2013west0827 (Law No. 13, 2013)

Since it is presumed that a purchase is made from sales of scrap metal, purchase costs are recognized as deductible expenses.

In principle, the sales of scrap metal is established by the volume of the purchased scrap metal. Therefore, it is unreasonable to deny the necessary expenses for purchase as it is recognized that sales have more inventory than the inventory amount stated in the account book, barring any circumstances such as that the sales have been conducted. Therefore, the purchase cost is recognized as deductible expenses.

Article 19 (Scope of Deductible Expenses)

2013Guhap295444 Disposition of revocation of imposition of value-added tax

OOO Co., Ltd.

O Head of tax office

Part of a parosh

March 27, 2015

April 17, 2015

1. The defendant limited to the plaintiff

(a) the imposition of corporate tax of KRW 33,687,940 (including additional tax) for the business year 2010 dated January 2, 2013, and the notification of the change in the amount of income for the business year 2010 (income earner: Haddd and income amount: 140,921,550);

B. The imposition of KRW 18,741,690 (including additional taxes) of corporate tax for the business year 2011 dated September 1, 2012 and the notification of the change in the amount of income for the business year 2011 (income earners: Haddd and income amount: 93,502,750) shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the costs of lawsuit, 1/2 is assessed against the Plaintiff, and the remainder 1/2 is assessed against the Defendant, respectively.

Cheong-gu Office

Disposition No. 1 and the Defendant’s imposition of value-added tax of KRW 23,456,450 (including additional tax) on January 2, 2013 to the Plaintiff and KRW 14,862,680 (including additional tax) on September 1, 2012, each disposition of imposition of value-added tax of KRW 14,862,680 (including additional tax) on September 1, 2012, shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a corporation established on June 16, 1995 and primarily engaged in steel products, half-finished products, wholesale, retail, and acceptance and entry business.

B. △ Resource-related

(1) On September 8, 2010, the Plaintiff received each purchase tax invoice of KRW 61,186,50 (including the supply price of KRW 66,924,00 on October 11, 2010 from the △△△△△△△△△△△ located in △△△△△△dong (representative B; hereinafter referred to as “△△△△△△△”), and reported the relevant input tax amount from the output tax amount to the amount of output tax for the second year of 2010, after deducting the relevant input tax amount from the amount of output tax for the second year of 2010; 2) on January 2, 2013, the Defendant included the supply value in the first tax invoice in the deductible expenses on the corporate tax return for the business year of 2010; 2) on the ground that the Plaintiff’s tax invoice constitutes a tax invoice different from the fact, 23,456, 450, 2010 (including additional tax); and 30104.5

3) Accordingly, on June 24, 2013, the Plaintiff filed an appeal with the Tax Tribunal on the disposition of imposition of value-added tax, corporate tax and notice of change in income amount, but was dismissed on September 13, 2013.

C. Regarding ○○ Resources

(1) On March 26, 2011, the Plaintiff received a purchase tax invoice of KRW 84,502,500 (hereinafter “second tax invoice”) from the ○○○○○○○○○○○○○○○○○○○○○○○○○○○○ (hereinafter “○○○”) on the ground that the Plaintiff’s return of the value of supply on March 26, 2011 was made by deducting the relevant input tax amount from the output tax amount, and then included the supply value on the second tax invoice in deductible expenses at the time of filing a corporate tax return for the business year 2011. (2) On September 1, 2012, the Defendant issued a notice of the amount of supply under the second tax invoice in the input tax invoice in the deductible expenses. (3) On the ground that the Plaintiff constituted a false tax invoice.

