Seoul High Court 2008Nu37604 ( August 14, 2009)

It is necessary to determine whether to refund gold bullion to an exporter of gold bullion transaction via a bombing company by applying the good faith principle.

In a series of gold bullion transactions, if a malicious business operator knew, or was unable to know, the circumstances that there was an illegal transaction for the purpose of evading the output tax amount, and that the deduction and refund of the input tax amount would lead to the reduction of other tax revenues by gross negligence, the exporter’s assertion of input tax deduction and refund cannot be permitted against the good faith principle.

209du15555 Corporate Tax revocation of disposition to impose corporate tax

-Appellant 00

-Appellee head of tax office

Remand Supreme Court Decision 2008Du16995 Decided December 11, 2008

The Seoul High Court Decision 2008Nu37604 decided August 14, 2009

The part of the judgment of the court below against the plaintiff and the part against the defendant concerning the imposition of value-added tax for the second period of 2003, the first period of 2004, and the second period of 2004, excluding additional taxes, such as failure to submit a list of total tax invoices, are reversed, and the case is remanded to the Seoul High Court.

The defendant's remaining appeals are dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Plaintiff’s ground of appeal

Although it is not clear whether a party's claim of a complaint contains a subject matter of a lawsuit, if it is evident that the claim is the cause of the claim that the subject matter of a lawsuit from the original point of view is included in the subject matter of a lawsuit, it shall be deemed that the subject matter of a lawsuit is included in the written application for modification of the claim. Ultimately, the parties clearly identified the subject matter of a lawsuit by arranging the claim in accordance with the cause of the claim and clarifying the subject matter of a lawsuit. Thus, whether the period for filing a lawsuit regarding the subject matter of a lawsuit should be determined at the time of submission of the written application, not at the time of modification of the claim (see, e.g., Supreme Court Decision 88Nu

According to the reasoning of the lower judgment and the evidence duly admitted by the lower court, the Plaintiff reported KRW 249,750,770 as the refunded amount of the value-added tax for the second half-year period of 2004; ② on September 1, 2005, the Defendant deemed that most of the refund amounts reported by the Plaintiff constitutes an input tax amount for which the requisite entries in the tax invoice are stated differently from the facts, and thus, constitutes an object of refund; and accordingly, the Plaintiff issued a disposition rejecting refund of the remaining declared amount (hereinafter “instant disposition rejecting refund”) upon limiting the refund amount to KRW 14,267,70, and then, issued a disposition rejecting refund of the value-added tax for the second half-year amount of 204 amount of value-added tax to KRW 47,096,60 (hereinafter “instant disposition imposing additional tax”) and then notified the Plaintiff of the said disposition to the effect that the above refund amount was 300,600,000,0000 won for the first half-year tax payment period of KRW 20.

In light of the above facts in light of the legal principles as seen earlier, it is reasonable to view that the notice of KRW 32,962,570 against the Plaintiff is combined with the instant refusal disposition and the instant additional tax disposition. Moreover, it is reasonable to view that the Plaintiff’s claim stated in the complaint that “the Plaintiff’s revocation of the instant disposition of KRW 32,962,570 for the second term of 2004” was not merely seeking partial revocation of the instant additional tax disposition, but also seeking revocation of the instant disposition of refusal to refund. Therefore, it is reasonable to view that the Plaintiff’s amendment of the purport of the purport of the purport of the claim to seek revocation of the instant refusal disposition by clearly stating that the Plaintiff would also seek revocation of the instant refusal disposition of refund, and it cannot be deemed that the Plaintiff newly added the instant claim for revocation of the instant refusal disposition.

Nevertheless, the court below rejected the claim for revocation of the refund refusal disposition of this case on June 3, 2009, on the premise that the claim for revocation of the imposition disposition of value-added tax of KRW 32,962,570 for the second quarter of 2004 by the original complaint shall be deemed to only seek revocation of part of the imposition disposition of additional tax of this case, and on the premise that amendment of the purport of the claim on June 3, 2009 shall be deemed to extend the scope of the claim for revocation of the imposition disposition of additional tax of this case and separate addition of the claim for revocation of the refund refusal disposition of this case, the claim for revocation of the refund refusal disposition of this case shall be filed on June 3, 2009, and shall be deemed to be unlawful.

