Seoul Administrative Court-2017-Gu Partnership-72928 ( October 30, 2018)

Seocho 2017west80 (Law No. 13, 2017.06)

Where the amount of refund is changed after a retroactive refund of deficit is made, and the State collects it, such collection refers to the disposition of imposition and collection.

(Revocation of the judgment of the first instance) The disposition to recover the amount of tax additionally refunded by the State due to a change in corporate tax that was subsequently refunded after the plaintiff filed for a retroactive deduction of losses by the State refers to the disposition to impose and collect the amount of tax to be refunded.

Article 72 of the former Corporate Tax Act; Article 110 of the Enforcement Decree of the former Corporate Tax Act

2018Nu42957 Revocation of Disposition of Corporate Tax Correction Notice

trustee in bankruptcy of the DAAAAAA of the bankrupt company

BB Director of the Tax Office

March 30, 2018

June 26, 2019

August 14, 2019

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition disposition of corporate tax 7,***,***,**** of the imposition disposition of the Plaintiff on October 17, 2016.

Sector 3,***,**,**,**** is revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

The reasoning for this part of the judgment by the court is as stated in the corresponding part of the judgment of the court of first instance except for the following parts written or added. Thus, this part of the judgment is cited in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure

○ From 2 pages of the judgment of the first instance court, the Corporate Tax Act was amended by the former Corporate Tax Act (wholly amended by Act No. 5581, Dec. 28, 1998; hereinafter referred to as the “former Corporate Tax Act”) and amended by the former Corporate Tax Act (wholly amended by Act No. 9267, Dec. 26, 2008; hereinafter referred to as the “former Corporate Tax Act”).

After the judgment of the court of first instance was received 7 days from the second bottom of the judgment, "(2)" was added to "the decision of refund by the defendant made upon the application for refund of this case" (hereinafter referred to as "the decision of refund of this case").

○ The judgment of the first instance court 3 pages 2 of the judgment form "the Corporate Tax Act" shall be added to "the Framework Act on National Taxes".

○ In the first instance judgment, the part of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 15970, Dec. 31, 1998; Presidential Decree No. 21302, Feb. 4, 2009; Presidential Decree No. 21302, Feb. 4, 2009; Presidential Decree No. 21302, Feb. 13, 2018) is written.

○ The last three written judgment of the first instance court " November 21, 2017" shall be followed by " November 21, 2016".

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Although Article 72(5) of the former Corporate Tax Act does not stipulate the case where the corporate tax amount or tax base for the immediately preceding business year changes, Article 110(6) of the former Enforcement Decree of Corporate Tax Act newly establishes a redemption requirement that is not prescribed by law. Therefore, Article 110(6) of the former Enforcement Decree of Corporate Tax Act is null and void as it exceeds the delegation scope of the parent law, and the instant disposition is unlawful as it is based on the above Enforcement Decree.

2) The instant disposition constitutes a disposition imposing and collecting corporate tax for the 2006 business year, and the instant disposition is null and void since it was made after the expiration of the exclusion period of imposition. If it is deemed that the instant disposition is a disposition collecting national tax, the instant disposition is null and void as it was made after the completion of the extinctive period of the national tax collection

3) The instant disposition was made on October 17, 2016, and DAAA was already declared bankrupt on October 16, 2014. Therefore, the corporate tax and the claim equivalent to the amount of interest arising from the instant disposition constituted a bankruptcy claim or estate claim, and thus, the Defendant cannot proceed with the collection procedure based on such claim.

4) The application for refund in the instant case and the subsequent claim for correction for the business year 2005 are the best judgment that the Plaintiff could make at each point of time, and there is no unreasonable purpose and there is a “justifiable cause for excessive refund of corporate tax.” Therefore, the part of the disposition in the instant case imposing the amount equivalent to the interest on the excessive refund is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

The reasons for this part of the judgment of the court of first instance shall be that of the court of first instance, with the exception of deletion of 8-6 pages to 8

The relevant part of the reasoning of the judgment of the court of first instance is the same as the statement of reasons (2.c. part of the judgment of the court of first instance).

D. Determination

1) Corporate Tax Act applicable to the disposition of this case

The imposition of taxes shall be governed by the provisions of the law in force at the time of the establishment of tax liability, i.e., the establishment of tax liability, and even in the case of an amendment of tax-related Acts, the statutes at the time of establishment of tax liability among the Acts and subordinate statutes before and after the enactment of tax-related Acts, barring any special circumstance (see, e.g., Supreme Court Decision 97Nu9253, Oct. 14, 1997). The instant disposition is related to the corporate tax for 2006 business year. Thus, the instant disposition is governed by Article 21(1)1 of the former Framework Act on National Taxes (amended by Act No. 8830, Dec. 31, 2007; hereinafter the same shall apply) and the former Enforcement Decree of the Corporate Tax Act (amended by Act No. 8830, Dec. 31, 2006).

