The early 2012 middle 1483

No evidence exists to deem that the Plaintiff paid the instant operating expenses to drug wholesalers or pharmacists, and the expenses that the Plaintiff spent to the doctor cannot be deemed as losses.

There is no evidence to deem that the Plaintiff paid the instant operating expenses to drug wholesalers or pharmacists, and the Plaintiff’s offering part of the instant operating expenses to the doctor as a so-called rebates may not be deemed as extremely violating social order as losses.

Article 19 of the Corporate Tax Act

2013Guhap 13779 Demanding revocation of a disposition imposing corporate tax, etc.

AA Pharmaceutical Co., Ltd.

1. The director of the tax office;

July 24, 2014

September 4, 2014

1. The plaintiff's claims against the defendants are all dismissed.

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

Cheong-gu Office

The imposition of each corporate tax on the details of the imposition of the attached Form 1 against the plaintiff by the head of the Suwon Tax Office and the notification of each change in the income amount of the attached Form 2 against the plaintiff by the director of the regional tax office of Jungwon shall be revoked.

1. Details of the disposition;

A. In around 1958, the Plaintiff began with a personal enterprise called BB medication, and was converted into a corporation around 1978. From around 1996, the Plaintiff mainly manufactured and sold prescription drugs, such as CCC, DDD, EE.

B. The Plaintiff reported the tax base and amount of corporate tax in relation to the corporate tax for the year 2004 to 2010, and the details of the deductible expenses related to the instant case among the deductible expenses reported by the Plaintiff are as follows (hereinafter “instant operating expenses”).

Classification

Travel Expenses and Transportation Expenses

Welfare expenses, etc.

Sales promotion expenses

Payment Fees, etc.

Total

204

OOO

-

-

-

OOO

205

OOO

-

-

-

OOO

206

OOO

OOO

-

OOO

OOO

2007

OOO

OOO

-

OOO

OOO

208

OOO

OOO

OOO

OOO

OOO

209

OOO

OOO

OOO

OOO

OOO

2010

OOO

OOO

OOO

OOO

OOO

Total

OOO

OOO

OOO

OOO

OOO

C. From July 19, 201 to November 14, 2011, a regional tax office conducted a tax investigation on the Plaintiff regarding corporate tax and value-added tax for each business year from 2004 to 2010, and it was discovered that the Plaintiff included the amount of input tax in deductible expenses even though it was not subject to deduction of the amount of input tax for each business year." (d) Accordingly, the head of the Suwon Tax Office, including the instant operating expenses, deemed that the amount exceeding the limit as entertainment expenses under the Corporate Tax Act, deemed that the amount was included in deductible expenses under the Corporate Tax Act; (e) the Plaintiff’s tax office’s notice of imposition of KRW 200,000,000,000,0000,000,000 won and KRW 20,000,000,0000,000,0000,000,000 won and KRW 20,000,000.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3 and Eul evidence Nos. 1, 5, 6, 7, 8, 9, 10 and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) The instant operating expenses are various characteristics, such as market development, sales promotion, and public relations expenses, and they are disbursed for the purpose of facilitating the sales of products to customers. The nature of the instant operating expenses is different from the entertainment expenses disbursed in order to promote the smooth progress of transactional relations by boosting friendship with the trading partner. In particular, the sales agency expenses paid to drug wholesalers and pharmacists constitute sales discount that should be deducted from the sales amount. The sales agency expenses paid to drug wholesalers constitute sales incentive or sales allowance that are paid in return for the use of the sales network secured by manufacturers in general commercial transactions. Accordingly, the imposition of corporate tax equivalent to the instant operating expenses in the instant disposition of corporate tax is unlawful.

2) The Defendant recognized that the amount of the instant operating expense was actually paid to the doctor, pharmacist, etc., but, on the ground that only the person to whom the amount of the instant income disposition (OOO) was attributed is not confirmed, the Defendant disposed of the representative bonus and notified the change in the amount of income. There is no reason to treat the sales employee directly by receiving cash from the head of the branch office, or by receiving it from the account of the sales employee in cash, and then withdrawing it from the account of the sales employee and then delivering it to the doctor, etc.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

(1) Determination on the disposition of imposition of the corporate tax of this case

(A) First, the issue of who bears the burden of proving who is actually paid to the doctor, pharmacist, and drug wholesaler of the instant case for the purpose alleged by the Plaintiff is examined.

