Financial statements, etc. received voluntarily shall not be deemed a tax investigation, and when calculating an additional tax for unfaithful payment, an inorganic additional tax shall be deemed a tax amount paid.

The financial statements and tax adjustment statement for the year to which they deviate from the investigation during the tax investigation can not be deemed an illegal tax investigation, and the inorganic penalty tax paid by a person subject to double-entry bookkeeping when he/she returns the income tax by estimation shall be deducted from the paid tax amount in calculating the additional tax when he/she correctss according to the account books, etc. by the tax investigation,

Article 81-9 of the Framework Act on National Taxes / [Restriction on Extension of Scope of Tax Investigation / Additional Tax for Indecent Payment and Refund under the Income Tax Act

2016Guhap57984 and revocation of disposition of global income

1.A

2.B.

CC director of the tax office

on October 24, 2017

on October 24, 2017

1. The Defendant’s disposition of imposing global income tax of KRW 00,00,000 (including additional tax and special tax for rural development; hereinafter the same shall apply) for the amount exceeding KRW 000,000,000 among the imposition (including additional tax and special tax for rural development; hereinafter the same shall apply) of global income tax for the year 2009 on May 12, 2015, and the portion exceeding KRW 00,000,000 among the imposition disposition of global income tax for the year 2010 on June 3, 2015, and the imposition disposition of KRW 00,000,000 among the disposition of imposing global income tax for the year 209 on Plaintiff LB on May 12, 2015, and the imposition disposition of KRW 00,000,000 among the imposition disposition of KRW 10,000,000 for global income tax for the year 20,000.

2. The plaintiffs' primary claims are dismissed.

3. Of the litigation costs, 80% is borne by the Plaintiffs, and 20% is borne by the Defendant, respectively.

Cheong-gu Office

The primary claim: The Defendant’s imposition of KRW 000,000,000 of global income tax for the year 2009, as of May 12, 2015, and of KRW 000,000 of global income tax for the year 2010, as of June 3, 2015, and the imposition of KRW 00,000,000 of global income tax for the year 2009, as of May 12, 2015, and the imposition of KRW 00,000,000 for the global income tax for the year 2009, as of June 3, 2015, is revoked.

Preliminary purport of claim: It is as stated in paragraph (1).

1. Details of the disposition;

A. From 2003 to 2003, the Plaintiffs jointly operated the D Hospital with 1/2 equity shares, respectively. The Plaintiffs reported the comprehensive income tax accrued in 2009 and 2010, while filing an estimated return on the basis of the unpaid book expenses, and filed and paid an inorganic penalty tax.

B. From October 24, 2014, the Director of the Seoul Regional Tax Office (hereinafter referred to as the “Investigation Office”) conducted a consolidated investigation of global income tax for the Plaintiffs from October 24, 2011 to 2013. During that process, he/she submitted D Hospital balance sheet, income statement, and total trial balance sheet from EE Accounting Corporation in 2008 to 2013. On December 19, 2014, he/she conducted a consolidated investigation in a different taxable period under Article 63-11 of the Enforcement Decree of the Framework Act on National Taxes on December 19, 201, and expanded the scope of the tax investigation by the time of global income for the year 209 and 2010.

C. After that, the Defendant received notice from the Investigative Agency that “the Plaintiff intentionally submitted an estimated global income tax for 2009, 2010, and 2010, according to the books of account and evidence,” and that “the Plaintiff’s global income tax for 200,000,000 and global income tax for 200,000 as of May 12, 2015, and issued notice of the Plaintiff’s global income tax for 2009, as of June 3, 2015, as of May 12, 2015, and issued notice of correction and correction of the Plaintiff’s global income tax for 200,000,000,000 as of June 3, 2015 (hereinafter referred to as “instant disposition”).

D. The Plaintiffs appealed and filed an appeal with the Tax Tribunal on August 10, 2015, but was dismissed on December 28, 2015.

