Cho High Court Decision 2009Du3295 (O24, 2010)

A simplified taxable person may not be deemed a simplified taxable person if the entity has a place of business not subject to the application of simplified taxation.

Since an electronic parts wholesale retail business continues to run even after the report of closure is filed, since the real estate rental business is not subject to the simplified taxation, it cannot be deemed as a simplified taxable person, and it cannot be deemed as a general taxable person only at the time of issuance of the registration certificate for the real estate rental business. Therefore, the taxation is legitimate

2010Guhap22832 Invalidity of a disposition imposing value-added tax

Section AA

○ Head of tax office

May 12, 201

May 26, 201

1. The plaintiff's claim is dismissed.

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

The Defendant revoked each disposition of imposition of value-added tax of 1,235,480 won on August 13, 2009, value-added tax of 2005 for the second quarter of 2005, value-added tax of 1,023,210 won, value-added tax of 1,006 for the second quarter of 206, value-added tax of 474,610 won, value-added tax of 1,06,970 won for the first quarter of 2007, value-added tax of 1,06,970 won, value-added tax of 2,207, value-added tax of 1,64,600 won for the first quarter of 208, value-added tax of 1,64,600 won for the second quarter of 208, and of 1,824,300 won for the second quarter of 208.

1. Details of the disposition;

A. The head of the ○○ Tax Office informed the Plaintiff of the tax evasion of value-added tax in operating the electronic components Do and retail business (hereinafter referred to as “○○ Electric Business”) in the name of “○○○○○○-dong 237-131 from around 2002 to around 2003” and selected the Plaintiff as a subject of the revised assessment of value-added tax in 2002 and 2003, and conducted a tax investigation with respect to the Plaintiff on April 2009. In the process of the investigation, the Plaintiff continued to conduct the business after checking the circumstances of the business and selected the Plaintiff as a subject of the consolidated investigation.

B. As a result of the additional investigation, the head of ○○○ Tax Office confirmed that the Plaintiff continued to operate ○○ Electrical Business from around 2004 to around 2008, the sales revenue of KRW 419,227,272 and part of the ○○ Electricity Business Place was omitted from the sales revenue of KRW 39,223,513, and notified the Defendant of the amount of KRW 58,541,242 (hereinafter referred to as “the instant real estate”), 70,616,578, 205, 206, 207, 208, 206, 207, 205, 37, 206, 206, 206, 205, 206, 207, 257, 257, 2636, 258, 256, 206, 275, 2636, 257, 26768

C. Accordingly, on August 13, 2009, the Defendant corrected the disposition of this case (hereinafter referred to as the “instant disposition”) of value-added tax for the first term of 1,235,480 won, value-added tax for the second term of 205, value-added tax for the second term of 2006, value-added tax 1,023,210 won, value-added tax for the second term of 2006, value-added tax for 474,610 won, value-added tax for the second term of 2006, value-added tax for 1,066,970,720 won, value-added tax for the second term of 207, value-added tax for 1,090,720 won, value-added tax for 1,64,600 won, value-added tax for the first term of 208, value-added tax for 284,300 won.

D. On August 25, 2009, the Plaintiff appealed to the Tax Tribunal, but the Tax Tribunal dismissed the said appeal on February 24, 2010.

[Ground of recognition] Unsatisfy, Gap evidence I, 5, 8, Eul evidence No. 1 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

The instant disposition shall be revoked in an unlawful manner as follows.

(1) First of all, the Defendant rendered the instant disposition by deeming the Plaintiff as a general taxable person on the premise that the Plaintiff continued to operate the ○○ Electric Business Place, separate from the rental business on the instant real estate, but the Plaintiff had already completed the report on the closure of business at around December 31, 2003, and the instant disposition was excessive.

(2) Next, around August 2009, the Plaintiff received a business registration certificate from the Defendant for the previous taxable period due to the conversion of the type of taxation to a general taxable person. Thus, the Plaintiff became a general taxable person only at the time or became aware that it was a general taxable person. The only imposition of value-added tax on the subsequent taxable period is lawful, and it was erroneous to impose value-added tax on the previous taxable period prior to the issuance of the business registration certificate, for which there was no room for being paid the amount equivalent to value-added tax separately from the rent from the lessee of the

(3) In addition, pursuant to Article 74-2(2) of the Enforcement Decree of the Value-Added Tax Act, the Defendant shall notify the Plaintiff of the fact 20 days prior to the commencement of the taxable period to which the provision concerning a simplified taxable person is applied or not applicable, and shall issue a business registration certificate by the due date for the commencement of the taxable period. The above provision is effective only when the tax authority notifies the Plaintiff of the point at which the conversion of the taxable type takes effect and issues the business registration certificate that the application of the simplified taxable person differs from the point at which the conversion of the taxable type takes effect, and the transfer of the taxable type takes effect only when it issues the business registration certificate. Thus, the Defendant’s business registration certificate issued to the Plaintiff on July 1, 2009, stating on August 1, 2009 as the date of

(4) Lastly, the Plaintiff is a simplified taxable person from 2005 to 2008, whose proceeds from supply for each taxable period are less than 12 million won, and thus, the Plaintiff is exempted from the liability to pay the value-added tax pursuant to Article 29(1) of the Value-Added Tax Act.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) On January 1, 2005, the Plaintiff received a business registration certificate with respect to the leasing business of the instant real estate from the Defendant as a simplified taxable person.

