Whether a tax invoice received from a person suspected of material trade is a real trade (the manufacturing business of false materials)

The Plaintiff’s transaction partner issues a false tax invoice to the Plaintiff through the processing transaction, and thus, the instant tax invoice is also prepared without the actual transaction. The Plaintiff bears the burden of proving that the transaction was actually conducted.

Article 19 (Scope of Losses)

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s imposition of KRW 3,945,140 on October 10, 2005 and corporate tax of KRW 12,834,950 on October 10, 2001 against the Plaintiff shall be revoked.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff, as an enterprise manufacturing eggs for women, received a tax invoice of KRW 19.5 million (excluding value-added tax) from ○○ Industry Co., Ltd. (hereinafter “○○ Industry”) during the second taxable period of 2001, and deducted the said supply value as an input tax amount at the time of filing the return of value-added tax for the second taxable period of 2001, and included it in the deductible expenses at the time of filing the corporate tax return for the second taxable year of 2001.

(b)The head of ○○ Tax Office determined that the instant tax invoice constituted a false processing tax invoice which was issued and issued without a real transaction and notified the Defendant, who is the competent tax office, as taxation data, of the fact that the instant tax invoice was issued and issued without a real transaction.

C. Accordingly, on October 10, 2005, the Defendant: (a) determined the Plaintiff as a total final tax amount of value-added tax of KRW 81,495,740 (including additional tax of KRW 3,629,08) for the second period of value-added tax in 2001; (b) determined as a total tax amount of value-added tax of KRW 3,945,140 (including penalty tax of KRW 10); (c) determined as a total tax amount of KRW 21,193,205 (including penalty tax of KRW 5,568,928) for the corporate tax of KRW 201 for the year 201 after deducting the already paid tax amount of KRW 8,358,253 from the above tax amount; and (d) notified and notified each of the correction of corporate tax of KRW 12,834,950 (B) for the remainder after deducting the already paid tax amount of KRW 10 (10).

[Ground of recognition] Eul evidence 1-4, Eul evidence 2-1-9, Eul evidence 8, Eul's whole purport of pleading

2. Whether the disposition is lawful;

A. The assertion

On the other hand, the defendant asserts that the disposition of this case is lawful in light of the circumstances of disposition and the relevant Acts and subordinate statutes, while the plaintiff awarded a contract to ○○ Industries for the construction of the display stand for the storage of the plaintiff's goods, and issued and received the tax invoice of this case from ○ Industries. Since ○○ Industries completed the above installation work for the display stand, the tax invoice of this case was actually issued by the real transaction, but the disposition of this case that the defendant regarded the tax invoice of this case as false is unlawful.

(b) Related statutes;

○ Scope of deductible expenses Article 19 of the Corporate Tax Act

(1) Deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of the concerned corporation, excluding return of capital or financing, disposition of surplus funds, and what is provided in this Act.

(2) The losses under the provisions of paragraph (1) shall be losses or expenses generated in connection with the business of a corporation which are generally accepted as normal or directly related to profit, except as otherwise prescribed by this Act and other Acts and subordinate statutes.

(3) Matters necessary for the scope and types of losses under the provisions of paragraphs (1) and (2) shall be prescribed by the Presidential Decree.

○ Article 66 of the Corporate Tax Act, Decision and Correction

(2) Where a domestic corporation makes a report under Article 60 falls under any of the following subparagraphs, the superintendent of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and

1. Where there are errors or omissions in the contents of the report;

○ Article 17 of the Value-Added Tax Act

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as “paid tax amount”) shall be the amount obtained by deducting the tax amount under the following subparagraphs (hereinafter referred to as “purchase tax amount”) from the tax amount on the goods or services supplied by him (hereinafter referred to as “sales tax amount”):

Provided, That an input tax amount exceeding the output tax amount shall be the refundable tax amount (hereinafter referred to as the "repaid tax amount").

