Review Donation 2015-0049 ( November 09, 2015)

an illegal disposition resulting from duplicate investigations

Since the tax investigation conducted in 2012 requires the submission of explanatory materials on the acquisition of the instant land by the same method as the other real estate acquisition fund investigation, the request for submission of explanatory materials in 2012 constitutes an investigation and the instant disposition conducted after the investigation in 2014 constitutes an illegal disposition following the duplicate investigation.

Prohibition of Abuse of the right of tax investigation under Article 81-4 of the national technique

2016Guhap5704 Revocation of Disposition of Imposition of Gift Tax

United StatesA

BB Director of the Tax Office

January 13, 2017

February 14, 2017

1. The Defendant’s disposition of imposition of KRW 384,657,570 (including additional tax of KRW 209,757,570) and KRW 440,443,530 (including additional tax of KRW 285,552,330) and the gift tax of KRW 440,443,530 (including additional tax of KRW 285,552,330) on December 1, 2014, shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

On July 18, 2005, the Plaintiff acquired 992 square meters of land 311-5, ○○○-gu, 311-5 (hereinafter “instant land”).

From June 2, 2014 to July 16, 2014, the Defendant: (a) conducted an investigation into the source of funds to acquire the instant land; and (b) on December 1, 2014, presumed that KRW 1,083,00,00,000 out of the acquisition fund was donated from his/her spouse DoD; and (c) determined and notified the gift tax of KRW 384,657,570 (including additional taxes of KRW 209,757,57,570) and the gift tax of KRW 440,443,530 (including additional taxes of KRW 285,52,30) for the year 209 and the gift tax of KRW 440,443,530 for the year 209 (including additional taxes of KRW 285,52,30; and the aggregate of donations of April 22, 2009 (hereinafter referred to as “instant disposition”).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(i) tax investigation in the year 2012;

The Director of theCC Regional Tax Office (hereinafter referred to as the "Investigation Office") conducted an individual integrated investigation on the Plaintiff's spouse DoD (from January 11, 2007 to March 20, 2012) on the Plaintiff's spouse DoD (from January 1, 2007 to December 31, 2010) and conducted a gift tax investigation on other real estate, including ○○○○○○○-dong 381-1, an officetel 381-1, acquired on April 22, 2009 (hereinafter referred to as "real estate acquired in 2009"), with respect to the Plaintiff's financial source investigation (hereinafter referred to as "tax investigation of this case").

On January 17, 2012, the Investigation Agency demanded the Plaintiff to provide explanatory materials on the following six real estate acquisition funds, including the instant land:

On March 15, 2012, the investigating authority requested the Plaintiff to submit additional explanatory materials as follows.

On March 19, 2012, the Plaintiff submitted additional data as follows.

On April 4, 2012, the Investigation Agency: (a) deemed that the Plaintiff donated the acquisition fund of the real estate acquired in 2009 from DoD, a spouse; and (b) notified the Defendant of the determination and notification of KRW 209,008,80 (including additional taxes) of the gift tax on April 22, 2009; and (c) notified the Plaintiff of the result of the tax investigation on April 5, 2012. On May 8, 2012, the Defendant determined and notified the Plaintiff of KRW 209,008,800 of the gift tax on the gift donated in April 22, 2012.

From May 7, 2013 to March 4, 2014, the Defendant demanded the Plaintiff to vindicate the source of acquiring the instant land from May 7, 2013 to March 4, 2014, the Plaintiff submitted the following explanatory materials to the Defendant:

In addition, on May 23, 2013, the Plaintiff submitted the following explanatory materials to the Defendant:

On the other hand, the Plaintiff submitted a copy of the account as part of the explanatory materials in three instances ( May 14, 2013, 23, and 28). The same content is identical to the data printed at the point where the bank is located in the territory of the Republic of Korea on October 4, 2011.

(ii) tax investigation in the year 2014;

From June 2, 2014 to July 16, 2014, the Defendant conducted an investigation into the land rental deposit, literaryF, and cash loans from the headG of NewE (hereinafter “tax investigation in the year 2014”) with respect to the source of funds to acquire the instant land, and deemed that KRW 1.83 billion out of the acquisition fund was donated from DaD and accordingly, the Defendant issued the instant disposition against the Plaintiff on December 2, 2014.