The ground of appeal pointing this out is with merit.

2. As to the Defendant’s ground of appeal

A. As to the fact that the instant tax invoice was a false tax invoice

Based on its employed evidence, the lower court determined that the Plaintiff purchased gold bullion (hereinafter “instant gold bullion”) from two business operators, including the International Gold Metal Co., Ltd. from August 11, 2003 to September 17, 2004 (hereinafter “the instant supplier”), and received the instant gold bullion (hereinafter “the instant gold bullion”) and then received tax invoices under Chapter 48 of the instant transaction from the instant supplier (hereinafter “the instant tax invoice”). Based on the aforementioned facts, the Plaintiff processed the instant gold bullion as it is or under the status of gold bullion and exported it to the Hong Kong import. Based on the aforementioned facts, the lower court rejected the Plaintiff’s purchase price under the circumstances that it was difficult for the Plaintiff to conclude that the Plaintiff did not receive value-added tax exemption from value-added tax, but did not constitute the total supply price for the instant gold bullion (hereinafter “the instant entire transaction”). The lower court determined that there was no other amount equivalent to the Defendant’s purchase price for the instant gold bullion, which constitutes the Plaintiff’s purchase price under the pretext of supply and sale of the instant tax invoice.

In light of the records, such fact-finding and judgment of the court below are justified.

The court below did not err in the misapprehension of legal principles as to "tax invoices different from the facts" as alleged in the ground of appeal.

B. On the ground that unfair input tax deduction and refund claim violate the principle of good faith

(1) Article 15 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter referred to as the “Framework Act on National Taxes”) declares that the principle of good faith should be the basic guiding ideology in the field of tax law by stipulating that “A taxpayer shall perform his/her duty in good faith.” This shall also apply to a tax official’s performance of his/her duty.” Accordingly, if a tax law provision is applied to an individual case, the application of the tax law provision would result in an unreasonable result which is significantly difficult to pay in light of the common sense of justice and ethics, thereby leading to the sound legal order, the application of the provision may be exceptionally restricted or excluded pursuant to the principle of good faith. This principle may also be applied to legal relations concerning value-added tax (Article 1 and Article 3(1) main text of the Framework Act on National Taxes).

Article 15 of the former Value-Added Tax Act (amended by Act No. 9915, Jan. 1, 2010) provides that the value-added tax on the value of supply shall be collected from the person who receives the supply of goods or services when an entrepreneur supplies the goods or services. Article 17(1) of the same Act provides that the value-added tax payable by an entrepreneur shall be the amount obtained by deducting the input tax amount from the output tax amount, and that the input tax amount in excess of the output tax amount shall be refundable. This is based on the so-called tax credit system where the entrepreneur collects the output tax from the entrepreneur who receives the goods or services at each transaction stage before reaching the final consumer and pays the tax amount to the State through the process of deducting and refunding the input tax amount from the input tax amount, and ultimately imposes the burden on the final consumer (see, e.g., Supreme Court Decision 9Da3984, Nov. 12, 199).

If a malicious entrepreneur in a series of continuous transactions does not pay the value-added tax collected by him/her by attempting to make an abnormal transaction that only causes losses if he/she does not evade or evade value-added tax (hereinafter referred to as "illegal transaction") from the beginning by attempting to evade value-added tax from the beginning, the country is bound to make a refund of the input tax without the burden of the output tax, such as the exporter at the next transaction stage, if an entrepreneur is entitled to deduct and refund the input tax without the burden of the output tax amount, such as the exporter at the next transaction stage. As such, the outcome exceeds the passive gap of tax revenue and constitutes an outflow to the National Treasury, and thus, the burden exceeds the damage of the value-added tax system itself, thereby causing serious harm to the overall tax system.