1. The tax amount for the supply of goods or services used or to be used for his own business;

2. The tax amount for the import of goods used or to be used for his own business; and

(2) The following input taxes shall not be deducted from the output tax amount:

1-2. An input tax amount, in case where the tax invoice as provided in Article 16 (1) and (3) is not delivered, or the whole or part of the matters to be entered under Article 16 (1) 1 through 4 (hereinafter referred to as a “necessary entry items”) is not entered or entered differently from the fact on the delivered tax invoice: Provided, That the input tax amount in such case as prescribed by the Presidential Decree shall be excluded;

○ Correction of Article 21 of the Value-Added Tax Act (amended by Act No. 7007 of Dec. 30, 2003)

(1) The head of a district tax office having jurisdiction over the place of business, the Commissioner of the competent Regional Tax Office or the Commissioner of the National Tax Service shall correct the tax base or tax amount payable for the taxable period

1. Where the final tax return is not filed;

2. Where there are any mistakes or omissions in details of the final tax return;

3. Where the list of the total tax invoice by buyer or the total tax invoice by buyer is not submitted in the final tax return, or all or part of the list of the submitted total tax invoice by buyer or the list is not entered or entered differently

(c) Fact of recognition;

(1) On October 21, 1999, the Plaintiff was established for the purpose of manufacturing and selling clothes at ○○○○○ Dong, ○○○○○○○○, and the ○○ industry is a company that closed down on April 14, 1998 with ○○○○○○○ as its principal office and its manufacturing business, etc. as its main business item and became the ○○○○○ representative director, and was established on April 07, 2003.

(2) The Plaintiff received a tax invoice of KRW 21,50,000, including value-added tax prepared as of September 20, 2001 from the ○ industry as of September 2001, and deducted the amount of value-added tax as an input tax return for the second period of 2001, and included it in the deductible expenses at the time of reporting the corporate tax reverted for the business year 2001.

(3) The head of the ○○○ Tax Office filed a complaint with the ○○○ Police Station on the ground that the ○ Industry and its sales office, and the purchaser did not submit reliable explanatory data proving all real transactions, based on the findings of the investigation that the ○○ Industry and its purchaser failed to submit all of the supporting documents regarding the tax invoice issued or received by the ○○ Industry and its purchaser, including the instant tax invoice from 001.07.01 to 31 December 2002, 202, the ○○○ Industry and its manager issued KRW 2,276,530,000 of the supply value of the processed tax invoice including the instant tax invoice, and issued KRW 2,102,057,000,000 in total 81, on the ground that it violated Article 11-2(4) of the Punishment of Tax Evaders Act, including the issuance and receipt of false tax invoices.

(4) On the other hand, on April 01, 199, the ○ Industry stated that the above warehouse was not used after the lease contract for the warehouse located in the above main office was terminated, and that the ○○○ also used the ○○ Factory by 2000 after being investigated by the police.

(5) After undergoing an investigation at the ○○○○ Tax Office, the ○○○○○○ Office stated that all the tax invoices of the ○○○○ Company issued in the taxable period from 001.07 to 2002 were issued without real transactions. However, upon undergoing an investigation over several occasions at the ○○ Police Station, the ○○○○○○○ Construction Company, including the Plaintiff, and the 39 tax invoices for five companies, including the ○○○○○ Construction Company, ○○○○ Public Company, ○○○○○○○○○○, and ○○○○ Telecom Co., Ltd., Ltd., the 39,200 won total of 39,00 won was the 63 tax invoices total of 1,417,330,000 won, and the 00,000 won total of 60,000 won were the 1,60,000 won, and thus, the 3606,0060 won total of the sales tax invoices.

(6) Meanwhile, from January 1, 1998 to January 2001, 2001, ○○○ District Court was accused of committing an act on data and was sentenced to a fine of KRW 9 million on October 10, 2005 as a crime of violating the Punishment of Tax Evaders Act at the ○○○ District Court, and the said judgment became final and conclusive.

