[1] The meaning of "Fraud and other unlawful act" under Article 26-2 (1) 1 of the Framework Act on National Taxes

[2] The case holding that although an attorney-at-law made a false agreement stating the amount of success fees less than the actual fees, the return of income was less than the actual ones, active acts such as submitting a false agreement to the tax authority, such as submitting a false agreement, etc., it cannot be deemed that he evaded the tax by the "Fraud or other unlawful act" under Article 26-2 (1) 1 of the Framework Act

[1] "Fraud and other unlawful acts" under Article 26-2 (1) 1 of the Framework Act on National Taxes can be interpreted as the same meaning as "Fraud and other unlawful acts" under Article 9 of the Punishment of Tax Evaders Act. "Fraud and other unlawful acts" under Article 9 of the Punishment of Tax Evaders Act mean the act of deception and other active acts that make it impossible or considerably difficult to impose and collect taxes as the means of tax evasion, and without accompanying such acts, it does not constitute fraudulent acts.

[2] The case holding that although an attorney-at-law made a false agreement stating the amount of success fees less than the actual fees, the income return was less than the actual ones, there was no active act such as submitting a false agreement to the tax authority, it cannot be deemed that he evaded the tax by "Fraud or other unlawful act" under Article 26-2 (1) 1 of the Framework Act on National Taxes

[1] Article 26-2(1)1 of the Framework Act on National Taxes; Article 12-3(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 19893, Feb. 28, 2007); Article 9 of the Punishment of Tax Evaders Act / [2] Article 26-2(1)1 of the Framework Act on National Taxes; Article 12-3(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 19893, Feb. 28, 2007)

[1] Supreme Court Decision 2001Do3797 decided Feb. 14, 2003 (Gong2003Sang, 871) Supreme Court Decision 2005Do370 decided Mar. 25, 2005

Plaintiff (Law Firm Sejong, Attorney Lee Dong-chul, Counsel for the plaintiff-appellant)

Head of Seocho Tax Office

September 19, 2007

1. The Defendant’s imposition of global income tax of KRW 4,578,769,210 against the Plaintiff on January 1, 2005 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. As a result of the tax investigation against the plaintiff, the defendant accepted the case related to the right of repurchase from 43 persons, including the non-party 1 clan (hereinafter "the clan of this case"), around 1992. The defendant received 7,934,060,20 won with the fees for the above lawsuit as a result of settlement on October 12, 1995, even though it received 7,934,060,200 won with the fees for the above lawsuit, it shall be reported as 100 million won with the fees for the above lawsuit, and the remaining 7,834,060,20 won with the fees for the above case shall be reported as 10,000 won by preparing a false agreement with the financial benefits of the clan of this case, etc. as the initial fees for the success, and the omission of the fees for the above report shall be deemed to constitute a case of evading national taxes by fraud or other unlawful acts, and notified the plaintiff of the imposition of global income tax for the above reported amount of 195,75,75,75.

B. On March 29, 2005, the Plaintiff filed a request for adjudgment with the Director of the National Tax Tribunal, but the Director of the National Tax Tribunal dismissed the said request on January 4, 2006.

[Reasons for Recognition] Unsatisfy, Gap evidence 1, Gap evidence 2, Eul evidence 1

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

The disposition of this case had already ceased to be liable for tax payment due to the lapse of five years, which is the exclusion period of the assessment of national taxes, at the time of the disposition of this case for attribution of 195, and even if not, in accepting the lawsuit related to the right of repurchase in this case, some clients agreed to accept the lawsuit related to the right of repurchase in this case without compensation and to receive 10-30% fees from some clients, respectively. In addition, there was a case where some clients did not enter into an additional agreement on the fee of 10% from some clients, and there was a case where they did not receive the agreed fee of 10% from the agreed fees. The fees actually received by the Plaintiff did not have to pay to investors the amount equivalent to 300% of the investment amount agreed while soliciting the redemption money, etc., so the Plaintiff’s income differs from the income