3) Accordingly, on January 23, 2013, the Plaintiff filed an appeal with the Tax Tribunal on the disposition of imposition of value-added tax, corporate tax and notice of change in income amount, but was dismissed on September 3, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1, 2 and 8 (including paper numbers), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) As to △△ transactions

The Plaintiff’s employee confirmed the new shares (cognent and ASEANs) and transported new shares to the Plaintiff’s place of business through OOOO, a measurement company, and issued a measurement certificate by OOOO, and received the first tax invoice from the △△△△ after re-upringing the new shares. In addition, the Plaintiff transferred the purchase price to the deposit account known by △△△△△△, and entered the new shares in the account book by suffering the new shares purchased. As such, the Plaintiff performed a real transaction with △△△△△△△, and fulfilled its duty of care, the imposition of value-added tax on the portion of △△△△△△ was unlawful.Although the first tax invoice constitutes a different tax invoice, the Plaintiff sold or exported the newly purchased shares to the domestic company, the imposition of corporate tax and the notice of change in the amount of income, based on the premise that the purchase of the purchase price on the first

2) As to the O trading portion

The Plaintiff confirmed the OO’s business registration certificate, deposit account, and the representative headA’s identification card, etc., deposited the purchase price of new shares into the deposit account, and confirmed the certificate of official measurement. As such, the Plaintiff was engaged in real transactions with the OO and fulfilled its duty of care, thus, the imposition of value-added tax is unlawful. Therefore, the imposition of value-added tax on the O transaction portion is unlawful. Even if the secondary tax invoice falls under a tax invoice different from the fact, the Plaintiff’s disposition to impose corporate tax and to notify changes in the amount of income, based on the premise that there was no purchase price equivalent to the purchase price on the 2 tax invoice,

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

1) Regarding the △△ Transaction Division

A) On July 1, 2010, △△△△ was an individual entrepreneur who opened business, and the office is a container next to the office of the OM (hereinafter “OM”). On October 27, 201, the employee of the OM was investigated as not using the office for a long period of time as a result of on-site verification, and there was no human and physical facility for the business, such as guidance facilities, stores, and employees, and was closed ex officio on June 30, 201. Meanwhile, on the deposit account of △△△△△△, the carB, the operator of the △△△△△△△△△△, made a statement on the purchase of new stocks and new stocks at the request of the OM workers, and made a statement on the purchase of △△△△△△△△△△△△△△△, which was not in cash or in cash, but did not know on the purchase price of the Plaintiff’s new stocks and new stocks at the time of the request of the △△△△△, which was not in the Plaintiff’s sales volume.

C) On February 2, 2012, the director of the Central Regional Tax Office of China filed a complaint with the Seoul Western District Public Prosecutor’s Office on the grounds that “△△△△△ was 100% data of supply value of KRW 9,957,826,850 during the Second Year of 2010 and the First Year of 201, which issued the processed tax invoices (including the first tax invoices of KRW 128,110,500).”

D) The Plaintiff transferred 67,305,150 won (=61,186,500 won + 6,118,650 won) of the purchase price of new shares on September 8, 2010 to the deposit account known by the teaB (=66,924,00 won + 6,692,400 won) on December 73, 2010.

E) On September 6, 2012, the Plaintiff’s directors JJ submitted the following certificates:

��운송주선업체의 소개로 OO물류에 운송의뢰하여 2010. 9. 7. 경기 OO사OOOO호 차량에 상차하여 OO시 OO구 소재 원고 하치장에서 잡신주 14,630㎏를 계근하고 하차하였다. △△ 대표자와 중량확인 후 구입한 잡신주를 일본으로 수출하였다.

��2010. 10.경 다시 △△에 문의하여 유한회사 EE기업으로부터 광주 OO바OOOO호 차량을 수배하였고, 잡신주 16,200㎏, 고철 1,460㎏을 구입하여 일본으로 수출하였다. ��△△ 소재지는 계속해서 고철상을 하고 있다.

F) On September 7, 2010, the Plaintiff received a tax invoice of KRW 400,000 from the O to theO (value of supply). On September 8, 2010, the Plaintiff remitted the amount of carriage to the O logistics on September 8, 2010. In addition, on October 11, 2010, the Plaintiff received a tax invoice of KRW 430,000 from a limited liability company EE enterprise to Gwangju (value of supply) and remitted the amount of carriage to a limited liability company EE enterprise on October 12, 2010.

