It constitutes "Fraud or other unlawful act" in the event that the intention of active concealment to evade tax is objectively revealed.

The exclusion period of 10 years is applied to cases where the active concealment intention to evade the comprehensive income tax falls under the "Fraud or other unlawful act" that is objectively revealed, instead of simply failing to file a return required under the tax law.

Article 26-2 (Period for Excluding Assessment of National Taxes)

2013-Gu Partnership-15205 Revocation of a disposition imposing gift tax

AA

O Head of tax office

Mar. 11, 2014

April 1, 2014

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 370,005,200 on global income for the year 2007 against the Plaintiff on July 1, 2013 is revoked (the “the date of the disposition stated in the purport of the claim” appears to be erroneous in writing).

1. Details of the disposition;

A. On June 2005, the Plaintiff requested JJ to lend money from ○○ District Court ○○○ Branch ○○○ Branch ○○○ Branch ○○○ Branch ○○○ Branch ○○○ Branch ○○○ Branch ○○○○ Branch ○○ Branch ○○ Branch ○○○ Branch ○○○ Branch ○○ Branch ○○○ Branch ○6847, Sept. 15, 2005 (hereinafter “instant secured mortgage”) and completed the registration of the creation of a joint collateral mortgage (hereinafter “instant secured mortgage”), the title holder was established in the name of HH, the Plaintiff’s employee, and around that time, JJ lent a total of KRW 2.4 billion to JJ.

B. On January 13, 2006, the Plaintiff filed an application for an auction of real estate rent under the name of HH on January 13, 2006, ○○ District Court ○○○○○○○○○○○○○,006, when the JJ did not repay the said loan. At the auction procedure, the Plaintiff received dividends of KRW 3,130,137,728 as the creditor on August 3, 2007 (i.e., principal + KRW 2.40 billion + interest + KRW 730,137,728).

C. On May 31, 2008, the Plaintiff filed a global income tax return on May 2007 with respect to the three businesses as listed below, and did not file a return on the said dividends (hereinafter “instant interest”).

D. Around December 2010, the Plaintiff received an explanation from HH on the explanation of taxation data for the successful bid price sent by HH from HH, and on the 24th of the same month, HH’s 2007 comprehensive income tax for the year 2007, which was not the Plaintiff, but at least 146,027,545 won (i.e., interest of this case 730,137,728 - necessary expenses - necessary expenses 584,10,183) calculated by deducting 80% of necessary expenses for the interest of this case received in excess of the principal amount from the said dividends (i.e., interest of this case 730,137,728 - necessary expenses - necessary expenses 584,515 won (= principal tax 42,769,249,249 + additional tax 16,285,266 won).

E. From April 9, 2013 to May 13, 2013 of the same year, the Defendant conducted a tax investigation on gift tax evasion related to the instant collateral security established in the name of HH. As a result, the Defendant confirmed that the source of the funds that created and lent the instant collateral security was not HH, and confirmed that the instant interest income was not the Plaintiff’s interest income, not the other income of HH. Accordingly, on July 1, 2013, the Defendant deemed the instant interest income as the Plaintiff’s interest income, not the other income of HH, and notified the Plaintiff of the correction and notification of the global income tax amounting to KRW 370,005,200 (= principal tax amounting to KRW 177,179,938 + penalty tax amounting to KRW 192,825,263).

[Ground for Recognition: Facts without dispute, Gap's statements, Gap's evidence 3, 6, 7, 8, 11, 12, 13, 16, Eul's evidence 1 through 4 (including branch numbers), and the purport of the whole pleadings]

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

On June 2005, the Plaintiff was aware of the land for the construction of a commercial building, and requested to lend money from the JJ, which had been subject to pressure of funds due to the request for the auction of the land of this case. The Plaintiff purchased the land of this case and the land of this case and the land of this case ○○○○ Dong 126-4 adjacent thereto, and planned to conduct the construction of a commercial building and jointly with the JJ to support the JJ for a total amount of 2.4 billion won. The Plaintiff established the instant mortgage. Since the Plaintiff was aware of the land for the construction of a commercial building, the Plaintiff merely established the instant mortgage in the name of HH because the owner of the land of Madle had known that the Plaintiff had been operating the housing construction-related company, it did not evade national taxes due to the “Fraud or other unfair acts” under Article 26-2(1)1 of the Framework Act on National Taxes, the instant disposition that imposed national taxes by considering the exclusion period of national taxes as ten years is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) According to the provisions of Articles 26-2(1)1 and 47-2(1) of the Framework Act on National Taxes and Article 12-2(1) of the Enforcement Decree of the same Act, where a taxpayer evades national taxes, or obtains a refund or deduction due to “Fraud or other unlawful acts” as stipulated in each subparagraph of Article 3(6) of the Punishment of Tax Evaders Act, the exclusion period of the imposition of national taxes is extended to 10 years. In addition, where a taxpayer fails to report the tax base of national taxes by the statutory due date of return due to such act, an amount equivalent to 40/100 of the calculated tax amount, etc. is imposed as additional tax. In this regard, the term “Fraud or other unlawful act” under Article 3(6) of the Punishment of Tax Evaders Act refers to an active act falling under any of the following subparagraphs, which makes and makes it impossible or considerably difficult to impose and collect taxes, such as making and receiving false documents or false documents, destruction of books and records, fabrication of income, profit-making, fabrication or concealment of tax invoices or electronic facilities, fabrication or management of tax invoices.

“Fraud or other unlawful act” in the crime of evading tax under Article 3(1) and (6) of the Punishment of Tax Evaders Act means an act which enables the evasion of tax, i.e., a deceptive scheme or other unlawful act which makes it impossible or considerably difficult to impose and collect taxes. Therefore, it does not constitute merely a failure to file a tax return under the tax law or making a false tax return without accompanying other acts, but it does not constitute the mere failure to file a tax return or making a false tax return. However, in cases where the circumstances indicate active concealment, such as failure to file a tax return or underreporting, and intentionally failing to enter revenues or sales in the account book, etc., it may be recognized that the imposition and collection of taxes are impossible or remarkably difficult (see, e.g., Supreme Court Decision 2010Do9871, Jun. 14, 2012). Whether the active concealment intention can be objectively seen as objectively revealed, not only whether the basic account book stating revenues or sales, but also the method and method of filing a false tax return or the details of a false tax return, etc.

2) In light of the above provisions and legal principles, even if the Plaintiff’s global income tax at issue in this case was found to have been based on the above facts and evidence, i.e., (i) the taxpayer is obligated to pay taxes by voluntarily filing a tax base and tax amount, so long as the taxpayer does not voluntarily file a tax return, it is difficult for the tax authority to capture and impose tax evasion. The Plaintiff received dividends of KRW 3,130,137,728, including the interest income at an auction procedure on the instant land on August 3, 2007, and did not report the above dividends at all. (ii) the Plaintiff’s act of not reporting the global income tax at KRW 70,400,000,000,0000 to secure the loan claim under the name of the Plaintiff’s global income tax at KRW 70,000,000,000,0000,0000,000,000,000,000.

3. Conclusion

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