[Ground of recognition] Facts without dispute, purport of whole pleading

2. Whether each of the dispositions of this case is legitimate

A. The plaintiffs' assertion

1) The main claim part

The Investigation Agency received accounting data from EE accounting firms by expanding the period of investigation without notifying the Plaintiffs of the grounds for extension of the scope of tax investigation and the scope of its extension, etc. to the part attributable to 2009, 2010. After that, the Investigation Agency is merely a post-notification on the tax investigation that was actually made by the Investigation Agency. Such acts by the Investigation Agency are in violation of Articles 81-7 and 81-9 of the Framework Act on National Taxes and Article 63-11 of the Enforcement Decree of the same Act. In addition, EE accounting firms are not the other party who is entitled to exercise the right of inquiry and investigation based on subparagraph 7 of Article 170 of the Income Tax Act. Accordingly, each of the instant dispositions taken based on the result of the illegal tax

2) The ancillary claim part

In calculating an additional tax pursuant to Article 47-5(1) of the Framework Act on National Taxes, where the amount of tax paid falls short of the amount of tax payable, the amount of tax paid, including the additional tax, should be calculated as the difference between the already paid tax amount (paid tax amount) and the amount of tax deducted, reduced, and exempted from the calculated tax amount. However, the Defendant calculated an additional tax for unfaithful payment based on the amount obtained by subtracting only the principal tax returned and paid by the Plaintiffs from the amount of tax determined as corrected by the Defendant. The non-paid additional tax paid by the Plaintiffs upon filing a return of income tax estimate, did not be included in the already paid tax amount (paid tax amount). Accordingly, the portion of an additional tax for unfaithful payment calculated as

B. Relevant statutes

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

C. Judgment on the main claim

1) A tax investigation is a kind of administrative investigation to realize the State’s right to impose taxation, and refers to any act of inspecting, investigating, or ordering the submission of books, documents, and other things. In the case of a tax investigation conducted by a tax authority for the purpose of imposing taxation, a legal obligation of a tax official to answer questions for the collection of taxation data and to allow inspection by a tax official or a person, etc. who is deemed to have a transaction with the taxpayer (hereinafter “taxpayer, etc.”) shall be imposed on the tax official. If such questioning and investigation is made in a false manner or refuses or evades such investigation, a fine for negligence under Article 17 of the Punishment of Tax Evaders Act shall be imposed, and there is always a possibility of infringing on the taxpayer’s freedom of business or legal stability. As such, Article 81-4 of the Framework Act on National Taxes has the nature of an act of power. Accordingly, a tax official shall not impose a tax investigation to the minimum extent necessary to realize an appropriate and fair taxation, and Article 81-7 of the same Act shall not impose a right to investigate for any other purpose, etc.

In light of the nature and effect of the above tax investigation and the various provisions of the Framework Act on National Taxes to protect the rights and interests of taxpayers, in cases where a tax official’s act of investigation substantially affects taxpayers’ freedom of business by having taxpayers answer questions and undergo an inspection, etc., such act shall be deemed to constitute a “tax investigation” regardless of the pretext of the procedure. On the other hand, in cases where all investigation conducted by the tax authority for collecting taxation data or for verifying the accuracy of the details of the investigation constitutes a tax investigation for which

Inasmuch as a mere fact-finding alone does not necessarily lead to a regular tax investigation and unnecessary compliance with a taxpayer, etc., it does not constitute “tax investigation” even if a taxpayer, etc. has no duty to answer or accept, and the taxpayer’s freedom of business, etc. is not likely to infringe on the taxpayer’s freedom of business, or the right to conduct tax investigation is not likely to be abused. Furthermore, whether an investigation conducted by a tax official constitutes “tax investigation” as mentioned above ought to be determined individually in a specific case by comprehensively taking into account the purpose and process of the investigation, the subject and method of the investigation, the materials obtained through the investigation, the scale and period of the investigation, etc. (see Supreme Court Decision 2014Du8360, Mar. 16, 2017).

2) According to the purport of testimony of ProfessorF, Gap's evidence Nos. 5 and 9, while conducting a comprehensive investigation on global income tax for the year 201 through 2013 against the plaintiffs, the investigating agency found that the amount of the basic inventory assets for the year 2011 was abnormal large compared to the amount of the basic inventory assets for the year 2008, 2012, and 2013, and confirmed that the sales cost was excessively appropriated as a result of the investigation. On November 24, 2014, the investigating agency requested the submission of the statements and financial statements for the year 2008 through 2013 to EE accounting corporation which accepted the plaintiffs' book keeping records. On that date, the investigating agency received the balance sheet, income statement, total balance sheet (hereinafter referred to as "the balance sheet, etc.") from EE accounting corporation for the year 201 through 2013, and the investigating agency notified the plaintiffs of the extension of the scope of the tax investigation for the year 2014.