G) Written measurement certificates prepared by Fririthing, the guidance service provider, and the specifications of the Plaintiff’s purchase and transaction are as follows:

Statement of Purchase and Transaction of Plaintiff’s Certificate

��일시 2010. 9. 7.

- Vehicle number: OOOO

- Items: New shares

- Total weight of 19,870 kilograms, 9,280 kilograms and net weight of 10,590 kilograms;

��일시 2010. 9. 7.

- Vehicle number: OOOO

- Items: New shares

- 14,615 kilograms of total weight, 24,030 kilograms, 19,870 kilograms of ball weight, 4,160 kilograms of weight and 14,750 kilograms of storage weight, put into storage, less 14,615 kilograms of weight;

��2010. 10. 10.

- Vehicle number: OO

- Item name: New shares

- Total weight 31,180 kilograms, 14,480 kilograms, net weight 16,700 kilograms;

at 16,700 kilograms of storage less 16,200 kilograms of storage

H) On November 15, 2012, Yang H, a driver, submitted a written confirmation that “On September 7, 2010, 2010, △△△ △△, the driver loaded the water onto the Plaintiff’s valleys.”

2) As to O trading relations

A) On January 15, 201,O submitted a written confirmation that it is an individual entrepreneur who started business on January 15, 201, and a place of business is a factory with small garden near a housing building. There is no facility for a business, such as a valley, and a lessor has no fact of collecting, transporting, and selling vehicle traffic and scrap iron at an OO establishment on November 201, 201.

B) On November 15, 2011, the head of the tax office of the Korea-U.S. filed an accusation against the violation of the Punishment of Tax Evaders Act, on the ground that the “O” was 100% of the supply price of KRW 4,174,218,450 during the first period of the year 201, on the grounds that the supply price of KRW 84,502,50 (including secondary tax invoices of KRW 84,502,50) was issued.

C) On March 26, 2011, the Plaintiff remitted KRW 93,50,750 to the deposit account, including transportation expenses, to which an employee of theO knew.

Statement of Purchase and Transaction of Plaintiff’s Certificate

��일시 2011. 3. 25.

- Vehicle number: OO

- Items: New shares

- Total weight 2:59 34,070 kilograms, public vehicle weight 1:48 16,070 kilograms, net weight 18,00 kilograms, storage volume 17,790 kilograms

D) Written measurement certificates prepared by JAAAD located in OO and the specifications of the Plaintiff’s purchase and transaction are as follows.

3) The Plaintiff’s inventory status

The inventory status of the Plaintiff’s scrap metals prepared on the basis of the head of the sales office by transaction partner, the specifications of purchase and transaction, and the export declaration completion certificate are as shown in the attached inventory status. According to this, on December 31, 2009, inventory is 130,816 kilograms; on September 2010, the purchase volume is 111,575 kilograms; on September 201, the domestic sales volume is 14,860 kilograms; on October 2010, the export volume is 95,85 kilograms; on October 2010, the purchase volume is 138,740 kilograms; on domestic sales volume is 15,320 kilograms; on December 31, 2010, the domestic sales volume is 117,320 kilograms; on December 31, 2010, the inventory is 195,45 kilograms; on March 31, 2011, the domestic sales volume is 69,2016,29 kilograms

[Ground of recognition] Facts without dispute, Gap evidence 5 to 13 (including additional numbers), Eul evidence 3 to 8 (including additional numbers), the purport of the whole pleadings

D. Determination

1) Relevant legal principles

A) Article 17(2)1 of the former Value-Added Tax Act (amended by Act No. 11129, Dec. 31, 201) provides that an input tax amount shall not be deducted from the output tax amount in cases where the entries of a tax invoice are different from the facts. In such a case, the meaning of different facts is that where the ownership of income, profit, calculation, or transaction subject to taxation belongs only to the name of the person to whom such income, profit, or transaction belongs, and there is another person to whom such income, profit, act or transaction belongs, the person to whom such income, etc. belongs shall be liable for tax payment in light of the purport of Article 14(1) of the Framework Act on National Taxes that provides that the necessary entries in a tax invoice are different from those in the transaction contract prepared between the parties to the goods or service, regardless of the formal entries in the transaction contract prepared between the parties to the transaction, the taxpayer and the person to whom such tax invoice was actually supplied, and thus, the other party to the transaction cannot be verified to the extent that it was not aware of the tax invoice’s.

