Global Income Detailed and Revocation of Disposition

(1) On the premise of an unlawful tax investigation, the plaintiff's assertion that each of the dispositions of this case was made in violation of the principle of prohibition of disadvantageous alteration under the Framework Act on National Taxes, ③ taxation requirement legal principle, strict interpretation principle, etc., ④ assertion that the principle of trust and good faith has been violated, and ④ assertion that the imposition of additional tax for unfaithful payment

The contents of the judgment are the same as attachment.

2017Guhap51981 global income and revocation of disposition

LAA

BB Director of the Tax Office

on January 28, 2018

November 13, 2018

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of global income tax of KRW 246,587,036 (including additional tax) and global income tax of KRW 244,814,647 (including additional tax) for the year 2011, which was imposed on the Plaintiff on February 1, 2017, shall be revoked.

1. Details of the disposition;

A. The Plaintiff transferred 26 real estate in 201 and 2012, as indicated below, as follows:

Accordingly, the transfer income tax was reported and paid.

[Attachment] A list of real estate transferred by the Plaintiff from 2011 to 2012

B. After reviewing the Plaintiff’s report on capital gains tax reverted to year 201, the Defendant notified the Plaintiff of the advance notice of taxation of capital gains tax denying the application for reduction or exemption on July 3, 2012, and the Plaintiff appealed and filed a request for pre-assessment review of capital gains tax on July 23, 2012.

C. The defendant decided that the above request for review was excluded from the examination.

D. On December 20, 2012, the Defendant confirmed that the Plaintiff acquired and transferred several land and buildings from around 2004 to around 2012, and confirmed that the Plaintiff constitutes a person who sells real estate under Article 1(2) of the former Enforcement Rule of the Value-Added Tax Act (amended by Ordinance of the Ministry of Strategy and Finance No. 342, Mar. 23, 2013; hereinafter “former Enforcement Rule of the Value-Added Tax Act”) by indicating the sale and purchase of real estate for business purposes and sells real estate at least once during the taxable period for business purposes and sells real estate at least twice during the taxable period for business purposes (hereinafter “real estate sales businessman”), and completed the registration of business ex officio against the Plaintiff (the starting date of business July 1, 2006).

E. After that, on March 4, 2013, the Defendant respectively decided and notified the Plaintiff of KRW 30,310,580, and KRW 3,751,000, which belonged to the first year of 2009, respectively. On October 31, 2013, the Defendant decided and notified KRW 22,622,330, which belonged to the second year of 2006 (hereinafter “instant imposition of value-added tax”).

F. The Plaintiff dissatisfied with each of the above dispositions and filed a request for review with the Board of Audit and Inspection, but April 2014

15. was dismissed.

G. Although the Plaintiff filed an administrative litigation against each of the above dispositions, the Chuncheon District Court rendered a judgment dismissing the Plaintiff’s claim on November 20, 2015. The judgment was all dismissed and finalized as it became final and conclusive (Seoul District Court 2014Guhap ○○○○○, Seoul High Court 2015Nu2016 ○○○○○○○○○○○, hereinafter referred to as “related lawsuit”).

H. On February 1, 2017, the Defendant considered the income accrued from the transfer of real estate listed above [Attachment] (hereinafter “the instant real estate”) as the business income and imposed the global income tax of KRW 262,731,750 for the year 201 and KRW 262,323,920 for the global income tax of KRW 20 for the year 201 on the Plaintiff.

I. The Plaintiff was dissatisfied with each of the above global income tax imposition dispositions and filed an appeal with the Tax Tribunal.

On September 25, 2017, the Tax Tribunal rendered a decision on February 1, 2017 that the Defendant’s imposition of KRW 262,731,750 of the global income tax for the year 201 and KRW 262,323,920 of the global income tax for the year 201 and the global income tax for the year 2012 shall not be imposed, and the tax base and tax amount shall be corrected, and the remainder of the Plaintiff’s claim shall be dismissed.

(j) The details of the disposal remaining as a result shall be KRW 246,587,036,000 for the global income tax for the year 2011.

The actual additional tax is KRW 83,511,158 (including KRW 83,51,158) and KRW 244,814,647 (including additional tax for arrears 70,271,195) and global income tax for the year 2012 (hereinafter referred to as "each disposition of this case").

Facts that there is no dispute over recognition, Gap No. 1, 2, Eul No. 1 through 3

Each entry, including branch numbers, hereinafter the same shall apply) and the purport of the whole pleading

2. The plaintiff's assertion

A. The Defendant’s act of collecting taxation data by selecting the Plaintiff as a subject of tax investigation and thereby making each of the instant dispositions is unlawful in violation of the principle of due process under the Constitution, and Articles 81-3(1) and 81-5 of the former Framework Act on National Taxes.