B. Determination

1) Whether the instant tax investigation in 2012 and the subsequent request for explanatory materials constitutes a tax investigation on the instant land

According to Article 81-2(2)1 of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014; hereinafter the same), a tax investigation refers to a series of acts that investigate and verify taxation requirements and collect direct and indirect data necessary for taxation, such as questioning in order to determine or correct the tax base and amount of national taxes, or inspecting or investigating the relevant account books, documents or other articles, or ordering the submission thereof. A tax official shall notify the taxpayers subject to an investigation of the details of the investigation, the period of investigation, the reason for investigation, etc. ten days prior to initiating the investigation (Articles 81-7(1) and 81-8 of the Framework Act on National Taxes).

The Defendant alleged that the Plaintiff was excluded from the subject-matter of the tax investigation of the instant real estate acquired in the year 2005 because the period of investigation was specified in the year 2007 and 2009 at the time of the tax investigation in the year 2012. However, the prior notice of the tax investigation in the year 2012 did not specify the period of investigation, and the investigating authority requested the Plaintiff to vindicate all real estate acquired in the year 2001 through 2009. After reviewing the explanatory materials submitted by the Plaintiff, the investigating authority requested the Plaintiff to submit a further document by specifying the necessary portion of the proof and the shortage in the proof regarding the instant land and the officetels acquired in the year 209. In the method of investigation on the acquisition fund, it is difficult to find any difference between the instant real estate and the real estate acquired

The Defendant imposed gift tax with regard to the acquisition of real estate in 2009 after the tax investigation in 2012. On the other hand, while the Defendant demanded a continuous tax investigation without taking any measure with regard to the land of this case for which a similar level of vindication was requested, the Plaintiff submitted such explanatory materials. The Plaintiff, the other party to the tax investigation, at the time of the tax investigation in 2012, seems to have continued to comply with the Defendant’s demand for explanatory materials under the circumstances where it is unclear whether the tax investigation was conducted together or how taxation related to the land of this case was conducted at the time of the tax investigation in 2012 (the Plaintiff appears to have submitted the same explanatory materials several times). The Plaintiff, while conducting a tax investigation with regard to the specific taxable period and tax items, even though the tax investigation was conducted to the extent that the period and scope of the tax investigation were not included in those subject to notification of the tax investigation in advance, would not still violate the purport of the Framework Act on National Taxes which prohibits the tax investigation in question at the time of the tax investigation or subsequent tax investigation.

Although it is not included in the scope stated in the notice of tax investigation notified to the Plaintiff, if the Plaintiff’s right to ask questions and investigate the acquisition of the instant real estate was exercised in the course of the tax investigation on other real estate acquisition, thereby investigating and verifying the taxation requirements and collecting necessary data, the relationship with the taxpayer ought to be deemed as a tax investigation. Therefore, in relation to the real estate acquisition funds subject to tax investigation, the instant tax investigation for the year 2012, which requested an additional submission, clearly stating the necessary portions, constitutes a tax investigation on the instant land acquisition funds.

Meanwhile, the Defendant asserts to the effect that a gift tax can be levied on the acquisition of the instant land only by the result of the tax investigation conducted in 2012, as the grounds that the instant tax investigation conducted in 2014 is not unlawful as a duplicate tax investigation. Even according to such assertion, it may be deemed that an investigation was conducted to the extent that it is possible to impose gift tax on the acquisition of the instant land, subject to the tax investigation conducted in 2012. As such, it is difficult to view that it is merely a mere fact verification by requesting the submission of explanatory materials for the land acquisition fund at the time of the tax investigation conducted in 2012. If it is deemed that a taxation can be conducted on the grounds of the result of the initial tax investigation conducted after infringing on the legal stability, etc. of

In addition, the defendant asserts that at the time of the tax investigation in 2012, since the plaintiff sent the deposit account by facsimile on May 23, 2013, the investigation on the acquisition fund of the real estate of this case was not sufficiently conducted. However, the deposit account is the same as the data printed on October 4, 201, and the account is the same as the data printed on October 12:26, 201, and it is necessary for the plaintiff to prove the source of the fund, so it is deemed that it had already been submitted at the time of the tax investigation in