B) In principle, the sales of the scrap metal wholesale business is established in the volume of the scrap metal purchased differently from the general manufacturing business. In determining the business income of the scrap metal wholesaler, in calculating the total revenue when the scrap metal wholesaler recognizes the amount reported as the sales price for the scrap metal, and in calculating the necessary expenses, if the same quantity is excluded from the sales price for the scrap metal, the scrap metal wholesaler would have processed and sold the scrap metal that was not purchased. Therefore, it can be presumed that the amount of stock carried over in the previous year was at least the sales volume, unless there are special circumstances, such as that the quantity of the scrap metal carried over in the previous year exceeds the total stock of the business operator, or the quantity of the processed or sold was adjusted, or the sales unit price was adjusted (see Supreme Court Decision 88Nu10589, Jul. 11, 1989).

2) As to the imposition of value-added tax

A) As to △△ transactions

The above facts and the evidence revealed as follows: (a) △△△△△△△△△ was not equipped with human and material facilities for the scrap metal business and deemed to have no capacity to supply scrap metal, etc.; (b) it is consistent with the typical data transaction behavior, such as immediately withdrawing when the payment was made in the deposit account of △△△△△△; (c) it is not equipped with the data necessary for the business, such as the volume and volume of the scrap metal stored without being well aware of the high-speed steel market price; and (c) the Plaintiff’s Hahh and the Plaintiff’s director ChoJ submitted a written confirmation to the effect that the Plaintiff was not aware of the fact that the location of the △△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△△ was not a OO; (d) it is reasonable to view that the Plaintiff was not aware of the supply of the relevant data or the actual risk of the supply of the derivatives, and thus, the Plaintiff did not know the actual transaction type and the risk of the supply of the derivatives.

B) As to the O trading portion

The facts acknowledged earlier and the evidence revealed as follows: ① O was a personal entrepreneur, who opened a business on January 15, 201, without being equipped with human and physical facilities for the scrap metal business, and there was no purchase; ② A lessor at the place of business after commencement of lease on January 201 stated that there was no vehicle traffic, or collection, transportation, and sale of scrap metal at the place of business; ③ As such, OO was a company and was not equipped with human and physical facilities for business for more than two months after commencement of transactions on the second tax invoice, and the Plaintiff was not equipped with human and physical facilities for a considerable period of time. If the Plaintiff actually confirmed the location or business facilities of the place of business, etc., it was possible to verify the actual identity of the other party to the transaction, but did not know that the Plaintiff was not negligent in purchasing value-added tax immediately from an O related person, etc., which was found to be the Plaintiff’s place of business, and thus, the Plaintiff was not aware of the fact that the Plaintiff did not actually knew or was not negligent.

3) As to the imposition of corporate tax and notice of change in income amount

In light of the aforementioned facts and the following circumstances acknowledged by the evidence, i.e., (i) the sales of scrap metal is established by the volume of the purchased scrap metal; (ii) the sales is recognized as being more inventory than the inventory recorded in the account book, and there is no evidence to acknowledge that there was an inventory or sales amount during the business year 2010 and the business year 2011; (ii) the Plaintiff exports most of the monthly storage amount to Korea or overseas; and (iii) the inventory amount is continuously managed on the basis of the ledger of sales by each customer, detailed statement of the purchase transaction, export declaration certificate, etc., it is difficult to deny the entry in the account book; and (iii) the Plaintiff paid the purchase amount with new shares to the account account notified by BB prior to the date of supply on the first tax invoice, and received the purchase tax invoice; and (iv) there is no other premise that the Plaintiff returned the purchase amount to the account of O’s employee after the date of supply on the second tax invoice, and thus, the Plaintiff did not seem to be unlawful in consideration of the actual tax invoice amount.

