Cho High Court Decision 2016Du881 (Law No. 1435, Oct. 22, 2016)

Scope of Application of Additional Provisions of the amended Provisions

In cases where the disposition of income was made after January 1, 2012, if the exclusion period has not yet lapsed at the time when the amended provision enters into force, the supplementary provisions of the amended provisions apply to the exclusion period for imposition of ten years.

Article 26-2 of the Framework Act on National Taxes (Period for Excluding Assessment of National Taxes)

2016Guhap74965 global income and revocation of such disposition

Park ○

AA Head of the Tax Office

June 21, 2017

August 18, 2017

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 imposition of global income tax of KRW 158,462,80 (including additional tax of KRW 50,945,541) for the year 2006 against the Plaintiff on June 9, 2015 is revoked.

1. Details of the disposition;

A. From February 20, 1991 to October 19, 201, the Plaintiff was in office as a representative director of a corporation Aa, a, who operated the wholesale business of the bamboo sources.

B. On July 5, 2012, the director of the AA tax office received the processed tax invoice of KRW 965,648,508 during the taxable period from the second half of the year 2005 to the second half of the year 2006, and issued the processed tax invoice of KRW 291,780,50,000, which deducts the above processed amount from the above processed purchase amount, on the ground that "the above processed tax invoice was issued", 673,868,000, which was deducted from the above processed purchase amount, was deemed to have been out of the company and its attribution is unclear, and disposed of as a bonus to the plaintiff who was the representative director of a Aa, and notified this to the defendant,

C. Accordingly, on June 9, 2015, the Defendant issued a revised and notified the Plaintiff of global income tax of KRW 163,475,370, and global income tax of KRW 158,462,80 for the year 2006.

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on February 19, 2016 on August 28, 2015. The Tax Tribunal rendered a decision on the imposition of global income tax of 163,475,370 won for the year 2005 on the ground of the exclusion period of imposition on June 22, 2016.

E. Around July 7, 2016, the Defendant revoked the Plaintiff’s disposition of imposition of global income tax for the year 2005 (i.e., imposition of global income tax for the Plaintiff in 2006; (ii) the disposition of imposition of global income tax for the year 2006 was imposed; and (iii) this case’s disposition was referred to as “the instant disposition”).

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 4, Eul evidence 1 (including branch numbers, if any) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

According to Article 26-2(1)3 of the Framework Act on National Taxes, any national tax may not be levied any more than five years after the date on which the national tax is assessable.

According to the principle of prohibition of retroactive legislation and the principle of protection of trust, the latter part of Article 26-2(1)1 newly established under the Framework Act on National Taxes amended by Act No. 11124, Dec. 31, 201 cannot be applied to this case. Thus, the Plaintiff’s liability to pay global income tax for the year 2006 expired with the lapse of the exclusion period of imposition on June 1, 2012. Therefore, the instant disposition made on a different premise is unlawful.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Article 26-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 201) provides that "where a taxpayer evades a national tax, obtains a refund or deduction by fraudulent or other unlawful means, it shall be ten years from the date on which the national tax can be imposed, and where a taxpayer does not fall under subparagraph 1, it shall be five years from the date on which the national tax can be imposed." However, Article 26-2(1)1 of the former Framework Act on National Taxes amended by Act No. 11124, Dec. 31, 201; Article 26-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 11124, Dec. 31, 2011; hereinafter referred to as "the latter part of Article 26-2(1)1 of the Corporate Tax Act (amended by Act No. 1210, Dec. 16, 2012>

2) The above amended provisions stipulate that even if the period of exclusion of corporate tax falls under 10 years due to corporate fraud or other unlawful act, it is difficult to deem that the representative of a corporation was expected to receive the bonus disposal or the bonus disposal from the name of the portion belonging to the corporation in order to evade the income tax imposed due to it, and thus, the exclusion period of exclusion of imposition of global income tax due to bonus disposal or recognized loan disposal is five years in principle (see, e.g., Supreme Court Decisions 2007Du20959, Jan. 28, 2010; 2007Du11382, Apr. 29, 2010); Article 9-2 subparagraph 2 of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010); and Article 9-2 subparagraph 2 of the same Act, which excludes the application of the Punishment of Tax Evaders Act on the amount disposed of under the Corporate Tax Act (wholly amended by Act No. 99919, Jan. 1, 201, 201).

