Whether a substantive business operator is a substantive business operator (violation of new rules)

If an evasion of the law is actively assisted with the purpose of evading compulsory execution, and business registration, refund and payment of value-added tax, and comprehensive income tax are paid without any objection, it is legitimate to impose tax on the person who is deemed as an actual business operator in violation of the good faith principle.

Article 14 of the Framework Act on National Taxes

Article 6 (Supply of Goods)

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The imposition of value-added tax of KRW 9,417,180 for the term of 2004 imposed by the Defendant on the Plaintiff on September 6, 2004 and the imposition of value-added tax of KRW 122,496,039 for the term of 113,196,030 imposed on October 1 of the same year, respectively, and the imposition of value-added tax of KRW 9,300 for the term of 204 imposed by the Defendant on the Plaintiff on December 10 of the same year shall be revoked.

1. Details of the disposition;

A. From 193 to 1996, with respect to each real estate listed in paragraphs (1) through (15) of the attached list (hereinafter referred to as each of the instant real estate), each ownership transfer registration has been filed in the name of the non-party ○○○○ Co., Ltd. (hereinafter referred to as “○○○○○”) during the period from 1993 to 1996. On November 15, 2001, the ownership transfer registration was filed in the name of the Plaintiff. On the real estate stated in paragraph (16), around 1993, the ownership transfer registration was completed in the name of ○○○○ Co., Ltd. (hereinafter referred to as “○○○”) on November 15, 2001.

B. From September 17, 2001 to September 22, 204, the Defendant closed down a real estate rental business and manufacturing business with the name of ○○○○○○○○○○○○○○○○, one of the instant real estate, and the Plaintiff did not report the value-added tax for the first, second, 2004. As the Plaintiff did not report the value-added tax for the first, second, 2004, the Defendant imposed KRW 9,417,180 on the Plaintiff on September 6, 2004.

C. On the other hand, on October 1, 2004 of the same year, the Defendant imposed KRW 9,300,000 of the preliminary return tax amount among the value-added tax for the second quarter of 2004. On December 10 of the same year, each of the instant real estate in response to the Plaintiff’s closure of business is deemed to have been supplied to the Plaintiff itself pursuant to Article 6(4) of the Value-Added Tax Act, and accordingly, the Defendant issued a correction and notification of KRW 112,49,039 in total of the value-added tax for the second quarter of 2004, including KRW 10,168,526 of the value-added tax on the supply value, plus KRW 1,342,245 of the value-added tax on the supply value (hereinafter the instant disposition).

D. On November 24, 2004, the Plaintiff filed a request with the National Tax Tribunal for a trial on January 21, 2005 on the value-added tax for the first term of November 2004, but was dismissed on June 20 of the same year.

[Ground of recognition] Facts without any dispute, Gap evidence 16 to 20, Eul evidence 1 to 1-2, Eul evidence 2 and 3

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The transaction subject to the instant disposition is the Plaintiff’s act of leasing the instant real estate, etc. against the Plaintiff’s ○○○○○, etc., and the Plaintiff is merely a person who was entrusted with the title of the instant real estate, etc. from ○○○○ and ○○○○○○. The Plaintiff did not lease each of the instant real estate to ○○○○ and ○○○○○○○, and the Plaintiff’s act of leasing the instant real estate to ○○○○○○○○○. As such, the Plaintiff’s act of leasing the leased to ○○○○○○, a real owner, was eventually a transaction which is nonexistent or null and void as a false conspiracy, and the Plaintiff’s business registration under the name of ○○○○, etc., was a legal form that was written for the said false conspiracy or fictitious act. Ultimately, the instant

(b) Related statutes;

Basic Act

Article 14 (Real Taxation)

(1) If the title to the income, profit, 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 concerning the calculation of tax base in tax-related Acts shall apply according to the substance, notwithstanding the name or form of income, profit, property, act or transaction.

Article 15 (Assumption and Fidelity) Any taxpayer shall perform his/her duties in good faith and sincerity. The same shall apply to tax officials in performing their duties.