3. Conclusion

Therefore, the plaintiff's claim is justified within the scope of the above recognition, and the remaining claims are dismissed as it is without merit. It is so decided as per Disposition.

Relevant statutes

Value-Added Tax Act (Amended by Act No. 11129, Dec. 31, 2011)

Article 17 (Payable Tax Amount)

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as the "paid tax amount") shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as the "in-house tax amount") from the tax amount on the goods and services supplied by him/her (hereinafter referred to as "the output tax amount"): Provided, That in cases of an input tax amount in excess

1. The tax amount for the supply of goods or services used or to be used for his own business;

2. The tax amount for the import of goods used or to be used for his own business; and

(2) The following input taxes shall not be deducted from the output tax amount:

1. An input tax amount where the list of total tax invoices by customer is not submitted under Article 20 (1) and (2), or the input tax amount on the portion not entered or the portion entered differently from the fact, where the whole or part of the registration numbers or supply values by transaction parties is not entered or differently entered from the fact, from among the entries on the list of total tax invoices by customer submitted: Provided, That in such cases as prescribed by Presidential Decree,

2. An input tax amount, in cases where a tax invoice under Article 16 (1), (2), (4) and (5) is not issued, or all or part of the matters to be entered under Article 16 (1) 1 through 4 (hereinafter referred to as "necessary matters to be entered") are not entered or entered differently from the fact on the tax invoice issued: Provided, That the input tax amount in cases prescribed by Presidential Decree shall be excluded;

3. An input tax amount for payments not directly related to the business.

Corporate Tax Act

Article 19 (Scope of Losses)

(1) Deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of a corporation, excluding return of capital or financing, disposition of surplus funds, and what is provided for in this Act.

(2) Losses referred to in paragraph (1) shall be losses or expenses incurred in connection with the business of a corporation which are generally accepted as ordinary or directly related to profit, except as otherwise expressly prescribed by this Act and other Acts.

Article 6 (Settlement and Correction)

(1) Where domestic corporations fail to file a report under Article 60, the head of the competent tax office or the Commissioner of the competent Regional Tax Office having jurisdiction over the place of tax payment shall determine the tax base and

(2) Where a domestic corporation files a report under Article 60 in any of the following cases, the head of the tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the corporate tax base and amount

1. Where any error or omission occurs in the details of a return;

Article 67 (Disposal of Income)

When filing a report on the corporate tax base on the income for each business year pursuant to Article 60 or determining or revising the corporate tax base pursuant to Article 66 or 69, the amount included in the calculation of earnings shall be disposed of to the person to whom it belongs, as prescribed by Presidential Decree, such as bonus, dividends, other external outflow and internal reservation.

Enforcement Decree of Corporate Tax Act

Article 19 (Scope of Losses)

Losses under Article 19 (1) of the Act shall be those provided for in the following subparagraphs, except as otherwise provided for in the Act and this Decree:

1. The purchase value of raw materials of commodities or manufactured goods sold (excluding purchase overcharge amounts and purchase discount amounts under corporate accounting standards) and incidental expenses;

§ 106. Disposal of income

(1) The amount included in the calculation of earnings under Article 67 of the Act shall be disposed of in accordance with the provisions of the following subparagraphs. The same shall also apply to non-profit domestic corporations

1. Where it is obvious that the amount included in the calculation of earnings has leaked out of the company, the dividends, bonuses from the disposition of profits, other income, and other outflow from the company under the following items according to the person to whom they accrue:

Provided, That where the accrual is unclear, it shall be deemed that it has been reverted to the representative (where the total number of stocks, etc. owned by an executive who is not a minority stockholder, etc. and persons with a special relationship under Article 43 (8) with him/her holds not less than 30/100 of the total number of stocks issued or total amount of investment in the relevant corporation and actually controls the management of the corporation, such executive shall be deemed the representative, and where there are not less than two

(b) If the person to whom it belongs is an officer or employee, the bonus to that person;