2) Whether the instant tax investigation constitutes a reinvestigation prohibited in the year 2014

Article 81-4 (1) of the former Framework Act on National Taxes provides that "tax officials shall conduct a tax investigation to the minimum extent necessary to realize proper and fair taxation, and shall not abuse their authority of investigation for any other purpose, etc." (Article 81-4 (2) provides that "tax officials shall not conduct a re-investigation into the same item of tax and the same taxable period unless it falls under any of the following subparagraphs," and "where it is possible to conduct a re-investigation, as prescribed by Presidential Decree (Article 63-2 of the Enforcement Decree of the same Act)" (Article 63-2 of the same Act provides that "in cases where there is clear evidence to acknowledge suspicion of any tax offense under Article 2 (1) 1 of the Procedure for the Punishment of Tax Evaders Act" (Article 2 (2) of the same Act provides that "where it is necessary to conduct a re-investigation into the same item of tax and the same taxable period, the taxpayer's freedom of business and legal stability, etc., and it may seriously violate the principle of fair taxation except for cases where there is a serious possibility of abuse of taxes.

In this regard, "where it is necessary to conduct an investigation on the other party to the transaction" under Article 81-4 (2) 2 of the Framework Act on National Taxes shall be deemed necessary to conduct a re-audit on the plaintiff among the plaintiff's tax investigation on the other party to the transaction. This is because, in a case where a duplicate tax investigation is permitted even when the plaintiff has closed the initial tax investigation on the plaintiff and conducted an investigation on the other party to the transaction again, the scope of the duplicate tax investigation to be exceptionally permitted

However, it does not seem that the Defendant conducted a tax investigation in 2014 because it is necessary to re-examine the Plaintiff while investigating the lessee of the land in this case and the other party to the loan of money to the Plaintiff (in the course of investigating the acquisition fund of this case, it appears that an investigation was conducted with respect to the lessee of the land and the other party to the loan of money, etc. in the course of investigating the acquisition fund of this case). Since it was merely an investigation conducted with respect to the other party to the transaction in order to determine the gift tax base and tax amount related to the acquisition of the land in this case during the course of investigating with the Plaintiff, it does not constitute

In addition, "Various taxation data" in the former part of Article 63-2 subparagraph 2 of the Enforcement Decree of the Framework Act on National Taxes refers to data prepared or acquired by any institution other than the tax authority, which is not likely to abuse or arbitrarily exercise the right to investigate for the purpose of its duties, and provided to the tax authority for the purpose of its duties, which are necessary for the imposition, collection, and management of national taxes, and such data does not include taxation data produced or acquired by the tax authority in the previous tax investigation (see Supreme Court Decision 2014Du4325

The Investigation Agency ordered the plaintiff to conduct a reinvestigation while sending the data acquired at the time of the tax investigation in 2012 to the defendant. Accordingly, since the defendant appears to have conducted a new tax investigation, the tax investigation in 2014 does not constitute "re-investigation for the handling of all kinds of taxation data" in the former part of Article 63-2 (2) of the Enforcement Decree of the

Article 63-2 subparagraph 3 of the Enforcement Decree of the same Act shall be limited to cases where the probability of tax evasion is recognized to a considerable extent based on the data with objectivity and rationality, and it is reasonable to interpret that such data does not include the data already investigated in the previous tax investigation.

In light of the explanatory materials submitted by the Plaintiff to the tax authority, there is no reason to deem that it was difficult for the investigating authority to determine the source of funds to acquire the instant land even at the time of the tax investigation in 2012, or to investigate matters related to the acquisition of the instant land at the time of the tax investigation in 2014. It is difficult to deem that special materials were reinforced at the time of the tax investigation in 2014, and thus, the second tax investigation is difficult to be deemed to have started because the possibility of the tax evasion is objectively and reasonably reasonable. Furthermore, the Defendant

Therefore, since the instant tax investigation in 2014 was not exceptionally permitted as a duplicate investigation, the instant disposition taken therefrom is unlawful.

3. Conclusion

Thus, the plaintiff's claim of this case is accepted on the ground of the reasons.