(2) Meanwhile, around April 2009, the head of ○○ Tax Office visited the site of ○○ Electric Construction to conduct a tax investigation on the Plaintiff, and promulgated the situation in which the Plaintiff continues to engage in the Doing and retail business of electric parts in the said place of business even after having already reported the closure of business on December 31, 2003.

(3) The director of the ○○○ Tax Office: (a) deemed that the Plaintiff could continue to conduct business at the ○ Electric Place of Business and omitted the report of sales; and (b) requested the Plaintiff to submit relevant books of account; (c) the Plaintiff did not submit the relevant books of account (However, he/she stated to the effect that the Plaintiff did not discontinue the business for the purpose of recovering the outstanding amount even after receiving the tax investigation by himself/herself; and (d) did not discontinue the business for the purpose of collecting the outstanding amount after receiving the report of business closure); (c) secured our bank account and Japanese bank account, which is the Plaintiff’s business account; and (d) investigated the details of deposits during the period from January 1, 2004

(4) As a result of the investigation, there is a trace of continuously entering and withdrawing different amounts from each other from the number of customers who appear to be business in each of the above account transactions. The head of ○○○ Tax Office: (a) deemed that the Plaintiff’s sales was omitted while running a business at the ○○ Electric Business, and calculated the omitted sales amount by deeming the remaining amount, excluding only the same amount of deposits, such as the transaction details deposited by the Plaintiff himself or the same amount presumed to be the cancellation of the transaction; and (b) the detailed details are as follows.

(5) Around August 2009, the Defendant notified by the head of ○○ Tax Office of taxation data, on the ground that the Plaintiff was operating ○○ Electric Electric Business Place in addition to the instant real estate leasing business, and thus, the Plaintiff did not fall under the first simplified taxable person, thus correcting the business registration certificate from the past simplified taxable person on the grounds of conversion of the type of taxation as a general taxable person, and then

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3 through 5, Eul evidence Nos. 4 and 5, the purport of the whole pleadings

D. Determination

(1) Determination on the first argument

(A) Whether the Plaintiff actually closed the ○ Electric Construction Business on December 31, 2003

In general, the burden of proving the facts of taxation requirements in a lawsuit seeking revocation of a tax disposition shall be imposed on the tax authority, but if the facts alleged in the facts in light of the empirical rule are revealed in the course of a specific lawsuit, it cannot be readily concluded that the other party is an unlawful disposition that failed to meet the taxation requirements, unless the other party proves that the pertinent facts in question were not eligible for application of the empirical rule (see, e.g., Supreme Court Decision 2006Du13831, May 29, 2008).

In light of the following circumstances, the Plaintiff continued to operate the business from 2004 to 2008, even after the Plaintiff’s report on the closure of the ○○ Electricity establishment was completed, and the Plaintiff voluntarily stated to the effect that he did not discontinue the business for the purpose of recovering the outstanding amount even after having reported the closure of the business, and that he did not have any special circumstances such as the Plaintiff’s written statement was drafted by force against the Plaintiff’s will or there was any objective reason to regard the content of the written statement as false, it cannot be readily denied the value of evidence of the instant case.

② The Plaintiff asserted that most of the money deposited into the business account at the time was reduced due to personal lending and borrowing of money, or that the outstanding amount accrued during the operation of ○○ Electricity was repaid. However, the Plaintiff was unable to submit all relevant objective evidentiary documents, such as a loan certificate verifying the details of monetary transaction or collection of outstanding amount, or account books.

③ Considering the amount deposited into the business account after the date of reporting the closure of the ○○ Electric Business Place, the Plaintiff did not seem to have been able to have suspended the business, and the period of deposit is five years for which money was deposited.

(B) Whether the Plaintiff constitutes a simplified taxable person regarding the rental business of the instant real estate

According to the main sentence of Article 25(1) of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010; hereinafter referred to as the "former Value-Added Tax Act") and Article 74(1) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 21744, Sep. 21, 2009; hereinafter referred to as the "former Enforcement Decree of the Value-Added Tax Act"), an individual entrepreneur whose price for the supply of goods and services in the preceding calendar calendar year (referring to the price that includes value-added tax) is less than 48 million won is subject to the imposition and collection of value-added tax as a simplified taxable person: Provided, That the proviso to Article 25(1) of the former Value-Added Tax Act and Article 74(2)3 of the former Enforcement Decree of the Value-Added Tax Act do not apply to other entrepreneur holding a business subject to the simplified taxable period, regardless of the price for supply.