B. The Plaintiff filed a request for pre-assessment review of capital gains tax by dissatisfied with the pre-announcement of taxation without justifiable grounds, but the Defendant unilaterally filed a request for pre-assessment review, and then registered the Plaintiff ex officio as a real estate sales businessman through de facto tax investigation more unfavorable than the pre-announcement of capital gains tax, and added the capital gains tax to each of the instant dispositions. Therefore, each of the instant dispositions was not only infringing the Plaintiff’s right to receive pre-assessment review, but also did not violate Article 79(2) of the Framework Act on National Taxes,

C. The defendant's disposition of this case was taken in addition to the capital gains tax confirmed under the related tax laws.

There is no legal basis, and thus is contrary to the requirements of taxation, the legal principle, and the principle of strict interpretation.

D. On July 3, 2012, the Defendant notified the Plaintiff of taxation of capital gains tax of KRW 111,77,000.

After rendering each of the dispositions of this case, each of the dispositions of this case did not perform any act for about five years. Each of the dispositions of this case was unlawful against the principle of trust and good faith.

E. Of the dispositions of this case, the additional payment for arrears shall be revoked pursuant to Article 48 of the Framework Act on National Taxes.

3. Determination

A. Determination as to the assertion that each of the dispositions of this case was made on the premise of an illegal tax investigation

1) The Defendant asserted illegality in the tax investigation conducted in relation to the imposition of each value-added tax of this case in a related lawsuit. However, the first instance court, "the Defendant," and "the Plaintiff's final tax return was made without registering the real estate sales business," and deemed that there was an error in the final tax return or the final tax return, and thus, the Plaintiff was registered ex officio as a real estate sales broker by on-site investigation of the Plaintiff's transaction land pursuant to Article 21 (1) 1 and 2 of the former Value-Added Tax Act (amended by Act No. 11873, Jun. 7, 2013). In the process of taking each disposition, the Defendant did not order the Plaintiff to investigate and submit relevant data or documents, and it is difficult to view that the Defendant selected the Plaintiff as a person subject to tax investigation under the former Framework Act on National Taxes (amended by Act No. 12162, Jan. 1, 2014; hereinafter referred to as "former Framework Act on National Taxes") and there is no other evidence to acknowledge otherwise.

2) The Plaintiff’s assertion is not significantly different from the assertion in the above-mentioned suit, and solely based on the Plaintiff’s assertion, the Defendant cannot be deemed to have violated the principle of due process by exercising its tax investigation authority in violation

B. Determination on the assertion that the principle of prohibition of disadvantageous alteration under the Framework Act on National Taxes was violated

1) Article 79(2) of the Framework Act on National Taxes provides that "no decision which is unfavorable to claimant shall be made, as a result of a decision on a request for a trial dissatisfied with a taxation disposition," and the above provision also applies mutatis mutandis to a decision on a request for a review under the Framework Act on National Taxes. This prohibition also applies to cases where the contents of the order for a review are more unfavorable than those of the taxpayer who is the object of the request for a review. This prohibition does not apply to cases where the tax authority decides to correct the tax base or tax amount with omissions or errors based on the details revealed in the reasons for the review (see, e.g., Supreme Court Decision 2005Du

2) As seen earlier, the Defendant rendered a “not to be examined” decision on the Plaintiff’s claim for pre-assessment review, and deemed that the Plaintiff’s final return was not filed or an error was found in the final return on real estate sales business without registering the Plaintiff’s final return on the Plaintiff’s tax amount, the Defendant made ex officio registration of the Plaintiff as a real estate sales businessman based on the provisions of the former Value-Added Tax Act

3) Therefore, in light of the above legal principles, each of the dispositions in this case does not have the application of Article 79(2) of the Framework Act on National Taxes, and since the defendant decided to exclude "the exclusion from the examination" in accordance with the provisions of the Framework Act on National Taxes and the Act on the Management of Pre-assessment Review, it cannot be deemed that

C. Determination as to the assertion that the taxation requirement legal principle, strict interpretation principle, etc. were violated

(1) Article 80 (1) of the Income Tax Act provides that "if a person liable to file a final return on tax base pursuant to Articles 70, 70-2, 71 and 74 fails to do so, the head of a regional tax office or the head of a regional tax office having jurisdiction over the place of tax payment shall determine the tax base and the amount of the relevant taxable period." Paragraph (4) provides that "if any omission or error is found after the tax base and the amount of tax are determined or corrected, the head of a regional tax office or the head of a regional tax office having jurisdiction over the place of tax payment shall immediately correct the tax base and the amount of tax." (2) Income from the transfer of a resident's real estate falls under only one of the business income which is subject to global income tax or the capital gains tax which is subject to global income tax under the Income Tax Act, depending on whether the transfer is made as a part of a business, and the global income and the capital gains tax are different in a taxable unit, it shall be determined whether the imposition of capital gains tax and the global income tax are unlawful or invalid on the ground that it was made later regardless of substantive illegality.

3) As seen earlier, the Defendant deemed income from the transfer of the instant real estate as falling under “business income”, and the instant decision to levy each global income tax pursuant to Article 80 of the Income Tax Act.

