Seoul Administrative Court-2017-Gu 60857 (Law No. 13, 2018)

Fictitious tax invoices, fraudulent or other unlawful acts

Although payment under the instant service contract constitutes a processing transaction because it was paid without providing design consulting services, it cannot be deemed that there was awareness that such payment would result in a decrease in national tax revenues.

Article 16 of the Value-Added Tax Act, Articles 26-2 and 47-3 of the Framework Act on National Taxes

2018Nu68614 Revocation of Disposition of Imposing Corporate Tax, etc.

Co.*****

○ Head of tax office

July 17, 2019

August 28, 2019

1.The judgment of the first instance shall be modified as follows:

A. On December 17, 2014, the Defendant imposed the first imposition of the value-added tax (including the additional tax) on the Plaintiff on December 17, 2009 and the imposition of each unfair under-reported additional tax as specified in attached Table 2. (b) of the attached Table 2. of the imposition of each unfair under-reported additional tax, respectively, shall be revoked.

B. The plaintiff's remaining claims are dismissed.

2. Of the total litigation costs, 90% is borne by the Plaintiff, and the remainder 10% is borne by the Defendant, respectively.

The judgment of the first instance shall be revoked. The imposition of each corporate tax (including additional taxes) listed in attached Table 1. [Attachment 1] against the plaintiff on December 17, 2014 and the imposition of each value-added tax (including additional taxes) listed in attached Table 1. [Attachment 2] shall be revoked.

1. Details of the disposition;

The reason why the court uses this part is the same as that stated in Paragraph (1) of the judgment of the court of first instance, and thus, this part is acceptable in accordance with Article 8(2) of the Administrative Litigation Act and the text of Article 420 of the Civil Procedure Act

2. Whether each disposition of this case is lawful

The reason why the court uses this part of the judgment of the court of first instance is as stated in Paragraph 2 of Article 8 of the Administrative Litigation Act and Article 420 of the Civil Procedure Act, except for the dismissal of part of the judgment of the court of first instance as follows. Thus, this part of the reasoning is cited in accordance with Paragraph 2 of Article 8 of the

[Supplementary Use]

○ Part 12, 3 of the judgment of the court of first instance, " shall be deemed to constitute a processing transaction," and the evidence of Nos. 6 through 20, and No. 22 through 32 of the judgment of the court of first instance (a serial number) shall be deemed to constitute a processing transaction.

The testimony of ○○○○ by the witness of the party concerned with each description of each number (including each number) is insufficient to reverse the recognition, and there is no other counter-proof."

○ From 14th to 18th 14th 17th 17th 18th 2th 2th 2th 200.

3) Whether the exclusion period for imposition of value-added tax for the first period of 2009 has expired

A) Article 26-2(1) of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010) provides that in principle, the exclusion period for national taxes shall be five years (Article 3). However, in cases where a taxpayer evades, is refunded, or deducted from national taxes due to a fraudulent or other unlawful act, the exclusion period for national taxes shall be ten years from the date on which national taxes can be imposed (Article 10(1)).

However, in cases where a taxpayer receives a false tax invoice issued without a real transaction and receives a deduction or refund of an input tax amount, such an act constitutes “a case where a taxpayer evades a national tax or obtains a refund or deduction by fraudulent or other unlawful act” under Article 26-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010) and thus applying the exclusion period for imposition of ten years, in addition to the recognition that a taxpayer is entitled to receive a deduction or refund of an input tax with a false tax invoice, the person who issues a false tax invoice must be aware that the taxpayer would be entitled to a deduction of an input tax amount by evading the taxpayer’s liability to pay a value-added tax on the relevant tax invoice by filing a return or payment of the tax base and the amount of a value-added tax, excluding the amount of the output tax on the relevant tax invoice, or by filing a request for correction after filing a refund or refund (see Supreme Court Decision 2016Du52811, Jan. 12, 2017).

B) Re-return to the instant case, and the transaction pursuant to the instant service agreement constitutes a processing transaction, and the instant tax invoice issued with respect to the transaction constitutes a false tax invoice issued without a real transaction, as seen earlier.

However, in full view of all the following circumstances, the evidence submitted by the Defendant alone is insufficient to acknowledge that the Plaintiff was aware that: (a) the Plaintiff was exempted from the input tax pursuant to the instant tax invoice by evading the Plaintiff’s liability to pay value-added tax on the instant tax invoice; (b) the Plaintiff would result in a decrease in national tax revenues; and (c) there is no other evidence to acknowledge otherwise.