[Ground of recognition] Evidence Nos. 5, Eul Nos. 3, 8, 30, 33 through 46, Eul No. 10-1, Eul No. 31-1 and 2, and the purport of the whole pleadings

D. Determination

(1) If a tax invoice on some of the input tax amounts or necessary expenses reported by a taxpayer is proved to have been prepared falsely without a real transaction by the Defendant, who is the tax authority, without a real transaction, and it is disputed as to whether it is an actual cost and the other party to the payment of the expenses claimed by the taxpayer has been proved to be false, it is necessary to prove that there was a real transaction and that such expenses have been actually paid, in the taxpayer’s account book keeping and documentary evidence, etc. (see, e.g., Supreme Court Decision 96Nu8192, Sept. 26, 1997).

(2) Therefore, it is difficult for ○○ Industries to accept the following facts acknowledged by the above facts, namely, that most of its purchasing places did not submit explanatory materials, or that ○○○ Industries submitted them, and the ○○ Industries is punished for the reported value-added tax from January 1, 1998 to 2001, which was already established after the establishment of the Company, as well as that it appears to have been established for the purpose of carrying out the original data by ○○○, which is the manager. ○○○○ was the first investigation conducted by ○○○○, and the reasons leading up to the reversal of ○○○○ Industries’s statement are hard to accept. ○○○○ Industries stated at least 10 times in the first instance court, but it is difficult to establish that ○○○ Industries was a witness’s own sales contract with ○○○○○○ Industries, and it is not objectively suspected that ○○○○ Industries was a new business entity’s sales contract with ○○○○○○.

(3) Therefore, the Defendant’s instant disposition against the Plaintiff is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance, which has different conclusions, shall be revoked and the plaintiff's claim shall be dismissed. It is so decided as per Disposition.

[Seoul Administrative Court 2006Guhap36490 ( March 22, 2007)]

1. The Defendant’s imposition of value-added tax of KRW 3,945,140 against the Plaintiff on October 10, 2005 and KRW 12,834,950 on corporate tax of 2001 shall be revoked;

2. The costs of the lawsuit are assessed against the defendant.

1. Details of the disposition;

A. The Plaintiff, as an enterprise manufacturing eggs for women, received one copy of the purchase tax invoice of KRW 19.5 million (excluding value-added tax) from ○○ Industry Co., Ltd. (hereinafter “○○ Industry”) during the second taxable period of 2001 (hereinafter “instant tax invoice”), and deducted the said value as an input tax amount at the time of the return of the second taxable period of value-added tax for 2001, and included it in deductible expenses at the time of the return of the corporate tax for 2001.

B. The head of ○○ Tax Office determined that the instant tax invoice constituted a false processing tax invoice that was issued and issued without a real transaction, and notified the Defendant, who is the competent tax office, as taxation data, of the fact that the instant tax invoice was issued and issued without a real transaction.

C. Accordingly, on October 10, 2005, the Defendant: (a) determined the Plaintiff as a total final tax amount of value-added tax of KRW 81,495,740 (including additional tax of KRW 3,629,08) for the second period of value-added tax in 2001; (b) notified the Plaintiff of each of the following tax amount of KRW 3,945,140 (including penalty tax of KRW 10), which is the remainder after deducting KRW 77,550,592 which was already paid, from the above tax amount; (c) determined as a total final tax amount of KRW 21,193,205 (including penalty tax of KRW 5,568,928) for the corporate tax of KRW 201 for the year 201; and (d) notified and notified the Plaintiff of each of the revised tax amount of KRW 12,834,590 (B) for the remainder after deducting KRW 8,253.

[Grounds for recognition] B-1 to 4, B-1 to 9, B-8, the purport of the entire pleadings

2. Whether the disposition is lawful;

A. The assertion

On the other hand, the defendant asserts that the disposition of this case is lawful in light of the circumstances of disposition and the relevant Acts and subordinate statutes, while the plaintiff awarded a contract to ○○ Industries for the construction of the display stand for the storage of the plaintiff's goods, and issued and received the tax invoice of this case from ○ Industries. Since ○○ Industries completed the above installation work for the display stand, the tax invoice of this case was actually issued by the real transaction, but the disposition of this case that the defendant regarded the tax invoice of this case as false is unlawful.

(b) Related statutes;

○ Scope of deductible expenses Article 19 of the Corporate Tax Act

(1) Deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of the corporation, excluding return of capital or financing, disposition of surplus funds, and what is provided for in this Act.