Value-Added Tax Act

Article 6 (Supply of Goods)

(1) The supply of goods shall be a delivery or transfer of goods pursuant to all contractual and legal grounds.

(2) Where an entrepreneur consumess directly any goods produced or acquired in connection with his/her own business for his/her own business, those prescribed by Presidential Decree shall be deemed the supply of goods.

(3) Where an entrepreneur consumess goods which are produced or acquired in connection with his own business for the personal purpose or for other purposes of his employee, or donates them to his customers or many unspecified persons, those goods as prescribed by the Presidential Decree shall be deemed the supply of goods.

(4) The remaining goods when an entrepreneur discontinues his business shall be deemed to be supplied to him. The same shall apply to the case where a registration is made under the proviso of Article 5 (1) and the actual business does not commence.

Enforcement Decree of the Value-Added Tax Act

Article 21 (Time of Supply for Goods)

(1) The time of supply for goods under Article 9 (1) of the Act shall be as follows: Provided, That if the time of supply for goods supplied before closure of business arrives after such cessation of business, the time of supply shall be deemed the time of

1. For cash sales, outdoor sales, or installment sales, when goods are delivered or made available;

2. For long-term installment sales, when each part of the price is decided to be received;

3. For conditional sale, conditional sale, and other conditional sale and term sale, when the conditions are fulfilled or the sale becomes final and conclusive after the lapse of time limit;

4. The continuous supply of goods upon completion, standard payment or interim payment, or upon the continuous supply of goods with electricity or other indivisible units of supply, when each part of the price is decided to be received;

5. In the case of processing deemed the supply of goods, the time of delivery of the processed goods;

6. In case where deemed the supply of goods under Article 6 (2) and (3) of the Act, the time when the goods are used or consumed; and

7. In case of Article 6 (4) of the Act, when the business is closed;

8. In the case of the supply of goods using an unmanned vending machine, when the entrepreneur concerned takes cash from the unmanned vending machine.

9. In other cases, when the goods are delivered or transferable.

(c) Fact of recognition;

The following facts are not disputed between the parties, or may be acknowledged by comprehensively taking into account the following facts: Gap evidence 1, 2, 3-1 through 16, Gap evidence 4-8, Gap evidence 9-1, 2, 3, 10, 12, and 13, Gap evidence 16 through 20, Gap evidence 22-1, 2, 3, and 23, Eul evidence 1-1, 2, Eul evidence 1-2, and Eul evidence 2, and Eul evidence 2 and 3, and the testimony of ○○○○.

(1) Ground for the registration fee of ownership transfer under the Plaintiff’s name

(A) ○○○○○ was a manufacturer established around 1955 and established around 1989 and around 1995, ○○○○○○, which was an affiliated company of the above ○○○○○○○, established around 1989, and ○○○○, which was an affiliated company of the above ○○○○○○○, and the actual manager of the above corporations was Nonparty ○○○○, who was the largest shareholder of the ○○○○○○○○. On January 10, 1998, ○○○○○ applied for the commencement of the composition procedure with ○○○ District Court around 1998, and received a decision of composition from the above court on July 20 of the same year.

(B) The Plaintiff is the wife of ○○○○ University from March 1, 1985 to March 1, 1985, and is serving as ○○ University major professor.

(C) Of the instant real estate, the real estate listed in paragraphs (1) through (15) is owned by ○○○○○○, and the real estate listed in paragraph (16) was owned by ○○○○○○○○○○○ and ○○○○○○○ was using the instant real estate as a factory site and factory building. While ○○○○ and ○○○○○ used the instant real estate as a security to ○○ bank, a principal bank bank, offered the instant real estate as security, then the ○○ bank sold its secured claims to ○○○ Limited Liability Company around June 2001

(D) Under the circumstances where ○○○○ and ○○○○○ had been under way of restructuring at the time, the creditors failed to complete restructuring and agreed that the Plaintiff would take over the above claim from ○○○○○○○○ Company and set off the purchase price against the transferee’s claim, and the Plaintiff would lease the instant real estate to ○○○○○○○○, etc. after concluding a sales contract on the instant real estate, on the ground that the Plaintiff acquired the above claim externally, and completed the registration of ownership transfer in the future. The expenses incurred in the said series of acts inside the market were either procured or borne by ○○○○○, etc., and the Plaintiff borrowed only the name required for the enforcement.