In light of the nature of the value-added tax system that takes the pre-stage tax credit system, if a taxpayer believed that the taxpayer would return and pay all the amount of the tax paid to the other party as the output tax amount, it cannot be deemed that there would have been awareness that the taxpayer would have caused a decrease in the national tax revenue. However, the Plaintiff paid the amount equivalent to the value-added tax on the service paid by the Plaintiff in return for the service provided by AAAAAA, and received the said amount, both the relevant output tax amount received from the Plaintiff was reported and paid. Meanwhile, the AAAAA has not been subject to any act of receiving the value-added tax originally reported through a request for correction, etc., and there seems to have been no friendly circumstances in its intent. For the same reason, it is reasonable to deem that the Plaintiff was aware that further AAAA was aware that the entire amount of the tax paid by the Plaintiff would have been returned and paid as the output tax amount.

On March 4, 2016, the Defendant, after the instant disposition, corrected ex officio the value-added tax on the AAA ex officio by deducting the output tax amount on the instant tax invoice from the output tax amount initially reported by the AAA. However, the circumstance that the tax authority ex officio corrected the output tax amount of the supplier’s supplier by ex officio, is not only the circumstance that the supplier was not at the time of the deduction of the input tax amount, but also the circumstance that could not have been anticipated. On the other hand, it cannot be deemed that the Plaintiff was aware of the fact that the supplier would cause a decrease in the national tax revenue solely on the ground that the output tax amount was corrected ex officio.

C) Therefore, the imposition of the value-added tax in this case against the Plaintiff is subject to the five-year exclusion period under Article 26-2(1)3 of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010). The initial date of the exclusion period of imposition of the value-added tax in 2009 is July 26, 2009, the following day after the tax base return deadline. Thus, the first part of the imposition disposition of the value-added tax in this case in 2009 was made after the lapse of five-year exclusion period. The Plaintiff’s assertion in this part is with merit.

4) Whether the imposition of an unfair under-reported additional tax is illegal

A) In order for a taxpayer to receive a tax invoice different from the fact and receive a deduction or refund of an input tax amount, such an act constitutes “in cases where the taxpayer underreporting the amount of the tax amount of the value-added tax, etc. or overreporting the amount of the tax amount to be refunded due to an unlawful act as prescribed by Article 47-3(2)2 of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014), in addition to the perception that the taxpayer is entitled to receive a deduction or refund of the input tax amount based on a false tax invoice, there should be awareness that the taxpayer would be either a return or payment of the tax base and the amount of the value-added tax, excluding the amount of the output tax on the relevant tax invoice, or a request for correction after filing a return or payment on the entire amount of the amount of the output tax on the relevant tax invoice, thereby undermining the taxpayer’s liability to pay the relevant input tax amount, thereby bringing about a decrease in the national tax revenue (see Supreme Court Decision 2015Du5012222, Dec.

In other words, it cannot be deemed that the Plaintiff had awareness that it would result in the reduction of national tax revenues as a result of the Plaintiff’s deduction of input tax amount by the instant tax invoice. Nevertheless, the Defendant applied an unfair under-reported additional tax while imposing the value-added tax in the instant case. This is illegal as it imposes an unfair under-reported additional tax even though the requirements for imposing an unfair under-reported additional tax are not satisfied.

B) Meanwhile, the imposition of an unfair under-reported additional tax is a disposition imposing an additional tax on the same tax item, not independent tax assessment, and merely increases the relevant tax rate. As a result of a court’s deliberation, where the requirements for imposing an unfair under-reported additional tax are satisfied even if the requirements for imposing an unfair under-reported additional tax are not satisfied, the court should only cancel the portion exceeding the amount of the general under-reported additional tax (see Supreme Court Decision 2016Du3535, Jul. 14, 2016).

According to the aforementioned legal principles, the imposition of an unfair under-reported additional tax on value-added tax from the second to the second period from 2009 to the second period from 2013 ought to be deemed lawful. The calculation of a justifiable tax amount (general under-reported additional tax) would be the same amount as the attached Table 2.

5) Sub-decisions

Therefore, the portion of the first imposition of value-added tax in 2009 and the portion of the second imposition of tax for unfair underreporting from 2009 to 2013 should be revoked.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as it is without merit. Since the judgment of the court of first instance is partially unfair with the conclusion, part of the plaintiff's appeal shall be accepted, and it is so decided as per Disposition with the decision of the court of first instance as stated in paragraph (1) of this Article.