant’s final appeal is dismissed as it is without merit. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)