2) Whether Article 110(6) of the former Enforcement Decree of the Corporate Tax Act is invalid

A) In a case where a subordinate statute delegates a certain matter to a subordinate statute, determination of the scope of delegation by the parent law or whether the subordinate statute complies with the limits of delegation should be made based on the following factors: (a) whether the subordinate statute is an essential matter subject to the principle of parliamentary reservation, which requires the legislator to voluntarily regulate by a formal law; (b) whether the legislative purpose and content of the pertinent statutory provision; (c) the structure of the pertinent provision; and (d) the relationship with other provisions; and (e) whether the delegation itself has exceeded the limits of the literal meaning; (d) whether the delegation itself has exceeded the limits of the literal meaning; (e) whether the contents of the subordinate statute fall within the scope of prediction of the delegated contents from the mother law itself; and (e) whether the subordinate statute can be evaluated as a new legislation beyond the stage of embodying the delegated contents by expanding or reducing the scope of the terms used in the delegation provision beyond the scope of the terms used in the delegation provision (see, e.g., Supreme Court en banc Decision 2012Du23808, Aug. 20, 2015).

(b) The main sentence of Article 72 (1) of the former Corporate Tax Act shall read "where a small and medium enterprise under Article 25 (1) 1 has suffered losses for each business year under Article 14 (2), it may apply for the refund of the amount calculated under the conditions as prescribed by the Presidential Decree within the limit of corporate tax (referring to the corporate tax amount prescribed by the Presidential Decree) levied on income for the immediately preceding business year." Paragraph (3) shall read "where it receives an application under paragraph (2) of the same Article, it shall without delay determine the refundable amount and refund under Articles 51 and 52 of the Framework Act on National Taxes for the business year in which losses have occurred." Paragraph (5) of the same Article shall read "where losses have been reduced by revising the tax base and tax amount of corporate tax for the immediately preceding business year in which losses have occurred after refunding corporate tax under paragraph (3), it shall be refunded or the amount calculated by adding the amount equivalent to the amount of tax refund calculated under the conditions as prescribed by the Presidential Decree to the tax base for the immediately preceding business year in which losses have accrued."

On the other hand, Article 72(5) of the former Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013; hereinafter referred to as the "Revised Corporate Tax Act") added "where the amount of refund is reduced by revising the tax base and tax amount of corporate tax for the business year immediately preceding the business year in which the loss occurred" as the requirements for recovery.

As such, Article 110(6) of the former Enforcement Decree of the Corporate Tax Act provides that an excess amount of refundable taxes shall be collected even in cases where the amount of corporate tax or tax base for the immediately preceding business year, which is the basis for calculating the amount of refundable taxes, has changed, and this requirement becomes one of the legal requirements under the amended Corporate Tax Act. However, Article 72(1) of the former Corporate Tax Act provides that an application for refund of losses can be filed within the limit of the amount of corporate tax imposed on the income in the immediately preceding business year by stipulating the requirements for application for refund of losses in accordance with Article 72(1) of the former Corporate Tax Act, so that an application for refund of losses can be confirmed to be linked to the immediately preceding business year. ② This is also confirmed through Article 72(3) of the former Corporate Tax Act, Article 110(2) of the former Enforcement Decree of the Corporate Tax Act, and Article 72 of the former Corporate Tax Act and Article 110(5) of the former Enforcement Decree of the Corporate Tax Act can be sufficiently anticipated that the amount of refundable amount of the former Corporate Tax Act has changed.

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

3) Legal nature of the instant disposition

For the following reasons, it is reasonable to view the instant disposition as the imposition and collection disposition.

A) The decision to refund a retroactive deduction of deficit constitutes an administrative disposition by the tax authority that directly affects the taxpayer’s rights and obligations (see Supreme Court Decision 2013Da206610, Feb. 18, 2016).

In addition, the instant disposition is a disposition to recover corporate tax for the business year 2006 under the former Corporate Tax Act, which is the tax amount refundable upon the instant refund decision. The Defendant acquires tax claims against the Plaintiff by the instant disposition. In order for the tax authorities to collect tax claims, the taxation disposition by the tax authorities must be followed in this case. Therefore, even though Article 72(5) of the former Corporate Tax Act provides that “the corporate tax for the business year in which the relevant loss occurred, which is the corporate tax for the business year in which the relevant loss occurred,” it shall be understood as the imposition and collection.

