Seoul High Court 2009Nu15328 ( November 26, 2009)

National High Court Decision 2007west 2816 (No. 18, 2008)

It is necessary to determine whether to refund gold bullion to an exporter of gold bullion transaction via a bombing company by applying the good faith principle.

In a series of gold bullion transactions, if a malicious business operator knew, or was unable to know, the circumstances that there was an illegal transaction for the purpose of evading the output tax amount, and that the deduction and refund of the input tax amount would lead to the reduction of other tax revenues by gross negligence, the exporter’s assertion of input tax deduction and refund cannot be permitted against the good faith principle.

The part of the judgment of the court below regarding the imposition of value-added tax on the first term portion in 2003, the second term portion in 2003, and the first term portion in 2004, excluding additional taxes, such as failure to submit a list of total tax invoices, shall be reversed, and that part of the case shall be remanded

The defendant's remaining appeals are dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the fact that the sales tax invoice and purchase tax invoice of this case are false tax invoices

The first instance court, cited by the lower court, recognized the facts as indicated in its reasoning after compiling the evidence of employment, and determined that the sales tax invoice and purchase tax invoice in this case do not constitute a false tax invoice.

The ground of appeal on this part is that the above judgment of the court below is erroneous, but it is merely an error in the selection of evidence or fact-finding which belongs to the exclusive jurisdiction of the court below and thus cannot be a legitimate ground of appeal.

2. A. Article 15 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter “Framework Act on National Taxes”) declares that the principle of trust and good faith should be a basic guiding ideology in the field of tax law by stipulating that “A taxpayer shall drive away from reliance in the performance of his/her duty. The same shall apply to a tax official performing his/her duty.” In addition, the principle of trust and good faith, which provides that the operation of the law can be guaranteed through the function of supplementing or supplementing the existing law and supplementing it, thereby ensuring the concrete validity of the law, is also an amendment of the principle of no taxation without law in the field of tax law, and its scope of application is somewhat limited compared to that of civil law. However, if a tax law provision is applied to an individual case, the application of the principle of trust and good faith would significantly lead to a sound payment of value-added tax in light of universal justice and ethics, thereby excluding the application of the principle of trust and good faith.

B. Article 15 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) provides that when an entrepreneur supplies goods or services, the value-added tax on the value of the supply thereof shall be collected from the person who receives the supply thereof. Article 17(1) of the same Act provides that the value-added tax payable by an entrepreneur shall be the amount obtained by deducting the input tax amount from the output tax amount, and that the input tax amount exceeding the output tax amount shall be refundable. This is based on the process that an entrepreneur who receives the goods or services at each transaction stage prior to reaching the final consumer, pays the input tax amount to the State after deducting the input tax amount from the output tax amount, and then pays the tax amount to the final consumer, and ultimately imposes the burden on the final consumer (see, e.g., Supreme Court Decision 9Da33984, Nov. 12, 199).

Therefore, in a series of continuous transactions, where a malicious entrepreneur has attempted to evade value-added tax from the beginning to the end, and does not pay the value-added tax collected by him by attempting to make an abnormal transaction that only causes losses if he/she does not evade value-added tax (hereinafter referred to as "illegal transaction"), as in the next transaction stage, if an exporter is entitled to deduct or refund the input tax without the burden of the output tax amount due to applying the zero-rate tax rate as in the next transaction stage, as in the next transaction stage, the country has no choice but to make a refund with other tax revenues. Such a result exceeds the passive gap of tax revenues and constitutes an active outflow to the National Treasury. Accordingly, the burden exceeds the damage of the value-added tax system itself and is transferred to the general public, and it would cause serious harm to the overall tax system.

