Seoul High Court 2013Nu28772 (Law No. 10, 2015)

The mere fact that he was unaware of the fact that he was a tax invoice received without supplying the goods does not constitute a case where there is a justifiable reason.

It is difficult to view that the issuance and receipt of a tax invoice without a real transaction constitutes a case where there is a justifiable reason that does not err by neglecting his/her duty, and it cannot be viewed otherwise solely on the ground that the purchaser was unaware of the fact that he/she was a public corporation or a third party was not aware of the receipt of the tax invoice

Article 22 (Additional Tax)

2015Du1649 Disposition to revoke the imposition of value-added tax.

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BB Director of the Tax Office

Seoul High Court Decision 2013Nu28772 Decided February 10, 2015

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 22(3) of the former Value-Added Tax Act (amended by Act No. 11608, Jan. 1, 2013) provides that an entrepreneur shall impose an amount equivalent to 2/100 of the value of supply as an additional tax when he/she issues a tax invoice without supplying goods or services (Article 22(3)) or when he/she is issued a tax invoice without being supplied with goods or services (Article 22(3)). Considering that the tax invoice system has the function of mutual verification between taxpayers that facilitate the dissemination of income tax and corporate tax as well as the value-added tax by exposing transactions between the parties concerned, taking into account the following circumstances: (a) a entrepreneur liable to pay value-added tax for the proper exercise of the right to taxation and easy realization of the tax claim, imposing an obligation not to issue or receive the tax invoice without any supply of goods or services; (b) where an entrepreneur receives a tax invoice without any justifiable reason, it is unreasonable to conclude that the taxpayer was not aware of an obligation to pay taxes due to administrative sanctions.

2. A. The reasoning of the first instance judgment as cited by the lower court and the record reveal the following facts.

(1) The term “ACC” means DDDD, EEE, stock company EE, FFFFF (hereinafter collectively referred to as “G3 company”), and individually, “DDDDD”, “EE”, respectively.

'FFFFF’s actual operation of HHHHHH (hereinafter referred to as "HHHHH") is a corporation established by 100% and invested by 3rd II in order to develop and promote business management in small and medium enterprises’ products. G3 suppliers have concluded an entrustment contract with HHHHHHHH and on behalf of them for the purchase and supply of goods since 2005 and have performed its business.”

③ From March 1, 2000, the Plaintiff was a company listed on KOSDAQ and engaged in electronic commerce as its main business. From April 2008, the Plaintiff had already engaged in normal trade with DDDDD. Around February 2010, the Plaintiff concluded a contract under which the employees of DDDDD will purchase goods from HHHHH and sell EE and FFFFFF (hereinafter referred to as “EE” in this case) to the EE and FFF (hereinafter referred to as “EE”).

④ Accordingly, the Plaintiff received 13 copies of the purchase tax invoice of KRW 19,574,493,490, total supply value from HHH in the first and second stages of 2010, and issued and issued 11 copies of the sales tax invoice of KRW 16,942,95,431 (hereinafter collectively referred to as the “instant tax invoice”) to EEE, etc. on the aggregate of supply value. The instant tax invoice was all based on the part of the processed circular transaction, which was received without supply of goods.

⑤ The Plaintiff and the purchaser, HHHH and EE, etc., without preparing a written contract, trade the goods to be immediately supplied to the purchaser without going through the Plaintiff, without going through the Plaintiff. The price of the goods was treated by the Plaintiff by the method that the Plaintiff, after receiving the first share of the Plaintiff from the seller, pays the remainder to the purchaser. The rate of commission that the Plaintiff acquired was 0.5% of the sales amount.

6) Based on the instant tax invoice, the Plaintiff reported and paid the VAT for the pertinent taxable period on the basis of the instant tax invoice (However, around December 31, 2010, Chapter II of the purchase tax invoice was confirmed as a transaction without the movement of goods from HHHH, and thus excluded the Plaintiff from the date of report upon receiving a request for cancellation of the sales since it was confirmed as a transaction without the movement of goods from HHHH). The Defendant, upon notification of the results of the tax investigation by the commissioner of the Regional Tax Office, deemed all the instant tax invoice as a processing tax invoice, reduced the output tax amount, deducted the input tax

B. The Plaintiff entered into each of the instant contracts with HE under the pretext that it was difficult for HH to verify the facts and records as follows. However, the Plaintiff was not aware of the fact that the Plaintiff would not actually engage in the instant transaction, such as purchase and sale of the goods, but did not appear to have been aware of the fact that the Plaintiff would not actually engage in the instant transaction, such as purchase and sale of the goods. However, the Plaintiff did not appear to have been aware of the fact that the Plaintiff would have been engaged in the instant transaction, such as purchase and sale of the goods. However, the Plaintiff did not appear to have been aware of the fact that the Plaintiff would not have been aware of the fact that the Plaintiff would have been engaged in the instant transaction, such as purchase and sale of the goods, but did not appear to have been aware of the fact that the Plaintiff would have been engaged in the instant transaction, such as purchase and sale of the goods. However, the Plaintiff did not appear to have been aware of the fact that the Plaintiff had been engaged in the sales of the goods, such as purchase and sale of the goods.

Nevertheless, solely on the grounds indicated in its reasoning, the lower court concluded that there was a justifiable reason to exempt the Plaintiff from the penalty tax in bad faith. In so determining, the lower court erred by misapprehending the legal doctrine on the justifiable reason for exempting the tax in bad faith from taxation, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal

3. Conclusion

Therefore, without examining the remaining grounds of appeal, the judgment below is reversed, and the case is reversed.

The case shall be remanded to the lower court for further proceedings consistent with this Opinion. It shall be remanded to the lower court.

It is decided as per Disposition by the assent of all participating Justices.