The burden of proof for the extra expense lies on the claimant.

The burden of proof that the plaintiff's extra expense alleged to have been actually paid is unlawful since it is illegal to impose the additional tax only on some revenues as long as it is returned and paid by the method of the on-site investigation without proving that the plaintiff's extra expense was actually paid.

Article 19 of the Corporate Tax Act

2017Guhap60827 Revocation of Disposition of Corporate Tax Imposition

AA General Construction Corporation

BB Director of the Tax Office

March 6, 2018

June 28, 2018

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing corporate tax of KRW 000,000,000 against the Plaintiff on May 2, 2016 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a legal entity that was established on March 29, 199 and runs a construction business. On April 155, 2012, the Plaintiff entered into a construction contract (hereinafter “instant construction contract”) with the SongCC, under which the total construction cost (supply price) was KRW 0,00,000,000, and completed the construction work on March 2013.

B. The construction price received by the Plaintiff under the instant construction contract was not included in sales, and was returned and paid corporate tax for the business year 2012. The Defendant confirmed that value-added tax and corporate tax on the construction price of the instant construction project were not reported and paid, and imposed KRW 00,000,000 on the Plaintiff on January 5, 2016.

C. On May 2, 2016, the Defendant also corrected and notified corporate tax of KRW 00,000 for the business year 200,000, reflecting the construction cost, which was omitted from sales, to the Plaintiff (hereinafter “instant disposition”).

D. The Plaintiff, who was dissatisfied with the instant disposition, filed a request for examination with the National Tax Service on July 15, 2016, but was dismissed on October 28, 2016.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 to 4, 7, and 8, and the purport of the whole pleadings

2. Related statutes;

It is as shown in the attached Form.

3. The plaintiff's assertion and judgment

A. The plaintiff's assertion

1) The Plaintiff received KRW 50,000,00 from the SongCC on March 22, 2013 due to the dispute with the SongCC, and the Plaintiff received a total of KRW 1,000,547,80 as the construction cost of the instant construction. The Plaintiff also paid the subcontract price to the subcontractor, material company, etc. by withdrawing the amount deposited as the construction cost while managing the Plaintiff’s passbook. However, the construction cost of approximately KRW 1,00,000,000 received by the Plaintiff was actually paid by SongCC and KimF. In the process, the payment of the construction cost of the said sum received by the Plaintiff was clearly stated, and the tax invoice was issued by the subcontractor, etc., and the remaining construction cost was not paid without paying the construction cost, and the Plaintiff could not file a tax return and tax return thereon, and the Plaintiff had no choice but to file a tax dispute until the completion of the instant construction project.

2) The instant disposition, which the Defendant, without reflecting deductible expenses, appropriated the total amount of the construction cost of the instant construction contract as net income, goes against tax justice by going against the principle of substantial taxation by going against the principle of equity with other taxpayers, in practice, through experience and practice. In the event that construction works are performed upon being awarded a contract, the actual yield of the construction works is considerably 5 to 15% as the direct construction cost (such as material cost, labor cost, etc.) and indirect construction cost are considerably spent, and thus, if such expenses are excluded, the actual yield of the construction works can be clearly confirmed in various statistics, construction appraisal, government fememememy, etc., while the instant disposition, which calculated corporate tax by appropriating the total amount of the construction cost of the instant construction contract as net income, is unlawful.

3) 법인세법 제66조 제3항 단서는 신고가 누락된 ‹š에도 대통령령으로 정하는 사유로 장부나 그 밖의 증명서류에 의하여 소득금액을 계산할 수 없는 경우에는 대통령령으로 정하는 바에 따라 추계할 수 있도록 규정하고, 법인세법 시행령 제104조 제1항 제1호는 '소득금액을 계산함에 있어서 필요한 장부 또는 증빙서류가 없거나 그 중요한 부분이 미비 또는 허위인 경우'를 규정하고 있는바, 원고가 손비에 대한 증빙서류를 제출할 수 없거나 그 중요한 부분이 미비되었다면 피고로서는 이 사건 공사계약에 관하여는 부외원가를 반영하거나 추계의 방법으로 소득금액을 합리적으로 산정하여야 할 것인데도 이를 간과한 채 이 사건 부과처분을 하였으므로, 이 사건 부과처분은 실질과세 및 신의성실의 원칙에 위배된 것으로서 위법하다.