B) The Defendant asserts that the instant disposition is merely a disposition to collect taxes pursuant to the former Corporate Tax Act and subordinate statutes after ex officio cancelling the instant refund decision. However, the Defendant’s revocation of the instant refund decision by ex officio is not sufficient to take account of the following: (a) that the Defendant may take the Plaintiff’s claim for restitution of unjust enrichment by public law and, on the basis of such revocation, take the steps to recover taxes pursuant to Article 51(8)3 of the former Framework Act on National Taxes (amended by Act No. 15520, Dec. 19, 2017) (see Supreme Court Decision 2013Da206610, supra, that “the taxation authorities may collect taxes by mistake or excessive refund against the taxpayer only after the revocation of the instant refund decision by ex officio” (see Supreme Court Decision 2013Da206610, Dec. 23, 2010). It cannot be deemed that the instant disposition of restitution of taxes pursuant to the Corporate Tax Act was impossible (see Supreme Court Decision 2010Du1714, etc.).

On the other hand, in the case of a redemption provision under individual tax law such as Article 72(5) of the former Corporate Tax Act, the tax authority may impose and collect the amount equivalent to the amount of the tax refund immediately in the form of corporate tax, without examining whether the claim for return of unjust enrichment was established by the State.On the other hand, the defendant's above assertion on the premise that it is different from this, is

Accordingly, under the premise that the disposition of this case is the imposition and collection disposition, we will examine whether the exclusion period has expired or not.

4) Whether the imposed body passes

A) A taxation disposition conducted after the exclusion period of the imposition of national taxes has expired (see, e.g., Supreme Court Decisions 9Du3140, Jun. 22, 1999; 2007Du24364, May 28, 2009).

B) As to the instant disposition, the exclusion period of five years shall apply pursuant to Article 26-2 (1) 3 of the former Framework Act on National Taxes, unless the instant application for refund does not correspond to “Fraud or other unlawful acts” under Article 26-2 (1) 1 of the same Act. Meanwhile, the starting date of exclusion period for the Plaintiff’s corporate tax for 2006 business year shall be April 1, 2007, one day after the one-half one’s relocation right and one’s relocation right, pursuant to Article 12-3 (1) 1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 20654, Feb

The legislative purport of Article 26-2(1) of the former Framework Act on National Taxes is to extend the exclusion period of national taxes to 10 years, in principle, in cases where there is an unlawful act, such as making it difficult for the tax authority to discover the taxation requirement of national taxes or forging or withdrawing false facts, while the exclusion period of national taxes is five years in order to promptly determine tax relations, and it is difficult for the tax authority to expect the exercise of the imposition right. Therefore, the "Fraud and other unlawful act" under Article 26-2(1) of the former Framework Act refers to a deceptive scheme or other active act, which makes it difficult to impose and collect taxes impossible or considerably difficult, and it does not constitute merely a failure to report under the tax law or making a false report without accompanying any other act, but it is difficult to acknowledge that there was an unlawful act, such as making it difficult for the Plaintiff to impose and collect taxes, or making it difficult for him/her to do so by finding out any false fact, such as intentionally not intentionally entering revenues or sales, etc. in the books (see, e.g., Supreme Court Decision 2019Du2814.

Therefore, the five-year exclusion period should apply to the instant disposition. Since the date of the instant disposition was October 17, 2016, it is apparent that the instant disposition was made five years after April 1, 2007, which was the starting point of the exclusion period of imposition.

C) As to this, the Defendant asserts that the instant disposition is lawful as it was based on the Plaintiff’s filing of a request for the follow-up correction under Article 45-2(2) of the former Framework Act on National Taxes (Amended by Act No. 15520, Dec. 19, 2017); the special exclusion period under Article 26-2(2)35 of the same Act is applicable; or (2) the starting point of calculating the exclusion period under Article 26-2(1) and (5) of the former Framework Act on National Taxes and Article 12-3(2)36 of the former Enforcement Decree of the Framework Act on National Taxes at the time of the instant disposition.

① However, the special exclusion period under Article 26-2(2)3 of the former Framework Act on National Taxes (amended by Act No. 15220, Dec. 19, 2017) is not applicable to other taxable periods that are linked to the tax base and tax amount subject to a subsequent request for correction (see, e.g., Supreme Court Decision 2002Du1011, Jan. 27, 2004). As regards the Plaintiff’s issuance of a subsequent request for correction of the tax base and tax amount of corporate tax for the business year 2005, the Defendant made a decision to refund corporate tax for the business year 2005, and thereafter, the disposition of this case where the disposition of this case was issued for the imposition of corporate tax for the business year 2006 linked thereto (i.e., the disposition of this case cannot be applied to the special exclusion period for the same business year as that of the Plaintiff’s request for correction.)

D) Ultimately, the instant disposition is unlawful since the exclusion period for imposition expires ( insofar as the Plaintiff’s petition is accepted, it does not separately determine the remainder of the Plaintiff’s assertion).

3. Conclusion

Thus, the plaintiff's claim shall be accepted as requested by the plaintiff on the ground of its ground.

Since the judgment of the first instance is unfair with different conclusions, it is so decided as per Disposition by accepting the plaintiff's appeal and cancelling the judgment of the first instance and accepting the plaintiff's claim.