Meanwhile, according to the purport of Articles 38 and 59 of the Constitution that provides for the no taxation without law, the provision imposing new tax liability or tax liability more aggravated than the previous one may be applicable only when the requirements for imposition are met after its enforcement, and it is not permissible to apply retroactively to the facts subject to taxation requirements that have already been closed before its enforcement (see, e.g., Supreme Court en banc Decision 2008Du17363, Sept. 2, 201). However, the retroactive legislation under Article 13(2) of the Constitution or Article 18(2) of the Framework Act on National Taxes refers only to the so-called so-called so-called genuine law that regulates facts and legal relations that have already been completed in the past, and it is possible to apply new legislation from the beginning of the exclusion period after its enforcement to the first 600Hun-Ba (see, e.g., Supreme Court Decision 200Du4069, Sept. 14, 201; Supreme Court Decision 2006Du9869, Jun. 28, 2006).

If the provision on the amendment is interpreted only in accordance with the language and text, the period for exclusion of income tax or corporate tax from such disposition may always be ten years, but as seen earlier, it is not permitted to do so. Therefore, even in cases where the disposition of income was made after January 1, 2012, if the period for exclusion of imposition has already elapsed before the enforcement of the provision on the amendment, it shall not be applicable (see, e.g., Supreme Court Decision 2013Du25627, Mar. 27, 2014; 2013Du25627, Apr. 1, 2015). However, since the provision on the amendment does not have yet expired when the period for exclusion of imposition of income tax from bonus has not yet expired after January 1, 2012, the period for exclusion of imposition of imposition of total income from the disposal of the evaded corporate tax shall be ten years after the enforcement date of the provision on the amendment (see, e.g., Supreme Court Decision 2015Du1575, Apr. 27, 2015).

In addition, 10 years have passed since January 1, 2012, 201. 1. 20 years have passed since January 1, 2012. 20 years have passed since January 1, 2012. Thus, in case of global income tax for which 206 has been imposed first before January 1, 2012, 20 years have passed since 20 years have passed since 10 years have passed since 10 years have passed since 20 years have passed since 10 years have passed since 20 years have passed since 10 years have passed since 20 years have passed since 10 years have passed since 20 years have passed since 10 years have passed since 20 years have passed since 20 years have passed since 2 years have passed since 20 years have passed since 3 years have passed since 20 years have passed since 3 years have passed since 20 years have passed since 2 years have passed since 3 years have passed since 20 years have passed since 2 years have passed since 20 years have passed since 3 years have passed since 2 years have passed since its exclusion period for taxation.

3) In order to determine whether the amendment of the former Act violates the principle of protection of trust by infringing the trust of the parties to the existence of the existing Act or subordinate statute, on the other hand, the purpose of public interest realized through the amended Act or subordinate statute should be comprehensively compared and balanced (see, e.g., Supreme Court en banc Decision 2003Du12899, Nov. 16, 2006). Even if the amended Act or subordinate statute is somewhat infringed on the taxpayer’s trust due to the above amendment’s corporate tax which was evaded by fraud or other improper act, the period for exclusion of income tax on the amount disposed of as bonus, dividend, etc. shall be 10 years, as well as corporate tax.

Then, the purpose of the public interest is to extend the exclusion period from imposition to 10 years in the absence of the expiration of the exclusion period from imposition of new tax liability for taxpayers merely because of the extension of the exclusion period from imposition of tax from 5 to 10 years. In light of the fact that a corporation evades corporate tax due to unlawful act or obtains a refund or deduction of corporate tax, and the subject of application is limited as income tax on the amount of income disposed of in connection with the illegal act, the scope of damage to the trust interest formed prior to the enforcement of the amended provision and the above public interest to realize the amended provision cannot be deemed to be greater than the former, and there is no special circumstance to limit the application of the amended provision against the principle of protection from trust.

4) On July 5, 2012, the director of the AA tax office received the processed tax invoice of KRW 965,648,508 during the taxable period from the second half of the year 2005 to the second half of the year 2006, and issued the processed tax invoice of KRW 291,780,50,000 after subtracting the above processed sales amount from the above processed sales amount, on the ground that "the above processed sales amount was out of the company and its attribution is unclear, and thus disposed of as a bonus to the plaintiff who was the representative director of a Aa. was disposed of as a bonus. Such outflow from the company is a processed transaction that takes the form of goods supplied by aa from the customer, and constitutes "Fraud or any other unlawful act."

Examining the above facts in light of the legal principles as seen earlier, the amended provisions were newly established before the expiration of five (5) years (5) years (5.0, 2012) of the Plaintiff’s global income tax for 2006, and each of the instant dispositions was imposed by the Defendant upon the Plaintiff for the first time after January 1, 2012. As such, the exclusion period for imposition of global income tax for 2006, based on the above disposition, is applicable to the revised provisions and until May 31, 2017. Accordingly, the instant disposition was made within the exclusion period for imposition, and thus, the Plaintiff’s assertion is lawful.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.