(2) The defendant's assertion

The plaintiff prepared an agreement to receive contingent fees of 40% in relation to the lawsuit related to the right of repurchase in this case, and prepared a false agreement to receive fees of 7,934,060,200 won equivalent to 40% of the economic interest of the state while the clan, etc. in this case received contingent fees of 100 million won, and reported only KRW 7,834,060,200 as the amount of income, and omitted the report. This constitutes an active act that makes it difficult to impose or collect taxes, and thus applying 10 years under Article 26-2 (1) 1 of the Framework Act on National Taxes with the exclusion period of imposition of the disposition in this case as it constitutes a "Fraud or other unlawful act" due to an active act that makes it difficult to impose or collect taxes, it is justifiable to apply the ten-year period under Article 26-2 (1) 1 of the Framework Act on National Taxes with the exclusion period of imposition

B. Relevant statutes

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

C. Determination as to whether the exclusion period for the imposition of national taxes is expired

(1) The meaning of fraud and other unlawful act

Article 26-2 (1) of the Framework Act on National Taxes provides for the exclusion period for the assessment of national taxes, and provides for the exclusion period for ten years from the date on which the national tax is assessable if the taxpayer evades, deducts, or deducts the national tax by fraud or other unlawful means (Article 1) and for seven years from the date on which the national tax is assessable if the taxpayer fails to file a return of tax base within the statutory due date of return, (Article 26-2 (1) of the Framework Act on National Taxes).

“Fraud and other unlawful acts” under Article 26-2(1)1 of the Framework Act on National Taxes can be interpreted as the same meaning as “Fraud and other unlawful acts” under Article 9 of the Punishment of Tax Evaders Act. “Fraud and other unlawful acts” under Article 9 of the Punishment of Tax Evaders Act refer to the act of deception and other active acts that make it impossible or considerably difficult to impose and collect taxes as the means of tax evasion, and without accompanying such acts, the fact that the failure to file a tax return under the tax law or by underreporting the tax base does not constitute an unlawful act (see Supreme Court Decision 2005Do370, Mar. 25, 2005, etc.).

Therefore, in order to constitute “Fraud or other unlawful act” under Article 26-2(1)1 of the Framework Act on National Taxes, there was ① intent to evade tax, ② a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect tax as a means to do so, and ③ thereby, the causal link between the impossibility or significantly difficult to impose and collect tax should be acknowledged.

(2) Facts of recognition

(A) The details of the Plaintiff’s acceptance of the case and the preparation of agreement

① On August 192, 192, the Plaintiff provided a redemption price equivalent to the compensation received by the said clans, etc. in accordance with the repurchase right provisions, and accepted as an agent for litigation related to the repurchase right of this case, the Plaintiff shall bear all the litigation costs including the recognition of the said litigation, appraisal fees, etc., and entered into an agreement for the case of the said clans individually with 43 persons including the said clans, in order to receive a certain percentage of contingent remuneration when the delegated affairs are successful.

② According to the agreement concluded between the non-party 2 who representing the clan of this case and the plaintiff, "where delegated duties of representation of the case between the clan of this case and the country of the first, second, and third instances are successful, the amount equivalent to 30% of the value of the economic benefits accrued therefrom shall be stated as the amount equivalent to 30% of the value of the non-party 2's success in the delegated duties.

③ Meanwhile, 34 persons, including the instant clan, from among the clients of the instant lawsuit related to the instant repurchase right, failed to prepare for the redemption price equivalent to the compensation to be paid in advance to the State at the time when the limitation period expires for repurchase lawsuit is not less than one month, the Plaintiff requested the Plaintiff to prepare the said redemption price, and agreed to pay the Plaintiff 10% of the agreed contingent remuneration as additional interest instead of paying it to the Plaintiff.

④ On October 12, 1995, the instant lawsuit related to the instant redemptive right was concluded with the settlement that the instant clans, etc. should have the right to claim payment of deposit money of KRW 16,727,159,270, the Seoul High Court, Seoul High Court (Seoul High Court 93Na24645, decided October 12, 1995.

⑤ On November 29, 1995, the Plaintiff paid KRW 4,075,789,00, which was transferred to the right to claim for a clan, and deposited KRW 2,475,789,000 after deducting KRW 1.6 billion from the attorney’s fees among them, with a specific trust fund in the name of the above clan, and with a general account in the name of Nonparty 3, the representative of the above clan at the time.