Of course, even if there are the above reasons, if an exporter is in a situation where the existence of an illegal transaction is unknown even if there is no other reason, he/she may not, in principle, deny that the exporter is entitled to deduct or refund an input tax amount as prescribed by the Value-Added Tax Act. However, if the exporter was aware that there was an illegal transaction at the pre-stage stage, and he/she was engaged in the transaction in order to promote his/her own interest, and his/her transaction profit is connected to the aforementioned illegal transaction, and his/her participation in the transaction becomes a critical factor that makes it possible to make the illegal transaction ultimately by securing the market for the illegal transaction, it is an act of pursuing unjust benefits by abusing the input tax deduction and refund system, which is a premise. Such deduction and refund of an input tax amount by using another tax revenue as a tax revenue to such exporter, not only can guarantee the profits attributable to the illegal transaction through the National Treasury, but also cannot prevent serious harm to the overall tax system as seen above.

In such a case, seeking input tax deduction and refund cannot be made remarkably in light of the universal sense of justice and ethics. This is not permissible as it goes against the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes. Such a legal doctrine is reasonable to deem that if an exporter was unaware of such an illegal transaction due to gross negligence in light of the perspective of fairness, the gravity of the outcome, and the universal sense of justice, it is equally applicable in cases where the exporter was unaware of such illegal transaction due to gross negligence, i.e., the relationship with a malicious business entity, and the exporter was aware of the fact that he was aware of the fact that he was aware of the fact that he was aware of the fact, and even if he did not know of the fact that he was able to have been aware of the fact, it is not limited to cases where there was a specific conspiracy or accomplice relationship with a malicious business entity who made an illegal transaction with the exporter (see, e.g., Supreme Court en banc Decision 2009Du

(2) 원심판결 이유 및 기록에 의하면, ① 원고는 2003. 4. 3. 귀금속, 장신구 제조 및도소매업 등을 목적으로 하여 설립된 회사로서 자본금이 3억 원에 불과함에도 설립 첫해부터 수십 차례에 걸쳐 거액의 이 사건 금지금을 매입하여 이를 수출하는 영업을 해온 사실, ② 이 사건 금지금 거래는 수입업체에 의하여 외국으로부터 수입되어 면세금으로 유통되던 중 과세금으로 전환된 것으로서 매우 짧은 기간 내에 수입업체로부터 최종 수출업체인 원고에 이르기까지 6˜7단계의 도매업체들을 거쳐 수출까지 이루어졌으며, 그 중 자신들이 매입한 금지금을 매입가액보다 낮은 공급가액에 매출한 후 임의로 폐업함으로써 부가가치세 납부의무를 이행하지 아니하는 악의적 사업자가 끼어 있었던 사실, ③ 원고는 매일의 금지금 시세가 인터넷이나 전화 등으로 제공되고 있음에도 수출 당일의 국내시세 및 국제시세보다 상당히 저렴한 가격으로 수출하였고, 통상의 금지금 거래 관행과는 달리 국내의 금지금 매입거래처로부터 외상으로 매입하여 수출한 후 수출대금을 받아 매입대금을 지급하기도 한 사실, ④ 원고는 2003년 제2기분, 2004년 제1기분 및 제2기분 부가가치세를 신고하면서 이 사건 금지금 중 수출된 부분에 관하여 영세율 적용을 이유로 그 매입세액의 공제ㆍ환급을 구하였으나, 2005. 9. 1. 이를 거부하는 취지에서 환급신청에 대한 거부처분과 기환급액의 회수를 위한 부가가치세 부과처분 등의 이 사건 각 처분을 한 사실 등을 알 수 있다.

