Seoul Administrative Court 2006Guhap17055 ( November 29, 2006)

National High Court Decision 2005No1805 (2006.03.07)

Appropriateness of a disposition imposed on an actual enterpriser;

In light of the fact that a lessee or an entrepreneur of the business report certificate or the business registration certificate for the excess point is the plaintiff, and the employee stated that the plaintiff is the actual business operator at the time of the tax investigation, the plaintiff is the actual business operator.

The contents of the decision shall be the same as attached.

Article 14 (Real Taxation)

1. The plaintiff's appeal is all dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The decision of the court of first instance shall be revoked. Each disposition of the defendant and the head of the tax office on February 1, 2005 exceeding 5,880,000 won out of value-added tax of 22 years 202 to the plaintiff on February 1, 2005, and the amount exceeding 33,571,952 won, global income tax of 2002 to 33,571,952 won, global income tax of 2003 to 74,508,610,610 won, and global income tax of 28,010,990 won, which belongs to 202 to the plaintiff on February 4, 2005, and each disposition of imposition of value-added tax of 2 years to 20,795,160 won to 14,568,600 won, value-added tax of 2 years 203 to 12,204,2004 won, respectively.

1. Details of the disposition;

The following facts do not conflict between the parties, or can be acknowledged by adding up the various types of evidence Nos. 1-1, 2, 3, and 2-1 through 7, A-3, 4, A-12, and 13, A-14, and 15.

A. On July 10, 1989, the Plaintiff registered his/her business with the trade name "○○", and operated multiple-use ginseng and other retail stores (hereinafter "the retail store of this case") in Seoul 00-Gu 00-000 000 buildings and operated multiple-use ginseng and other retail stores (hereinafter "the retail store of this case") in the middle of the 1990s, while concurrently engaging in credit business with loans and receiving interest from the mid-190s, the Plaintiff registered his/her credit business with the Seoul Special Metropolitan City Mayor on February 21, 2003, added his/her credit business to the business registration on August 19, 200. On July 10, 2002, the Plaintiff opened his/her business with the trade name "00-000 n.e., "00 n., the subject of this case").

B. On December 2004, the head of the tax office confirmed the fact that the tax base and the tax amount of the Plaintiff were omitted in the part of the credit business in 2002, KRW 79,870,00, KRW 133,013,00, and KRW 400,000, and KRW 141,560,000, and KRW 114,976,000, and KRW 114,976,000, and KRW 99,53,000, and KRW 106,664,00,000, respectively, in the part of the retail store in this case.

C. Accordingly, on February 1, 2005, the head of the tax office imposed the Plaintiff the imposition of value-added tax of 202 KRW 27,169,59,590 (including the additional tax; hereinafter the same shall apply), global income tax of 2002 KRW 54,706,230, global income tax of 2003 and global income tax of 74,508,610. On February 4, 2005, the head of the tax office imposed the Plaintiff the imposition of value-added tax of 20,795,160, value-added tax of 14,568,60, 12,062, 400, 12,34, 204, and 204, respectively.

D. On May 2, 2005, the plaintiff appealed to the Director of the National Tax Tribunal. On March 7, 2006, the Director of the National Tax Tribunal decided on February 1, 2005 that "the head of the National Tax Tribunal imposed value-added tax 27,169,590 on the plaintiff on February 1, 2005, the total of KRW 195,260,000,000, and KRW 40,000,000,000,000, which was estimated by applying the national average value added rate for the same type of business as the plaintiff, shall be calculated based on the estimated amount of sales for the pertinent taxable period, and based on this, the Director of the National Tax Tribunal decided that "the remaining tax base and tax amount shall be dismissed," and the defendant's decision that imposed tax on each of the above global income shall be reduced to 2035,205,000,000 won [the above decision that belongs to the above global income tax office.]

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

A. The plaintiff's assertion

(1) The Plaintiff’s decision of estimating KRW 184,853,00 by omitting sales, on the part of the retail store’s purchase amount of February 2002 excluding KRW 40 million in the process of calculating the sales price. Since the remainder was lawfully recorded and the tax return was made lawfully, Defendant 00 did not err in calculating the sales price of KRW 40,000,00 in addition to the above omission of purchase, Defendant 200 was rendered a decision of estimating the sales price of KRW 184,853,00 by omitting sales. However, this is merely a simple omission, and it does not constitute a ground for estimating sales due to on-site investigation, and thus, it does not constitute a ground for estimating sales amount. Accordingly, the disposition of imposing the value-added tax for February 2, 2002 and global income tax for 202, which was made by estimation as above, is unlawful in violation of the principle of taxation based on the Framework Act on National Taxes.