1) The burden of proof of the tax base, which serves as the basis of taxation in a lawsuit seeking revocation of corporate tax assessment, is against the tax authority. Since the tax base of revenues and necessary expenses is deducted from necessary expenses, the tax authority shall bear the burden of proving revenues and necessary expenses. However, considering the fact-finding that most of the necessary expenses are advantageous to the taxpayer and they are in the territory under the control of the taxpayer, and it is easy to prove it, it is consistent with the concept of fairness to recognize the necessity of proof for the taxpayer by allowing presumption of non-existence regarding necessary expenses that the taxpayer does not perform the duty of proof (see Supreme Court Decision 2002OOO2, Sept. 23, 2004). In addition, in cases where the tax authority contests whether some of the expenses reported by the taxpayer are not real expenses, it is sufficiently proven that the taxpayer's use of the expenses claimed by the taxpayer and the other party are false, and as long as it is easy for the taxpayer to have spent other expenses, it is also necessary to present the amount of the reported expenses and all other expenses including O2040 O and the specific expenses.

2) As to the instant case, the Plaintiff filed a report on the tax base and tax amount of corporate tax for each year in relation to corporate tax for the year 2004 through 2010, the Plaintiff also has the purpose of use and the other party to the payment of the instant operating expenses different from the actual payment. As such, the Plaintiff needs to prove that the instant operating expenses have been actually paid, for any purpose, if actually paid, and for whom such expenses have been actually paid, and for whomever, whether they have been disbursed

(B) Next, as alleged by the Plaintiff, whether the instant operating expenses were paid to the doctor, pharmacist, and drug wholesaler for market development, sales promotion, and public relations, and, if so, whether they should be deemed as losses under the Corporate Tax Act shall be examined in the order of drug wholesalers, pharmacists, and doctors.

1) As to drug wholesalers:

“The Plaintiff paid a considerable portion of the instant operating expenses to drug wholesalers for market opening, sales promotion, public relations, and claim collection, etc. The Plaintiff alleged to the effect that the instant operating expenses fall under sales incidental expenses, claims collection expenses, sales agency fees, etc., and thus, should be included in deductible expenses. However, the testimony of the former witnessF, which corresponds to the Plaintiff’s argument, is a business expenses related to the sales promotion activities of the said branch, when the said witness is investigated by the Central and Medium Business Office on October 13, 2011.

Although the drug wholesaler supplies to the hospital, this is procedural and promotional activity is conducted in the hospital.

The subjects of promotional activities are mainly doctors.

A drug wholesaler is inconsistent with the statement to the effect that he does not engage in promotional activities (see subparagraph 10 of this paragraph). There is no explanation that the witness has made a contradictory statement for any reason, and there is no explanation that he/she can obtain specific and acceptable opinions as to what reason the witness has made, and ChoG, the actual representative of the plaintiff, has the right to choose the time of investigation conducted by the Central Tax Office on October 19, 201, and therefore, the business members are making an unofficial effort with respect to the doctor.

The above evidence alone is insufficient to recognize that the Plaintiff paid a considerable portion of the operating expenses of this case to a drug wholesaler from 2004 to 2010 under the pretext of sales unit expenses, bond collection expenses, sales agency fees, etc. (see subparagraph 9, e.g., the Plaintiff’s intention, pharmacist, drug wholesaler’s sales rate, etc.). It is difficult to believe that the Plaintiff spent the operating expenses of this case to the effect that it is inconsistent with the Plaintiff’s testimony of NAF, and the Plaintiff’s evidence Nos. 4 through 20 (including paper numbers) is inconsistent with the Plaintiff’s financial statements, the records of trading with the Plaintiff’s drug wholesaler, the details of trading with the Plaintiff’s drug wholesaler, the transaction statement and tax invoice with the drug wholesaler since 2011, and the details of sales discount after 201.

“The Plaintiff paid part of the instant operating expenses to a pharmacist for the purpose of credit early recovery, etc., which is alleged to the effect that the Plaintiff’s testimony of JeonF, consistent with the Plaintiff’s aforementioned argument, is difficult to believe for the reasons as seen earlier. The Plaintiff’s financial statements, data and account details organizing the Plaintiff’s pharmacy’s transaction details with the Plaintiff’s pharmacy, transaction details and account details with the pharmacy after 2011, transaction agreement with the pharmacy and with the pharmacy’s credit early collection expenses and pharmacy deposit expenses, and the above evidence merely merely stated that the Plaintiff paid part of the instant operating expenses under the pretext of credit early collection expenses from 2004 to 2010, and that it is difficult to recognize that the Plaintiff paid part of the instant operating expenses to the pharmacist for the reason that the Plaintiff did not have any other reasons to recognize the Plaintiff’s total operating expenses under Article 9 of the Plaintiff’s total operating expenses, since the Plaintiff’s aforementioned evidence is insufficient to acknowledge that the Plaintiff did not have any other reasons to acknowledge the Plaintiff’s total operating expenses.