(E) On November 23, 2001, the Plaintiff offered the instant real estate to ○○ Mutual Savings and Finance Company as a collateral, and completed the registration of establishment of a mortgage consisting of 3.9 billion won to the Plaintiff, the mortgagee, the ○ Mutual Savings and Finance Company, and the maximum debt amount. ○○○○ borrowed KRW 2.6 billion from the ○ Mutual Savings and Finance Company, and paid KRW 3.5 billion to the ○○ Limited Company.

(2) Circumstances where the instant real estate was offered

(A) On October 2001, ○○○○○ entered into a restructuring agreement with ○○ Capital Co., Ltd. (representative director ○○○), a company specializing in restructuring, and subsequently decided to repay composition debt and terminate composition by offering new stocks equivalent to 15 billion won on February 26, 2002.

(B) During the process of restructuring above, ○○ Capital borrowed capital for capital increase from ○ Mutual Savings Bank. Around February 24, 2002, the process of receiving the said loan, ○○○○dong and real estate located in the same Gu ○○○dong (ownership of ○○○○○○○○○), the machinery and equipment installed in the instant real estate, and ○○○○○○○○○’s lease deposit for the said loan, etc., were provided as security for the said loan obligations.

(C) ○○○○ was punished for a violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Misappropriation) under the Specific Economic Crimes Act, on the ground that each of the instant real estate was offered as security at the time of receiving a loan from ○○ Mutual Savings Bank.

(3) The process of concluding a lease agreement on the instant real estate

(A) On November 20, 2001, the Plaintiff entered into a lease agreement with 80 million won, monthly rent of 8 million won, from November 20, 2001 to November 19, 201 with respect to part of the instant real estate, and concluded a lease agreement with 3.9 billion won on June 22, 2004 with respect to the whole of the instant real estate as the object, and entered into a lease agreement with 15 billion won, with 3.9 billion won for the lease on a deposit basis, and with 15 billion won for the term of June 21, 2006; on June 23, 2004, the establishment of chonsegwon was registered under 100 million won in the name of ○○○○○ on a deposit basis; on November 20, 2001, between 100 million won and 2010 million won on a deposit for lease between 200 million won and 100 million won on a deposit basis of the instant real estate.

(B) ○○○○ and ○○○○○ continued to operate a factory in the instant real estate even after the registration of ownership transfer was made in the name of the Plaintiff on the instant real estate, and pay taxes and public charges on the instant real estate. On the other hand, ○○○○○○○, ○○○, and ○○○○○○○○○, in the accounting process of the instant real estate, paid monthly rent of KRW 31 million to the Plaintiff as rent and treat the Plaintiff as paying interest on the instant loan to the ○○ Mutual Savings and Finance Company.

(C) At the time ○○○○ received a loan from the ○○ Mutual Savings and Finance Company, ○○○○○ was refused to provide the instant real estate as collateral, but it was requested by the ○○ Mutual Savings and Finance Company to provide a substantial security. As such, the Plaintiff, a title holder of the instant real estate, provided the instant real estate as collateral and signed and sealed as a joint guarantor for the said loan obligation.

(D) On October 5, 2001, the Plaintiff applied for the registration of business for the real estate leasing business and the ○○ Manufacturing business with the date of commencing the business of this case as of September 17, 2001. On September 22, 2004, the Plaintiff voluntarily reported the closure of business on September 22, 2004. At the time of the said closure, the Plaintiff paid the value-added tax and the global income tax in the name of the Plaintiff. At the time of the said closure of business, the Plaintiff paid the value-added tax and the global income tax in the name of the Plaintiff. At the time of the final return of value-added tax for the second year of 2001, the acquisition price of KRW 2,542,131,720, the input tax amount of KRW 236,180,446, which was deducted from the output tax amount.