6) After that, the non-party 4, who was appointed as the representative of the clan of this case from January 20, 191 to February 2, 1997, was appointed as the successor of the non-party 3 (the representative of the clan of this case) and was appointed as the representative of the clan of this case upon the plaintiff's request, separately from the agreement of the above paragraph 2, the non-party 4 entrusted the representative affairs of the lawsuit between the non-party 42 and the country concerning the registration of ownership transfer to the non-party 1, 2, and 3 for the success of the delegated affairs, the non-party 4, who was appointed as the representative of the clan of this case, prepared and delivered to the plaintiff a letter of agreement stating that "if the delegated affairs

7) On October 16, 2002, the instant clan filed a complaint with the Seoul Southern District Office by asserting that the Plaintiff embezzled KRW 127,265,054 of the interest on deposit money in the process of withdrawing the deposited money for which the right to claim the return of the clan was transferred after the lawsuit related to the right to claim the return of the clan was closed. A copy of the written agreement as one of the evidence, which was kept by the said clan, was submitted.

8) Accordingly, even though the Plaintiff received the fees of KRW 7,934,060,20, which is 40% of the total compensation from the clan of this case, etc., the Defendant calculated the total income tax for KRW 7,834,060,20, which is the remainder after deducting KRW 100,000,000, which is the amount of contingent fees as stated in the above paragraph 6, and imposed the instant disposition.

(B) Details of tax return on the income amount at the time, and Plaintiff's business income return

① On January 20, 1993, with respect to the report on the amount of attorney-at-law for the year 1992 between the director of the Seoul Regional Tax Office and the head of the Seoul Local Bar Association, a certain amount by grade based on attorney-at-law experience and the type of retained case was determined as the reported amount and the report on the tax base and tax amount by multiplying the number of transit cases entered

② According to the above consultation, lawyers filed tax returns according to the reported amount determined by the above consultation regardless of whether to receive fees and the amount of revenue. In such case, the case name is not submitted except for corporate cases, and the head of Seoul Regional Tax Office decided to treat the reporting person as an individual reporting person who did not report the amount of revenue pursuant to the above consultation in lieu of excluding tax interference with respect to the reporting person in excess of the amount of tax imposed by consultation.

③ Around May 31, 1996, when the Plaintiff filed a global income tax return on the portion reverted to the year 1995, the Plaintiff reported the amount of business income to KRW 276,591,290, and the amount of income to KRW 122,795,263, and paid KRW 43,757,860 of the global income tax (the amount of income was corrected to KRW 386,798,00 of the amount of income and KRW 234,181,167 of the amount of income on June 31, 1997, and was additionally notified of KRW 62,039,40 of the global income tax).

[Based on the basis of recognition] Gap's evidence 3, Gap's evidence 4, Eul's evidence 2-1 to Eul's evidence 18, the fact-finding results to the head of Seoul Bar Association of this court, the purport of the whole pleadings

(3) Determination

According to the above facts, the plaintiff's actual act in relation to the global income tax for the portion reverting to the year 1995 from May 31, 1996 until the time when he reported and paid the global income tax for the portion reverting to the year 1995 was deemed to have been omitted or underreported by the tax authorities on the success fees received from the clan of this case and the amount thereof. Further, there is no evidence to support the fact that the plaintiff made it impossible or significantly difficult to impose and collect taxes on the tax authorities by means of fraudulent means or other active acts such as submitting them to the tax authorities, etc. (A) (6) since the agreement in subparagraph (a) of the above paragraph is difficult to view that the non-party 3 who was appointed the representative of the clan of this case from January 20, 1991 to February 2, 197, at least the time when the non-party 4, who was the representative of the clan of this case, had no relation to the above global income tax return for the purpose of 195 years after February 3, 1997.

Therefore, since the exclusion period of imposition of global income tax for the plaintiff 195 shall be five years, the exclusion period of imposition of global income tax for the plaintiff 195 shall be deemed to be ten years, the disposition of this case, which reported the exclusion period of imposition of national tax to be ten years, is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

Judges Jeon Sung-soo (Presiding Judge)