A) The Plaintiff also paid part of the instant operating expenses to the doctor for market opening, sales promotion, and public relations, etc., and argued to the effect that it constitutes sales ancillary expenses and should be included in deductible expenses. The fact that part of the instant operating expenses was paid to the doctor does not dispute the Defendant.

B) Article 19(2) of the Corporate Tax Act provides that deductible expenses are generally accepted as losses or expenses incurred in connection with the business of a corporation or directly related to profit. Here, "generally accepted expenses" mean expenses deemed to have been disbursed under the same situation with other corporations engaged in the same kind of business as taxpayers. Whether such expenses are included shall be objectively determined by comprehensively taking into account the details and purpose of spending, form, amount, effect, etc. of such expenses. Unless there are special circumstances, expenses that the Plaintiff spent in violation of social order shall be excluded (see, e.g., Supreme Court Decision 2007DuOOO, Nov. 12, 2009). However, in light of that the business expenses in the instant case are health expenses that the Plaintiff spent to its doctors in violation of the social order, and (1) the doctor and provider should be deemed to have been aware of the public health and medical supplies to the extent that the public’s trust in the market would not be affected by the offering of rebates, and thus, if so, the Plaintiff’s offering of rebates to the public health and medical supplies to the public.

(2) Determination on the notice of change in the instant income amount

(A) On the other hand, as long as the revenue of a corporation that was released from the company without being entered in the account book is not clear, the tax authority is bound to dispose of it as a bonus for the representative pursuant to Article 32(5) of the Corporate Tax Act and the proviso of Article 94-2(1)1 of the Enforcement Decree of the same Act. In this case, the burden of proving that the revenue belongs to the representative is clear shall be the taxpayer (see, e.g., Supreme Court Decision 2010DuOOO, Mar. 28, 2013).

In light of the above legal principles, it shall be reasonable to view that the taxpayer has the burden of proving that the purpose of the cost claimed by the taxpayer and the other party to the payment was false, and that the tax authority's bonus to the representative where the tax authority disposed of the amount out of the company as a bonus is clear.

(B) On the other hand, where a person in a position of an employee of a corporation commits an illegal act, such as embezzlement of a corporation's funds for personal interest regardless of the corporation's business affairs, and the corporation acquires damage claims, etc. from such person, the amount equivalent to such money shall not be deemed to have been immediately flown out of the company. Only in the case where there are circumstances such as the pertinent corporation or its actual manager's prior or ex post consent, and the corporation's intention not to recover the damage claims from such person, such as waiver of collection of claims, etc., it shall be deemed to have objectively expressed its intention not to recover the damage claims from the company. It shall be deemed to have been disposed of as a bonus to such person. Even if the representative director is in the position of the corporation, it shall be deemed to have been equally in the case of the actual employee (see, e.g.,

(C) In light of the purport of the entire arguments as to this case’s health class, Eul’s evidence Nos. 2, 3, 4, 9, and 10, if the plaintiff set the daily expense for the business members at a higher level than the actual payment of the daily expense to the corporate account of each branch, and transfers the difference between the daily expense actually paid to the business members to the corporate account of each branch, the representative director’s personal account from 2006 to 2010, out of the items of travel expenses and transportation expenses, the OOO members were released from the company. The plaintiff received false tax invoices from the trading company and paid the money to the name of the trading company, but it cannot be acknowledged that the OO members were out of the company by the method of collecting the payment fees from the representative director’s account. The plaintiff’s assertion that the whole amount of the sales expense including the income disposition of this case was paid to the business operator, pharmacist, and drug wholesaler, but it is difficult to find that there is no other evidence to prove that the OOOOF's evidence that it did not directly receive the funds from the above.

(3) Sub-determination

Therefore, the plaintiff's argument about the disposition of corporate tax of this case and the notice of change in the income amount of this case is without merit.

3. Conclusion

Therefore, the plaintiff's claim against the defendants is dismissed in its entirety as it is without merit. It is so decided as per Disposition.