(E) Meanwhile, the plaintiff filed a lawsuit against ○○○○○○, ○○○○, and ○○○○○○, etc. to cancel the registration of chonsegwon by ○○○○ District Court 2005 Gohap○○○○○○○, which was dismissed on the ground that the plaintiff did not have been the bankruptcy trustee, and the lawsuit against ○○○○○○○○ was affirmed on the ground that the contract between the plaintiff and ○○○○○ was concluded on June 22, 2004, and the obligation to return the deposit based on the lease agreement concluded on November 20, 201 between the plaintiff and ○○○○○○, etc., and even though ○○○○, etc. had completed the registration of ownership transfer of the real estate of this case and completed the registration of ownership transfer, it becomes final and conclusive that the lease agreement or the lease contract between the above parties did not become null and void on the ground that it constitutes a false indication as a conspiracy to avoid doubts of the creditors.

D. Determination

(1)the ownership of the instant real property

According to the above facts, the real estate of this case is transferred to the plaintiff by ○○○○ and ○○○○○○○ in the course of the composition procedure of ○○○○○, etc. in order to avoid the creditor’s compulsory execution, and the real owner is ○○ and ○○○○○.

(2) Whether a lease contract is invalid as a false declaration of conspiracy

Therefore, each of the above lease agreements entered into between the plaintiff without any disposal authority and the actual owner, ○○○, and ○○○○○○, which are concluded between the plaintiff and the plaintiff, shall be null and void as it is a false representation, and the lease agreement entered into between the plaintiff and ○○○○ shall also be null and void as it does not have any substantive relationship. Even if ○○○○ accounts that ○○ paid to the plaintiff a monthly rent of 31 million won as the name of the payment of rent to the plaintiff, it shall not be deemed that ○○ was directly paid by ○○ as the principal payment of the rent for the mutual savings and finance company.

Ultimately, the instant disposition that the Plaintiff imposed on the ground that the Plaintiff performed a lease act as a rental business operator and received a rent is not based on the substance over form principle.

(3) Whether the principle of good faith is violated

(A) The defendant asserts that the plaintiff's argument about the disposition of this case is against the principle of good faith or the principle of no-competence.

(B) The application of the principle of good faith in tax litigation must be extremely limited and it should not be expanded and interpreted. However, as long as Article 15 of the Framework Act on National Taxes explicitly provides that the principle of good faith, which is the basic principle of private law, is also applicable to the tax law, the principle of good faith is still applicable to the tax law relationship. In order to apply this principle to the taxpayer, the first taxpayer should have the possibility of objectively contradictory behavior and subjective liability, and the second taxpayer's trust should exist.

(C) Along with the instant case, the reason why the ownership transfer registration was completed in the name of the Plaintiff is likely to have been ex officio cancelled during the composition procedure, and it seems difficult to be justified for ○○○○○○○○○○ and ○○○○○○○○ to avoid compulsory execution. ② Moreover, the fact that ○○○○○ and ○○○○○ had concluded a lease contract between the Plaintiff and ○○○ and ○○○ were to avoid doubt of the composition creditors regarding continuing the operation of the factory in the instant real estate, and the purpose of compulsory execution is to be more publicly announced. ③ The Plaintiff appears to have leased ○○○○○○ and ○○○○○ and ○○○○○ were to have been aware of the above facts, and thus, it appears that it would be difficult for the Plaintiff to treat the above portion of the real estate as the Defendant’s first sale of the real estate under the pretext of the principle of trust and good faith and thus, it appears that it would be inappropriate for the Plaintiff to have never been subject to tax exemption, on the premise that ○○○ and ○○○.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it violates the principle of good faith that the plaintiff argues the disposition of this case and it is not permissible to do so. Therefore, it is so decided as per Disposition.