B. Determination

1) In an administrative litigation seeking revocation of a taxation disposition, in principle, the legality of the disposition and the existence of the fact of taxation requirements should be borne by the defendant who is the taxation authority. However, with respect to the existence of special circumstances belonging to this example in light of the empirical rule, the plaintiff who is the taxpayer must bear the burden of proof or proof. As such, in principle, the burden of proof as to the amount of expenses to be included in the deductible expenses, which are the basis of the determination of the corporate tax base, is also borne by the taxation authority. However, whether the proof of specific items of expenses is difficult or the taxpayer bears the burden of proof in consideration of the equity of the parties. If the taxpayer finds income such as the omitted amount of sales in filing a return on the corporate tax base, etc., the taxation authority may include the omitted income in the gross income. If the taxpayer fails to report the income to be included in the gross income as mentioned above in the return on the tax base, etc., and if it is reasonable for the taxpayer to prove the omission of such expenses in the calculation of deductible expenses, the taxpayer should bear the burden of proof that it is in full or partial omission of expenses (see 297).

In this case, even if the disposition of this case was taken without reflecting the part of the construction cost incurred by the Plaintiff in the course of performing the instant construction project as losses, the Plaintiff is liable to prove the construction cost, etc. to be included in deductible expenses in connection with the instant construction project, as long as the Plaintiff filed a return by omitting the amount equivalent to the construction cost of the instant construction project from revenues in 2012, according to the legal principles as seen earlier, insofar as the Plaintiff did not report it from revenues in 2012, the Plaintiff is not liable to prove the construction cost, etc. to be included in deductible expenses. However, the Plaintiff’s assertion that the Plaintiff paid the construction cost, etc. as alleged by the Plaintiff in relation to the instant construction project is insufficient to recognize the fact that the Plaintiff actually managed the construction cost of the instant construction project ( even if SongCC, the contractor, or Kim FF, who was delegated by the contractor, was in fact managed the construction cost of the instant construction project, the Plaintiff, at least had been in possession of materials (tax invoices, etc.) related to the payment of the construction cost, and no other evidence exists.

2) In principle, corporate tax base and tax amount should be determined by a field investigation method. The method of estimating pursuant to the proviso of Article 66(3) of the Corporate Tax Act and Article 104 of the Enforcement Decree of the Corporate Tax Act is exceptionally permissible only in cases where there is no taxpayer’s account book or documentary evidence, or where there is no other method to disclose the actual amount of income due to lack of the taxpayer’s account book or documentary evidence, and where taxation is possible based on the remaining portion except for a portion entered or omitted in the account book kept by the taxpayer, the tax base and tax amount should be determined by a field investigation method. In addition, determining the tax base by mixing a single tax object with a field investigation and a estimate investigation cannot be deemed a taxation method recognized by the relevant Acts and subordinate statutes, such as the Corporate Tax Act and the Value-Added Tax Act, and the reported sales can not be deemed as unlawful to calculate and add the tax base by a field investigation method (Supreme Court Decision 2005Du14561 Decided July 26, 2007).

As seen earlier, inasmuch as the Plaintiff reported and paid corporate tax for the business year 2012 by field investigation, according to the above legal principles, the tax base cannot be calculated by means of estimation determination only with respect to the instant construction contract. Ultimately, solely on the ground that the tax base was not calculated by estimation determination method in relation to the construction cost of the instant construction project, it cannot be deemed that the instant disposition was against the principle of substantial taxation and the principle of good faith. The Plaintiff’s assertion to this effect cannot be accepted.

4. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.