In other words, the plaintiff returned to the instant case, and even if the price for the lease of the instant real estate during each calendar year between January 2005 and February 2008, which is the taxable period of the instant disposition, was less than 48 million won, as the plaintiff argued by the plaintiff, the plaintiff was running ○○ Electric Construction Business in addition to the lease of the instant real estate during the said period, as seen above. In light of each of the above provisions, electronic equipment Do and retail business constitutes a business to which a simplified taxable is not applicable, and therefore, the plaintiff, a business operator, who was holding ○○ Electric Construction Business Place, which is not subject to the application of the simplified taxable period, could not be deemed to be the first simplified taxable person.

Therefore, this part of the plaintiff's assertion is without merit.

(2) Judgment on the second argument

Pursuant to Articles 19(1) and 21(1)1 of the former Value-Added Tax Act, a business operator shall report to the head of the competent district tax office having jurisdiction over the place of business within 25 days (50 days in the case of a foreign corporation) after the end of each taxable period the tax base and amount of payable or refundable tax for each taxable period. If a business operator fails to make such a final return, the tax authority shall determine or correct the amount of payable or refundable tax for

On the other hand, Article 13 of the former Enforcement Decree of the Value-Added Tax Act provides that a business registration certificate may be renewed when the head of the competent tax office deems it necessary to efficiently deal with the value-added

In this case, the defendant, who became aware that the plaintiff did not file a final return of value-added tax on the rental business of the real estate of this case, was subject to the disposition of this case which corrected the tax base and tax amount of value-added tax for each taxable period from January 2005 to February 2008 to which the business date of this case belongs, and the defendant decided that it is necessary to conduct the above value-added business, and issued a business registration certificate for the rental business of the real estate of this case to the plaintiff on August 2009 because it was corrected from the previous simplified taxable person to the tax type conversion as a general taxable person and issued it to the plaintiff. Thus, the plaintiff cannot be deemed to have become final and conclusive as a general taxable person on the rental business of the real estate of this case only at the time of issuing the above business registration certificate.

Furthermore, tax liability is naturally established without the need to perform any special act of the tax authorities or taxpayers for the establishment of the pertinent tax liability when the tax liability satisfies the taxation requirements stipulated by the Act (see, e.g., Supreme Court Decision 83Nu279, Jan. 22, 1985). Thus, even if the Plaintiff becomes aware, as the Plaintiff’s assertion, that the Plaintiff becomes a general taxable person only at the time when the pertinent company registration certificate was issued, and thus, he/she should file a final return and pay the value-added tax, the Plaintiff’s obligation to pay value-added tax inevitably arises since the Plaintiff, who is a business entity, leases the instant real estate and receives the price therefor. Such circumstances do not affect the judgment on the legality

Furthermore, the issue of whether a rental business operator is to receive the amount equivalent to the value-added tax separately from the rent is merely a matter of determining the ultimate economic burden of value-added tax, and even if the Plaintiff was unable to receive the amount equivalent to the value-added tax separately from the rent from the lessee of the real estate in this case before the Plaintiff received the corrected business registration certificate, it does not affect the determination

Therefore, we cannot accept this part of the plaintiff's assertion.

(3) Judgment on the third argument

According to Article 25 of the former Value-Added Tax Act and Article 74-2 (1) and (2) of the former Enforcement Decree of the Value-Added Tax Act, where a provision concerning a simplified taxable person is applied to any individual entrepreneur because the price for the supply of goods and services in the immediately preceding year falls short of 48 million won, or the above simplified taxable provision is not applied to any individual entrepreneur, the chief of the competent district tax office shall notify it 20 days prior to the commencement of the taxable period in which the above simplified taxable provision is not applicable or is not applicable, and shall correct the business registration certificate and deliver it to the

However, in light of the language and purport of Article 74-2 of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 74-2), Article 74-2(2) of the former Enforcement Decree of the Value-Added Tax Act (amended by Presidential Decree No. 2010, Jan. 1, 2011) provides for the period of application of the said provisions, the said provision shall be applied to a case where an entrepreneur who was a general taxable person or a simplified taxable person falls under a general taxable person, and thus the type of taxation is legitimately changed. However, the said provision shall not be deemed as a matter of course to apply to a case where the tax

Therefore, it is difficult to accept this part of the Plaintiff’s assertion on a different premise without further review.

(4) Judgment on the fourth argument

If the proceeds from supply by a simplified taxable person for the pertinent taxable period under the main sentence of Article 29(1) of the former Value-Added Tax Act are less than 12 million won, the liability to pay the value-added tax shall be exempted. However, as seen earlier, as long as the Plaintiff was not a simplified taxable person in relation to the rental business of the instant real estate, there is no room to apply the said provision under the premise that the relevant entrepreneur is a simplified taxable person, so the Plaintiff

3. Conclusion

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