If the facts are the same, the Plaintiff could have purchased and exported the gold bullion of this case in a short time with profit margin. The fact that malicious business operators in the middle stage supplied the gold bullion of this case at low prices and evaded the output tax amount. In light of the structure of the transaction, it is almost impossible for the Plaintiff to export a large amount of gold bullion of this case without securing the markets, and thus, the Plaintiff and malicious business operators are in the inevitable mutual dependence relationship. In addition, if the Plaintiff cannot obtain the deduction and refund of input tax amount, the burden of the tax amount would exceed the profit margin, and thus, the mutual dependence relationship is premised on the Plaintiff’s receipt of deduction and refund of input tax amount from the State through the application of zero-rate tax rate. In addition, since such a series of transactions are made within a short period of time, it is difficult for the State to block it in advance.

Examining these circumstances in light of the legal principles as seen earlier, if the Plaintiff, an exporter, has a malicious entrepreneur who makes an illegal transaction for the purpose of evading the output tax amount in the course of a series of transactions previously conducted prior to the transaction, and thus, seeks the deduction and refund of the input tax amount even though he knew of the fact that the Plaintiff’s deduction and refund of the input tax amount would cause a decrease in other tax revenues by gross negligence, this would not only take part of the output tax amount evaded by a malicious entrepreneur by abusing the input tax deduction and refund system, but also bring about part of the input tax amount evaded by a malicious entrepreneur through the malicious entrepreneur’s abuse of the input tax deduction and refund system, and thus, it would not be permissible in violation of the good faith principle as stipulated in Article 15 of the Framework Act on National Taxes.

(3) If so, the lower court should have sufficiently deliberated on whether the Plaintiff knew or was unaware of the aforementioned circumstances in the transaction of the gold bullion in this case due to gross negligence, and determined whether the Plaintiff’s assertion on the deduction and refund of the Plaintiff’s input tax amount violates the principle of good faith. In so doing, the lower court erred by misapprehending the legal doctrine on the principle of good faith as stipulated in Article 15 of the Framework Act on National Taxes, and failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment, by failing to exhaust all necessary deliberations, on the ground that the Plaintiff’s assertion on the deduction and refund of the Plaintiff’s input tax amount should be allowed solely on the ground that the instant tax invoice does not constitute a false tax invoice.

The ground of appeal pointing this out is with merit.

On the other hand, a taxable entrepreneur between a malicious entrepreneur and an exporter is not only an essential factor in a series of variable gold bullion transactions, but also an intentional factor between an exporter and a malicious entrepreneur. Accordingly, even if the input tax deduction is recognized, the difference between the input tax amount and the input tax amount is paid to the State, and thus no direct loss occurs to the National Treasury. In addition, it is sufficient to restrict the exporter's input tax deduction and refund at the final stage to maintain the foundation of the pre-stage stage tax deduction system, and further to deny the deduction and refund of the input tax amount by the State. In light of the above, the principle of good faith is applicable only to cases where the input tax amount is deducted and refunded through the application of zero tax rate for exports, and it is not applicable to the deduction and refund of the input tax amount related to domestic tax transactions.

According to the records, the disposition imposing the value-added tax in this case includes not only the deduction and refund of input tax as a result of the Plaintiff’s application of zero tax rate as well as the deduction and refund of input tax related to domestic tax transactions. Thus, the court below should first examine the details of the disposition imposing the value-added tax in this case, classify the deduction and refund of input tax as a result of applying zero tax rate as a result of the export transaction and the deduction and refund of input tax amount as to the domestic tax transaction, and then point out that the court below need to review and determine whether the claim for deduction and refund of input tax amount in relation to the export transaction is contrary to

C. As to the imposition disposition of corporate tax

The defendant also stated this part of the petition of appeal as subject to appeal, but there is no legitimate ground of appeal in the petition of appeal or appellate brief.

3. Conclusion

Therefore, the part of the judgment of the court below against the plaintiff and the part against the defendant concerning the imposition of value-added tax for the second term of 2003, the first term of 2004, and the second term of 2004, excluding additional taxes such as non-Submission of a list of total tax invoices, are reversed, and this part of the case is remanded to the court below for a new trial and determination, and the defendant's remaining appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices.