A claim to revoke the revocation of imposing additional tax on insincere tax invoice

Since the real entrepreneur involved in the issuance of false tax invoices at the instant business place is the Plaintiff, it is legitimate to impose penalty tax against the Plaintiff in bad faith.

Article 16 of the Value-Added Tax Act

2017Guhap74818 Action Demanding revocation of Disposition of Imposing Additional Tax on Faithful Tax Invoice

○ ○

○ Head of tax office

June 14, 2018

August 9, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 118,374,060 against the Plaintiff on November 23, 2016 (additional Tax in Default on Tax Invoice) was revoked.

1. Details of the disposition;

A. On August 1, 2011, the Plaintiff registered the wholesale and retail business of dental materials (hereinafter referred to as the “instant place of business”) with the trade name of “AAAAAAA” with the location of the place of business in Yeongdeungpo-gu Seoul Metropolitan Government as the 64-ro, Yeongdeungpo-gu.

B. Since August 1, 2011, the Plaintiff was registered as a sole business operator of the instant workplace. On June 10, 2016, BB was added to a joint business operator of the instant workplace. On July 25, 2016, the Plaintiff filed a final return on KRW 17,282,861 in the name of the said BB on July 25, 2016 (i.e., output tax amount of KRW 306,870,343 - input tax amount of KRW 289,587,482), but the said value-added tax was not paid by the payment deadline. On September 8, 2016, the Defendant notified the Defendant of the correction of penalty tax amount of KRW 23,183 (=17,282,861 x 45 days x 43/1000).

C. From September 5, 2016 to November 13, 2016, the Defendant issued a tax investigation into the instant workplace. After the instant workplace was conducted, the amount of KRW 3,068,703,347, and the purchase tax invoice 2,850,000 that was received during the period of the value-added tax for the first year of 2016 constituted a tax invoice different from the fact. The actual operator of the instant workplace is deemed the Plaintiff, and on November 23, 2016, the Plaintiff issued a false tax invoice and received KRW 118,374,060 [the amount of KRW 5,918,703,70347,347 won [the amount of KRW 3,068,703,347, +280,500, and the amount of penalty tax corrected [the amount of penalty tax corrected] x the amount of penalty tax revised [the amount of penalty tax revised [the amount of penalty tax revised].]

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal, but was dismissed on May 17, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1, 12 evidence, Eul evidence 1 to 3, 16, 17 evidence (including additional number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Around the end of 2015, the Plaintiff intended to transfer the instant workplace to BB, and was informed by the tax office that the Plaintiff should first add BB to its partner and reduce the Plaintiff’s share. Accordingly, on December 4, 2015, the Plaintiff entered into a lease agreement with BB on the location of the instant workplace as a joint lessee. On January 4, 2016, the Plaintiff entered into the agreement with BB on the same business, which changed the Plaintiff’s share to 1%, and BBB’s share to 9% on January 8, 2016. On January 10, 2016, the Plaintiff entered into the agreement on the transfer of the instant business from the instant business establishment to the BB BB on the premise that the Plaintiff did not independently engage in the instant business establishment from 20 years to 20 years to 20 years to 16 years to 20 years to 20 years to 3B, the Plaintiff was unlawful.

2) Even if the Plaintiff is recognized as a partner of the instant workplace, the instant disposition imposing the Plaintiff the total amount of the said penalty tax is unlawful even if the penalty tax should be imposed according to the ratio of the equity in the instant workplace.

B. Relevant statutes

Attached Form is as shown in the attached Form.

(c) Fact of recognition;

1) The Plaintiff was in the position of the sole business entity and the representative from the commencement of the instant business. As to the instant business establishment, the lessor was drafted on December 4, 2015, which made the Plaintiff and the joint lessee as the Plaintiff and the BB with respect to the instant business establishment. In addition, in order to jointly operate the instant business establishment, two joint investments are in principle made between the Plaintiff and BB, and the Plaintiff was completed by paying to BB an amount equivalent to KRW 50 million in cash out of the contributions to the business establishment until December 30, 2016, by dividing the amount equivalent to KRW 50 million with respect to the contributions to the business establishment, until December 30, 2016. The Plaintiff and BB distributed profits according to the investment ratio of the Plaintiff and BB, and distributed profits according to the investment ratio at the time of the occurrence of losses.”

2) In addition, with respect to the instant business establishment jointly operated by the Plaintiff and BB, BB was additionally transferred 49% of the Plaintiff’s share of 50%, and its investment obligation is completed by paying the Plaintiff the amount equivalent to KRW 10 million with the Plaintiff’s share of 50% in installments until December 30, 2016. The Plaintiff and BB entered into the same business contract on January 8, 2016, stating that “B shall operate the said business, manage the property, and assume various liability for payment.” Moreover, between the Plaintiff and BB, “B” was comprehensively transferred all rights and obligations with respect to the instant business establishment on the base date on January 8, 2016, and “the total amount of assets and total amount of total assets on the account books shall be acquired” was also prepared for the business transfer and acquisition of the agreement on January 10, 2016.

3) On January 4, 2016, the Plaintiff filed an application for the correction of BB as a joint proprietor of the instant workplace on January 1, 2016, along with the foregoing documents. On June 10, 2016, the Plaintiff and BB registered the correction of BB as a joint proprietor of the instant workplace. Moreover, on January 8, 2016, the Plaintiff filed an application for the correction of BB as the representative of the instant workplace from the Plaintiff to BB on June 27, 2016 on the ground that the cause occurred, and on July 13, 2016, the Plaintiff filed an application for the correction of BB as the sole proprietor of the instant workplace, and on July 13, 2016, the BB was registered as the sole proprietor of the instant workplace and the representative at the instant workplace during the taxable period of value-added tax, and the instant application was not made ex officio on July 16, 2016.

4) Meanwhile, from July 5, 2014, the Plaintiff is in the position of the sole representative director of DDD (hereinafter “DDD”) that runs the wholesale and retail business of dental materials in Seocho-gu Seoul Metropolitan Government. The IP address of DD’s electronic tax invoice issuance is the same as the IP address that issued electronic tax invoices from February 2, 2014 to January 2016.

5) From June 30, 2016 to September 30, 2016, the Plaintiff received a tax investigation from the Busan Regional Tax Office with regard to the suspected violation of the Punishment of Tax Evaders Act regarding the instant workplace and the period from February 2, 2014 to February 2, 2015. During the investigation, the Plaintiff stated in the following as of August 17, 2016.

○ himself has been in contact with the instant place of business, and DDR's business operation and purchase business, and thus responsible answers can be made.

The instant place of business was established in order to close down a piracy, such as CCC and EE, and to manufacture and sell dental materials. On August 1, 2011, when the instant place of business was operated by himself/herself, the instant place of business was conducted joint business with BB on January 4, 2016, and thereafter on June 27, 2016, all of the instant place of business were transferred to BB, and the principal withdraws from the joint business and concentrate on DD.

○ The instant workplace was operated by EE and CCC, a DNA employee, and the instant workplace directly issued the tax invoices of the instant workplace.

○ issued processed tax invoices of KRW 2,143,321,498 in total during the period from February 2, 2014 to February 2, 2015, and received processed tax invoices of KRW 1,969,39,393,363 in total, and received the processed tax invoices of KRW 179,105,653 in an unfair manner.

6) From September 5, 2016 to November 13, 2016, the Defendant conducted an investigation into violation of the duty to receive tax invoices related to value-added tax at the instant place of business. From September 5, 2016 to November 13, 2016, the Defendant did not contact with BB, and the Plaintiff requested the materials related to the transaction of sales and purchase at the instant place of business when conducting one-time wire call related to the notice of tax investigation, but did not contact thereafter. The Defendant determined that the Plaintiff operated the instant place of business even at the first day of 2016, taking into account the field confirmation of the instant place of business, the details of the instant tax investigation by the said Busan regional tax office, the IP address, etc.

7) When the Plaintiff filed a request with the Tax Tribunal for the instant disposition, and when filing the instant lawsuit, the Plaintiff argued that the Plaintiff was unlawful to impose the penalty in full on the Plaintiff on the premise that the Plaintiff is a joint proprietor of the instant workplace according to the representative’s share ratio. In the instant lawsuit, the Plaintiff asserted that the Plaintiff was a partner of the instant workplace only in the form of the Plaintiff during the taxable period of value-added tax 2016, from March 19, 2018 when submitting a preparatory document as of March 19, 2018, and BB independently operated the instant workplace.

[Ground of recognition] Facts without dispute, Gap evidence 2 through 6, 8, 12 evidence, Eul evidence 1 to 17 (including additional numbers), the purport of the whole pleadings

D. Determination

1) Whether the Plaintiff operated the instant place of business during the first period of January 2016

In full view of the facts acknowledged earlier and the following circumstances revealed, the Plaintiff is an entrepreneur operating the instant place of business in the period of value-added tax for January 2016. Therefore, the instant disposition imposing penalty tax in bad faith on the Plaintiff regarding the issuance of false tax invoices at the instant place of business is lawful. The Plaintiff’s assertion is without merit.

A) The lessor of the lease contract of December 4, 2015, which was signed by the Plaintiff and BB as the joint lessee of the instant business establishment, as CCC, was related to the Plaintiff, who was operating the instant business establishment, and tried to operate the instant business establishment. On January 4, 2016 between the Plaintiff and BB, the Dong business contract of January 4, 2016, stating that the ratio of investment is not specified, but the Plaintiff shall pay 50 million won in cash. The Dong business contract of January 8, 2016 between the Plaintiff and BB determined the transfer value of 49% in cash as KRW 10 million between the Plaintiff and BB, it appears that there is no consistency in the calculation of the transfer share value, and the payment date of the transfer price is also paid in installments until December 30, 2016.

B) The Plaintiff added BB to a joint business proprietor of the instant business establishment, and filed an application for correction to change its representative to BB from the end of May 2016 through the beginning of July 2016 to the end of July 2016. Since the time when the Plaintiff became aware that a tax investigation on the issuance of false tax invoices by the instant business establishment would have been conducted by the Plaintiff, the documents such as the instant trade contract are likely to retroactively prepare the date to add BB from the motive to eliminate the Plaintiff’s liability for false tax invoices issued by the instant business establishment and to change the representative to BB.

C) In the process of the instant lawsuit, the Plaintiff failed to submit evidentiary documents regarding the fact that BB paid the Plaintiff investments by December 30, 2016 under the agreement on the business. Rather, the instant business establishment was subject to the application for suspension of business on November 9, 2016 and the closure of business on November 15, 2016, for which no long time has yet to elapse since the transfer of BB to a single business entity. Furthermore, the Defendant asserts that the transfer of business in the tax office is subject to the guidance and processing of the procedure by the transferee’s commencement of business after the transferor’s closure of business. In addition, it seems reasonable in such a way, and it is difficult to find reasonable grounds to inform the transferee of the procedure to increase the equity ratio after the transfer and acquisition of business in the tax office. Therefore, it is difficult to believe that the Plaintiff’s assertion that the tax office informed the process.

D) In the course of the Busan regional tax office’s tax investigation, the Plaintiff issued a tax invoice to operate a mixed business group, purchase business, etc. from the time of the establishment of the instant business establishment. From January 4, 2016 to June 27, 2016, the Plaintiff stated that the instant business establishment was jointly operated with BB. The Plaintiff also stated that the IP address issued electronic tax invoices of DDD and the instant business establishment are the same as the IP address that issued electronic tax invoices from February 2, 2014 to January 1, 2016, and that an application was filed to change BB as the sole business entity and the representative of the instant business establishment after the end of the first taxable period of January 1, 2016. In light of the above, the Plaintiff appears to have operated the instant business establishment even during the period of 2016.

2) Whether the part exceeding the Plaintiff’s share ratio in the instant disposition is unlawful

As seen earlier, the Plaintiff was operating the instant workplace during the first taxable period of January 2016 (in light of IP address, filing date of an application for correction of business registration, details of business subsequent thereto, application for closure and closure process, etc., the Plaintiff appears to continue to operate the instant workplace after June 27, 2016). Even if the Plaintiff jointly operated the instant workplace with BB during the first taxable period of January 2016 (amended by Act No. 14387, Dec. 20, 2016), Article 2 subparag. 3 of the former Value-Added Tax Act (amended by Act No. 14387, Dec. 20, 2016) provides that a person who supplies goods or services independently for business purposes is liable to pay value-added taxes for each workplace, and Article 6(1) provides that the Plaintiff is jointly and severally liable to pay value-added taxes for each of the instant joint and several business establishments regardless of the entrepreneur’s share in the amount of value-added tax or additional taxes for 20 years.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.