The plaintiff's assertion that each of the dispositions of this case was made after deducting the transfer income tax paid by the plaintiff (the defendant was in the process of the related lawsuit, so the judgment of the related lawsuit was made until the judgment of the related lawsuit became final and conclusive, and it cannot be accepted by the plaintiff's assertion that "the defendant made each of the dispositions of this case solely on the basis of the relevant judgment without any legal basis).

4) Rather, according to the Plaintiff’s assertion, in the case of income tax that adopts the tax return system, when a taxpayer files a preliminary return on setting the items of taxation, the tax liability becomes final and conclusive at the time of filing the return, and accordingly, it would result in unfair conclusion that it is possible to correct only within the same

5) Therefore, each of the dispositions of this case is lawful as it is based on Article 80 of the Income Tax Act, and the Plaintiff’s assertion on a different premise is without merit. Moreover, since the Plaintiff deducts the amount of capital gains tax already paid, each of the dispositions of this case cannot be deemed double taxation

D. Judgment on the assertion that the principle of good faith has been violated

1) The principle of trust and good faith shall not be exercised or performed by a party to a legal relationship in consideration of the other party’s interest by exercising its rights or by any content or method that is contrary to equity or trust.

In order to deny the exercise of the right on the ground that it violates the principle of trust and good faith, the exercise of the right must be in a state of trust and good faith of the other party or objectively viewed such trust and the other party's exercise of the right against the other party's trust should reach such a level that is not acceptable in light of the concept of justice. In general administrative law, in order to apply the principle of trust and good faith to the acts of the government agency in general administrative law, the principle of trust of the other party to the disposition should be applied exceptionally only when there are special circumstances that are deemed to conform to the concept of justice (see, e.g., Supreme Court Decision 2002Du121233, Jul. 22, 2004).

In a case where a tax authority imposed capital gains tax, etc. without knowing the fact that land transfer income constitutes business income, it cannot be deemed that the tax authority publicly expressed the view that no comprehensive income tax should be imposed by such disposition. Thus, it cannot be said that the tax authority subsequently recognized and imposed income from land transfer as income from real estate sale business, thereby violating the good faith principle (see Supreme Court Decision 9Du5412, Apr. 24, 2001).

2) The Defendant rendered each of the instant dispositions on the premise that the Plaintiff’s act of transferring real estate constitutes real estate sales business as part of “real estate sales business” according to the final judgment of related lawsuits, and that the income accrued therefrom constitutes business income.

3) After the Defendant already registered the Plaintiff as a real estate sales broker, each of the instant value-added taxes was imposed on the Plaintiff. In the relevant lawsuit, the issue of whether the registration of real estate sales business was unlawful and whether the Plaintiff can be seen as a real estate sales broker is disputed. Therefore, it seems that the Plaintiff, as a result of the relevant lawsuit, could have sufficiently predicted that the taxation of real estate transfer income was made

4) Therefore, each of the instant dispositions cannot be deemed to have violated the principle of good faith solely on the ground that the Plaintiff asserted. This part of the Plaintiff’s assertion is without merit.

E. Determination on the assertion that the imposition of each additional payment penalty should be revoked

1) Article 48(1) of the Framework Act on National Taxes where penalty tax is to be imposed under this Act or any other tax-related Act, the Government shall either fall under the grounds for extending the due date under Article 6(1) or pay such penalty tax.

If there is a justifiable reason for the taxpayer to fail to perform his/her duty, the penalty tax shall not be imposed.

2) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under tax law is an administrative sanction imposed pursuant to the law in cases where a taxpayer violates a return, tax liability, etc. as prescribed by the law without justifiable grounds, and the taxpayer’s intention or negligence is not considered, and it does not constitute a justifiable reason (see, e.g., Supreme Court Decision 2005Du3714, Oct. 26, 2006).

3) Circumstances revealed by comprehensively considering the aforementioned facts and the purport of the entire arguments, namely, ① the Plaintiff acquired 61 parcel of land and 6 buildings from 2004 to 2012 on 25 occasions, and frequently traded real estate by transferring them over 24 occasions. ② From 2004 to 2012, the amount of income from the transfer of real estate among the total income amount of KRW 3,045,45,000, which the Plaintiff reported to the National Tax Service from 2004 to 2012, exceeds KRW 3,045,45,000. From 2007 to 2009, the Plaintiff did not transfer other income from the transfer of real estate in addition to the transfer of real estate; ③ the Defendant had already examined the Plaintiff’s real estate transaction and registered ex officio as “real estate sales business” in consideration of the fact that the Plaintiff reported the global income tax base rather than the transfer income tax base, and the Plaintiff did not have any justifiable reason to be deemed otherwise.

Even though the Plaintiff did not know that the income accrued from the transfer of the instant real estate constitutes business income under the Income Tax Act, this is merely based on the Plaintiff’s negligence or merely on the land or mistake of statutes, and thus does not constitute “justifiable cause” under the above Framework Act on National Taxes.

4) Therefore, the Plaintiff’s assertion on this part is without merit.

4. Conclusion

If so, the plaintiff's claim is without merit, and all of the claims are dismissed. It is so ordered as per Disposition.

partnership.