Of course, even if there are the above reasons, if an exporter is in a situation where the existence of an illegal transaction is unknown at all, he/she may not, in principle, deny that the exporter may deduct or refund the input tax amount as prescribed by the Value-Added Tax Act. However, if the exporter had been aware that there was an illegal transaction at that pre-stage stage, and he/she had engaged in a transaction with an opportunity to promote his/her own interest without vagasing it, and his/her transaction profit is attributable to the aforementioned illegal transaction, and his/her participation in the transaction was ultimately a critical factor that makes it possible to make an illegal transaction ultimately by securing the market for the illegal transaction, it shall be deemed an act of pursuing unjust profits by abusing the input tax deduction and refund system, which is a premise, and thus, the exporter’s deduction and refund of the input tax amount with another tax revenue from another tax revenue may not be a serious obstacle to the overall tax system as seen above, as well as to guarantee the benefits accrued from the illegal transaction to the National Treasury.

Therefore, it is difficult for an exporter to seek input tax deduction and refund in such a case, in light of the universal sense of justice and ethics, and thus, it cannot be permitted as it goes against the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes. Such a legal doctrine is not applicable to a case where the exporter was unaware of such an illegal transaction due to gross negligence in light of the perspective of fairness, the gravity of the outcome, and the universal sense of justice. In other words, it is reasonable to deem that the same applies to a case where the exporter was unaware of such illegal transaction due to gross negligence, namely, the relationship with the malicious business operator, and the exporter was paid a little attention, even though he was fully aware of such fact, and even if he was unaware of such fact, it is not limited to a case where there was a specific conspiracy or an accomplice relationship with the malicious business operator who

In addition, in such cases, since an exporter who is in a mutual relationship with a malicious business entity is entitled to deduct and refund the input tax amount from the country to the National Treasury, the exporter denies the deduction and refund of the input tax amount as a sanction against such exporter, it cannot be said that the exporter transfers it to the exporter without reasonable grounds (see Supreme Court en banc Decision 2009Du13474, Jan. 20, 201).

C. Examining in light of the aforementioned legal principles, if the non-party company, who is the exporter, has a malicious business operator making illegal transactions for the purpose of evading the output tax amount in the course of a series of transactions prior to the transaction, and accordingly, seeks the deduction and refund of the input tax amount even though he knew of the circumstance that the deduction and refund of the input tax amount for the non-party company would result in the reduction of other tax revenues by gross negligence, the non-party company, who took advantage of the illegal transaction of the malicious business operator, takes part of the output tax amount evaded by the malicious business operator by abusing the deduction and refund system of the input tax amount, as well as taking part of the output tax amount evaded by the malicious business operator by taking advantage of the deduction and refund system of the input tax amount, is not allowed in violation of the principle of good faith as stipulated in

D. Therefore, the lower court should have sufficiently examined whether the non-party company knew or did not know of the above circumstances in its trading of gold bullion, and determined whether the non-party company's assertion on the deduction and refund of the input tax amount violates the principle of good faith. However, the lower court determined that the non-party company's assertion on the deduction and refund of the input tax amount should be allowed just because the purchase tax amount of this case does not constitute a false tax invoice. The first half of 2003, the second half of 2003, and the second half of 204, including the rejection of the deduction and refund of the input tax amount of the non-party company's input tax amount of the non-party company's non-party company's non-party company's non-party company's non-party 1's non-party company's non-party 2's non-party company's non-party 2's non-party company's non-party 2's non-party 2's non-party 1's non-party 2's non-party 2's non-party 2's non-party 3's tax deduction.

3. As to the imposition disposition of corporate tax

The defendant also stated this part of the petition of appeal as subject to appeal, but there is no legitimate ground of appeal in the petition of appeal or appellate brief.

4. Conclusion

Therefore, the part of the judgment of the court below regarding the imposition of value-added tax on the first term portion in 2003, the second term portion in 2003, and the first term portion in 2004, excluding additional taxes such as failure to submit a list of total tax invoices among the judgment below, is reversed, and this part of the case is remanded to the court below for further proceedings consistent with this Opinion. The defendant's remaining appeal is dismissed. It is so decided as per Disposition by the assent