As above, the investigative agency demanded the EE accounting corporation to submit a balance sheet, etc. on the same day without any particular objection, and it is expected that not only taxpayers can easily respond to such request, but also taxpayers' freedom of business, etc. The EE accounting corporation has no big influence on the balance sheet, etc. submitted to the investigative agency. Since the balance sheet, etc. submitted by EE accounting corporation does not have so-called settlement of accounts (accounting accounts for accurately measuring profits and losses during the pertinent period, such as substitution of inventory at the cost of sales and appropriation of depreciation costs), the submission of the balance sheet, etc. alone is difficult to calculate the annual tax amount for each item, and it is specifically necessary to conduct a tax investigation on each item (the submission of the balance sheet, etc. can not be deemed that the tax investigation on the portion for the year 209 and 2010 already was actually conducted). Thus, the submission of the balance sheet, etc. cannot be deemed to fall under "tax investigation" as referred to in the above legal principles. Thus, the plaintiffs' allegation in this part is without merit.

D. Determination on the conjunctive claim

1) Article 47-5(1) of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter referred to as “Framework Act on National Taxes”) provides that where a taxpayer fails to pay a national tax within the due date for payment under tax-related Acts or the paid tax amount falls short of the payable tax amount, an additional tax for unfaithful payment shall be added by applying the interest rate prescribed by the Presidential Decree, taking into account the period from the day following the due date for payment to the date of voluntary payment or the due date

Article 76(1) of the Income Tax Act or Article 64(1) of the Corporate Tax Act imposes on a taxpayer an obligation to pay the amount after deducting the amount of tax reduction or exemption from the calculated tax amount, etc. from the calculated tax amount. In principle, the "tax amount to be paid" is not the taxpayer's own return or payment, but the government imposes on a taxpayer (see Article 47(1) of the Framework Act on National Taxes). The "tax amount to be paid" is the tax amount not included in the calculated tax amount from the calculated tax amount to the interim tax amount after deducting the amount of tax reduction or exemption, the amount of tax to be imposed, the amount of tax to be deducted from the amount of tax to be paid, the amount of tax to be paid, the amount of tax to be deducted from the amount of tax to be paid, the amount of tax to be paid, the amount of tax to be paid, and the amount of tax to be collected from withholding

2) However, it is reasonable to view that the “tax amount paid” includes the additional tax paid by a taxpayer in the course of filing a return. First, a taxation disposition imposed by a tax authority is essentially different from that imposed by a taxpayer in the course of filing a return on the principal tax. However, if a taxpayer voluntarily calculates and pays an additional tax in the course of filing a return on the principal tax, it is necessary to strictly distinguish the amount of the additional tax. This is because the State already received the amount of money equivalent to the additional tax as the relevant taxpayer, taxable period, and tax item. Second, if a national tax paid in the name of a third party or a national tax paid in all separate items of tax, it is difficult to include the “tax amount paid” in the language and text of Article 47-5(1) of the Framework Act on National Taxes, but it is not necessary to interpret the relevant tax amount as the “tax amount paid” under Article 47-5(1) of the Framework Act on National Taxes so that the pertinent tax amount should not be included in the “additionally paid additional tax amount” under Article 18(1).5) of the Framework Act.

3) In calculating the additional payment for the erroneous payment for each of the dispositions of this case, when calculating the amount of tax paid by the defendant, the legitimate tax amount for the erroneous payment for the erroneous payment including the fact that the plaintiffs did not include the additional tax for the indefinite payment paid when filing the estimation of income tax, and the tax amount paid for the above indefinite payment, can be recognized as either a dispute between the parties or by the purport of the entire pleadings. As seen earlier, the portion of the additional payment for the erroneous payment calculated without including the additional tax for the indefinite payment for the "tax amount paid" in each of the dispositions of this case is unlawful, and therefore, the plaintiffs' assertion on the conjunctive claim is justified.

3. Conclusion

The plaintiffs' primary claims are dismissed as without merit, and the conjunctive claims are accepted as reasonable, and the costs of lawsuit are shared by the plaintiffs and the defendant according to the winning ratio. It is so decided as per Disposition.