(2) The Plaintiff leased KRW 250 million to 00,000,000 as the opening business funds of the instant excess point to 1% of interest per annum, and only lent the name of the business operator in the name of the lessee of the instant excess lease contract as a security for the loan claim. Since the actual business operator of the instant excess point is 00, among the dispositions in each of the instant case, the imposition of global income tax by Defendant 00 and the imposition of value-added tax by Defendant 00 on the premise that the Plaintiff is the actual business operator of the instant excess point is illegal.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the estimation of tax base for the second period of 2002 at the retail store of this case

According to Article 21 of the Value-Added Tax Act and Article 69 of the Enforcement Decree of the same Act, the tax authority shall, in principle, based on the tax invoices, account books, and other evidence in determining or correcting the tax base. However, in calculating the tax base, if there is no necessary tax invoices, account books, or other evidence in the calculation of the tax base or there is a reason under the proviso of Article 21(2) of the Value-Added Tax Act, such as where there is no material reason or material reason, the tax authority may make a decision by estimation. However, the fact that the basic inventory, the current purchase and the last inventory of the retail store of this case are not stated in the account book of 202 and the fact that the Plaintiff omitted the purchase amount of KRW 40 million in the calculation process of the sales price does not conflict between the parties, and it is reasonable for Defendant 00 to determine the tax base by the method of estimation investigation, because the important part of

(2) As to whether the Plaintiff is the actual business entity of the instant bakeries

(A) Facts of recognition

In full view of the evidence No. 5, evidence No. 2, evidence No. 3, and evidence No. 3, and witness No. 1 and witness No. 1 and witness No. 200, and witness No. 1 and witness No. 200, the following facts can be acknowledged.

1) The lease contract of the instant excess store is indicated as KRW 50 million, monthly rent of KRW 5.3 million, and the Plaintiff as the lessee.

2) On July 9, 2002 and the 10th day of the same month, the Plaintiff filed a business report and registered business of the instant control point in the name of the Plaintiff, and the settlement account for receiving the credit card fee of the instant control point is the Plaintiff’s deposit account.

3) At the time when Defendant 00 director of the tax office conducted a tax investigation on the Plaintiff, the head of the tax office stated that the actual business operator of the instant task branch was the Plaintiff, not only the Plaintiff but also the person in charge of managing the instant task branch, and the main contents thereof are as follows.

A) On July 15, 2002, the Plaintiff opened the instant tasks. On May 24, 2002, the Plaintiff purchased premium of KRW 360 million from May 24, 2002 for the instant tasks.

B) The Plaintiff, as a general manager of the instant task, managed the tasks, such as making a daily report on the sales amount, and reported the sales amount to the Plaintiff every day from the opening of the instant task to December 2002, and thereafter, the Plaintiff was placed on the tasks once and once every month, and the Plaintiff reported the sales amount to the Plaintiff.

C) This 00 deposited the Plaintiff’s sales into the Plaintiff’s bank account at a 00 bank00 point, and delivered data such as daily sales table, tax invoice, receipt, etc. to the Plaintiff’s designated tax accountant, and the said certified tax accountant declared value-added tax and general income tax as the Plaintiff’s business operator.

D) From 2003 to 2003, distribution of goods and its monthly salary is KRW 1.8 million.

(B) Determination

1) As above, in light of the fact that the Plaintiff and its employees stated that they were the actual business operators based on the specific grounds for the operation status, etc. of the excess point at the time of the tax investigation, the Plaintiff is ratified as the actual business operators of the instant excess point. The evidence submitted by the Plaintiff alone is insufficient to reverse it. Thus, the Plaintiff’s assertion is without merit.

2) The plaintiff alleged that 00 million won was lent to 1% per month interest, and that 100 million won was not reported on interest income, and that 00 was asked to make a false statement at the time of the tax investigation. However, it is difficult to understand that 250 million won was given to loan service providers who had experienced several lawsuits for debt collection without any specific security (Evidence No. 8) and that 1% per month was decided to pay the principal in installments over 75 times per month (the plaintiff's assertion that 30 million won per month was 1% interest, instead of 1% interest, was prepared and certified (Evidence No. 5) or that 50 million won was not stated on the basis of a false loan certificate, and that 50 million won was not trusted and stated on the basis of the above loan certificate, and that 50 million won was not more than the loan service provider's interest income in excess of 36 months.

It is difficult to understand that the testimony of the first instance court of 00 by the witness, who opened a deposit account in the name of the plaintiff to receive the payment of the credit card of this case from the bank account and disbursed personal expenses, such as Rason, etc. in the deposit account, is opened in the name of the plaintiff in light of the statement at the time of the initial tax investigation. It is difficult to understand that only the personal expenditure irrelevant to the operation of the 00 business revenue is only two to three items in the deposit account that is deposited in all of the 00 business revenue of this case. It is difficult to view that this0 was the actual business operator of the 00 point since the payment of the salary or the electricity fee was paid through the deposit account opened after each of the dispositions of this case.