(2) The losses under the provisions of paragraph (1) shall be losses or expenses generated or spent in connection with the business of a corporation which are generally accepted as normal or directly related to profit, except as otherwise prescribed by this Act and other Acts and subordinate statutes.

(3) Matters necessary for the scope and types of losses under the provisions of paragraphs (1) and (2) shall be prescribed by Presidential Decree.

○ Article 17 of the Value-Added Tax Act

(1) The amount of value-added taxes payable by an entrepreneur (hereinafter referred to as the “paid tax amount”) shall be the amount computed by deducting the tax amount under the following subparagraphs (hereinafter referred to as the “purchase tax amount”) from the tax amount on the goods and services supplied by him (hereinafter referred to as the “sales tax amount”): Provided, That where an input tax amount exceeds the output tax amount, it shall be a refundable tax amount (hereinafter

1. The tax amount for the supply of goods or services used or to be used for his own business;

2. The tax amount for the import of goods used or to be used for his own business; and

(2) The following input taxes shall not be deducted from the output tax amount:

1. An input tax amount in case where the list of the total tax invoice by customer is not submitted under Article 20 (1) and (2), or the input tax amount on the portion not entered or entered differently from the fact, in case where the whole or part of the registration numbers or supply values by transaction parties in the submitted list of the total tax invoice by customer is not entered or entered differently from the fact, excluding the input tax amount in such

C. Determination

(1) Therefore, as to whether the tax invoice of this case was issued and issued without a real transaction, only the document No. 10-1 of the evidence No. 10-1 (written answer) as direct evidence corresponding thereto is written on whether the tax invoice of this case was issued and issued without a real transaction. The above written answer is about ○○, the representative of ○○○○, and the statement to reverse the original statement was made, as seen below, as long as there are considerable doubtful parts, but there is no evidence suggesting that it is false, the statement of No. 10-1 of the evidence No. 10 alone is insufficient to recognize the above display construction work between the Plaintiff and ○○ enterprise as a processed transaction, and there is no other evidence suggesting that the tax invoice of this case is false [see, e.g., Supreme Court Decision 85Nu515, Mar. 24, 1987].

(A) On November 20, 2004, ○○○○ was investigated by the Department of ○○○○○, and stated that all the tax invoices of ○○ Company issued in the taxable period from July 2001 to December 2002 were issued without a real transaction.

(B) After undergoing several investigations at the ○○ Police Station by an accusation of a charge on the materials of the head of the ○○○○ Tax Office, the head of the ○○○○○○ Tax Office stated that transactions equivalent to KRW 859,20,000 in total amount of 39 tax invoices for five companies, including the Plaintiff, among the sales tax invoices, including the Plaintiff, ○○ Construction Co., Ltd., ○○○○○○ Co., Ltd., ○○○○○○○○○, and ○○○○○○○○○○○ Co., Ltd., Ltd., were actual transactions. The remaining tax invoices amounting to KRW 1,417,30,00 in total amount of KRW 1,417,30,000 in total, were entirely in charge of practical affairs, and thus, the purchase tax invoices amounting to KRW 2,06,146,00 in total, KRW 16,593,600 in total, and the remaining transaction amount was actually made.

(C) While attending this court as a witness and testified to the same effect as the statement at the ○○ Police Station, the head of the ○○○ Tax Office notified the public official in charge of the imposition of 700 million won amount of tax without any direct investigation on him/her in connection with the imposition of tax, the head of the ○○○ Tax Office stated the reasons for reversal of the statement that, in the process of ○○○’s filing of an objection with the public official in charge and requesting re-investigation, the public official in charge puts his/her signature on the above written answer by stating that he/she would cancel the imposition of the tax. However, upon being investigated by the ○○ Police Station, the head of the ○○○ Police Station stated that the person was made a statement different from the initial statement in the ○○○ Tax Office by distinguishing the company that did not make a transaction with the actual trading company.

(2) Therefore, the instant disposition, based on the premise that the Plaintiff received the instant tax invoice without any actual transaction corresponding thereto, is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.