Seoul Administrative Court 2016Guhap74989 ( October 24, 2017)

Unlike subject to heavy taxation under the Local Tax Act, entertainment bars subject to imposition of individual consumption tax do not have separate restrictions on the facilities and scale of business.

(1) According to the Local Tax Act, a place of business subject to acquisition tax and entertainment bar business subject to heavy taxation is subject to heavy taxation only when the area of business has a certain structure and scale. The Individual Consumption Tax Act does not separately impose restrictions on the scale, structure, facilities, etc. of entertainment bar business, and thus, the imposition of individual consumption tax is lawful.

Article 1 of the Individual Consumption Tax Act (Taxable Object and Tax Rate)

2017Nu43618 Revocation of Disposition of Imposing individual consumption tax

(Appellant)

(m) Three persons outside the ZZ:

(Appellant)

Y3 others, such as the director of the tax office

Seoul Administrative Court Decision 2016Guhap74989 decided March 24, 2017

August 22, 2017

September 5, 2017

1. All appeals filed by the plaintiffs are dismissed.

2. The costs of appeal are assessed against the Plaintiffs.

The judgment of the court of first instance is revoked. The defendant's individual consumption tax and the individual consumption tax of the first instance judgment against the plaintiffs.

The imposition of each individual consumption tax and education tax shall be revoked in the list of education tax imposition.

1. Quotation of judgment of the first instance;

The reasoning of this Court’s reasoning is as follows, except for the addition of the following judgments to the plaintiffs’ assertion, and thus, it is consistent with the reasoning of the judgment of the court of first instance. Thus, this Court’s reasoning is cited in accordance with Article 8(2) of the Administrative Litigation Act

2. Additional determination

A. The plaintiffs' assertion

The Defendants issued a business registration certificate indicating that they are not subject to the individual consumption tax on the application for business registration of ○○○○○○○○ store with the same content as the instant business establishment, and on this premise, they expressed the public view that these stores are not subject to the individual consumption tax. The Plaintiffs trusted that these opinions of the Defendants are well-grounded and did not pay the individual consumption tax on each of the instant business establishments. The Defendants were subject to each of the instant dispositions against such opinions contrary to the principle of trust and good faith (the principle of trust and good faith).

In addition, during a considerable period from around 2012 to 2015, the Defendants’ non-taxation practice was established by failing to impose individual consumption tax on stores engaged in the same business with the same content as the instant place of business. The Defendants’ disposition of this case without correcting previous non-taxation practice and expressing their intent to impose individual consumption tax in the future. Thus, it is unlawful in violation of Article 18(3)1 of the Framework Act on National Taxes, which provides for the principle of prohibition of retroactive taxation by non-taxation practice.

In addition, since there are justifiable grounds for not knowing that the plaintiffs were liable to pay individual consumption tax, at least the penalty tax of each of the dispositions of this case is unlawful.

B. Determination

1) As to the assertion of violation of the principle of trust and good faith (the principle of trust and good faith)

In general, in tax law relations, the principle of trust and good faith applies to the tax authority's act, first, the tax authority must issue a public opinion list that is the object of trust to taxpayers, second, the tax authority's statement of opinion should not be attributable to the taxpayer. Third, the taxpayer must trust that the name of opinion is legitimate, and what is it should be done by the taxpayer. Fourth, the tax authority's disposition contrary to the above opinion list should cause the result of infringing the taxpayer's interest by making the disposition contrary to the above opinion list. Only when the tax authority satisfies the above requirements, the disposition of the tax authority is considered illegal (see, e.g., Supreme Court Decision 9Du1861, Mar. 29, 2002).

According to the evidence No. 22-1 through No. 5, with respect to the application for business registration filed by AA, 000 0000000000000, which is an enterprise engaged in the business similar to each business of this case, it can be recognized that each application is accepted on the ground that it is not confirmed as a result of the on-site verification at each tax office by each of the relevant tax offices. However, it is not related to each of the businesses of this case, but only to the fact that the plaintiffs received an application for business registration according to the on-site verification as to whether the business establishment at the time of the application for business registration is in conformity with the business type, etc., and it cannot be viewed as a public opinion that the actual business after the time of the application for business registration constitutes an act of employing entertainment workers or allowing dancing of customers, etc., and there is no evidence to acknowledge any public opinion otherwise. Accordingly, there is no reason to acknowledge that the Defendants expressed such public opinion.

2) As to the assertion of violation of the principle of retroactive taxation prohibition

In order to establish a non-taxable practice prescribed in Article 18(3) of the Framework Act on National Taxes, there is an objective fact that has not been imposed over a considerable period of time, and a tax authority must have the intent not to impose taxes due to any special circumstance even though it knows that it is able to impose taxes on the matter. Such public opinion or intent must be expressed explicitly or implicitly, and in order to establish an implied indication, there is a circumstance to view that the tax authority expressed its intent not to impose taxes on the state of non-taxation for a considerable period of time, unlike a mere omission of taxation (see, e.g., Supreme Court Decision 2016Du43077, Oct. 13, 2016).

The Defendants received from around 2012 an application for business registration for the places of business engaged in the same business as the instant places of business, including each of the instant places of business, and subsequently did not impose individual consumption tax. The Defendants confirmed that dance halls, etc. are installed in each of the instant places of business, which are amusement facilities, and the customers are actually engaged in the business with the permission of dancing. Accordingly, each of the instant dispositions was taken since 2015. Accordingly, the Defendants cannot be deemed to have established non-taxation practices for a considerable period even though they knew that individual consumption tax can be imposed on each of the instant places of business. On the other premise, the Defendants’ assertion on this part is without merit.

3) As to additional tax

Under the tax law, in order to facilitate the exercise of the right to impose taxes and the realization of tax claims, the taxpayer’s intentional and negligent acts are not considered as administrative sanctions imposed in accordance with the law in cases where the taxpayer violates the reporting and tax liability as prescribed by the law without justifiable grounds, and the land or mistake of the law does not constitute justifiable grounds (see, e.g., Supreme Court Decision 2000Du5944, Apr. 12, 2002).

As seen earlier, the Defendants cannot be deemed to have expressed the public opinion that they would not impose individual consumption tax on the Plaintiffs, and it cannot be said that the non-taxation practice of imposing individual consumption tax on the same business at each of the instant workplaces was established. Although the Plaintiffs did not know that they should report and pay individual consumption tax on the business at each of the instant workplaces, such site or mistake does not constitute a justifiable ground that it is difficult for the Plaintiffs to have caused the failure of taxpayers to perform their duties. The Plaintiffs’ assertion on this part is without merit.

3. Conclusion

If so, the judgment of the first instance court is justifiable, and the plaintiffs' appeal is dismissed as it is without merit.