According to Article 27 of the Food Sanitation Act, if a person who is not directly engaged in business designates a person in charge of food sanitation from among his/her employees, he/she may have the person in charge receive education, and since the witness testified that he/she was subject to sanitation education as a general manager at the time of opening the instant tasks at the first instance court of 00Do, the Plaintiff’s testimony that he/she was subject to sanitation education as a general manager cannot serve as the grounds for not being the actual business operator.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed in its entirety as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed in its entirety, and it is so decided as per Disposition.

Related Acts and subordinate statutes

[Framework Act on National Taxes]

Article 14 (Real Taxation)

(1) If the title to the income, property, act or transaction subject to taxation is merely nominal and a person to whom such title belongs exists, the tax-related Acts shall apply to such person to whom such title belongs as a taxpayer.

(2) The provisions on the calculation of tax base in tax-related Acts shall apply according to the substance, regardless of the name or form of income, profit, property, act or transaction.

Article 16 (Ground Taxation)

(1) If any person liable for tax payment keeps and enters a book under tax-related Acts, the investigation and determination of the tax base of the national tax shall be based on the book kept and entered and related documentary evidence.

(2) In investigating and determining national taxes under paragraph (1), if the contents of the entry are different from facts or are omitted from the entry, only those parts may be determined according to the facts examined by the entry.

(3) When the account books are examined and determined by examining any fact different from the contents of entry or omission in the entry under paragraph (2), the fact examined and ground for determination by the Government shall be stated additionally in the determination note.

[Valued Tax]

Article 21 (Settlement and Correction)

(2) Where the head of a district tax office having jurisdiction over the place of business, the head of a district tax office having jurisdiction over the place of business or the Commissioner of the National Tax Service determines or revises the tax base and amount of refund for each taxable period pursuant to paragraph (1), he/she shall do so on the basis of tax invoices, account books and other

1. Where tax invoices, account books, and other evidence necessary for calculating the tax base do not exist or important parts are incomplete;

2. Where the details of tax invoices, account books, and other evidence are obviously false in light of the size of facilities, the number of employees, and the market prices of raw materials, commodities, products, or various charges;

3. Where it is obvious that the details of tax credit, account books, and other evidence are falsified in light of the quantity of raw materials used, power used, and other operational conditions.

[Enforcement Decree of the Value-Added Tax]

Article 69 (Methods of Determination and Revision by Estimation)

(1) Estimations referred to in the proviso to Article 21 (2) of the Act shall be made by the following methods:

1. The method of calculating by way of a type of sphere with other partners in the same trade who have not been corrected under the provisions of Article 21 (1) of the Act because the account books are deemed to be correct and the report is bona fide;

2. When the production ratio has been examined by the Commissioner of the National Tax Service on the raw materials put into a business category, the method of calculating by applying the market price of the quantity supplied during the relevant taxable period to the production

3. Where the Commissioner of the National Tax Service sets the quantity or value of human and material facilities (employee, guest room, workplace, vehicle, water supply and electricity, etc.) related to the business and the sales efficiency in consideration of the type, area, etc. of the business, a method of calculating by applying it thereto;

4. Calculation by any of the following methods determined by the Commissioner of the National Tax Service by type of business and by region:

(a) Input quantity per unit of won, which determines the relationship between the quantity of all or part of the raw materials and supplementary materials input for production and the quantity of production;

(b) A cost-related ratio which determines the relationship between all or part of the expenses and the amount of loans out of personnel expenses, rent, material expenses, water supply, mineral heat and other operating expenses;

(c) A commodities turnover rate which determines the relationship between the average stored amount during a given period and the sales amount or the sales cost;

(d) A sales profit ratio which determines the ratio of the sales to the gross sales profits for a specified period.

(e) The value-added ratio which determines the sales amount and value-added amount during the period.

5. Where the ratio referred to in subparagraphs 2 through 4 may be computed on a businessman subject to the estimation, determination and revision, the method of calculation by applying it thereto;

6. For food, accommodation and service business, which are mainly traded for end-consumers, the method of calculating according to the membership inspection criteria determined by the Commissioner of the National Tax Service.

[Food Sanitation]

Article 27 (Sanitary Education)

(2) Any person who intends to run the business as prescribed in Article 21 shall undergo in advance an education on sanitation.

(Omission of Fractional Omission)

(3) Where a person who is not directly engaged in the business or intends to operate a business in two or more places, from among those who shall undergo the sanitation education under paragraphs (1) and (2), designates a person in charge of food sanitation from among his/her employees, he/she may have such person in charge receive the education (the omission thereof).