Cho Jae-2017- Daejeon-2964 ( October 27, 2017)

Whether the consulting cost of this case constitutes necessary expenses and the legality of the illegal under-reported additional tax

The consulting cost of this case cannot be deemed to be included in the necessary expenses in calculating the business income of the land of this case, and the disposition against which the defendant imposes an unfair under-reported penalty tax is legitimate.

Article 19 of the Income Tax Act

2018Guhap90 Global Income and Revocation of Disposition

】 】

○ Head of tax office

October 4, 2018

November 8, 2018

1. The part of the instant lawsuit seeking revocation of ○○○○○○, among the claims filed for revocation of the disposition imposing global income tax on the Plaintiff for the primary claimant of the instant lawsuit in 2016.

2. The plaintiff's remaining main claim and the conjunctive claim are all dismissed.

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

Cheong-gu Office

○ The primary claim: The Plaintiff and A.I.D. recognize necessary expenses for the service agreement (consulting expenses) between the Plaintiff and A.I.D., and revoke the Defendant’s disposition of imposition of global income tax for the year 2016, which was revised on November 20, 2017 by the Defendant against the Plaintiff.

○ Preliminary Claim: The Plaintiff recognized the necessary expenses that the Plaintiff actually paid to the Company, and revoked the imposition of the Defendant’s penalty tax for unlawful underreporting by the Defendant.

1. Details of the disposition;

A. On December 27, 2013, the Plaintiff, who operated a housing construction and sales business and real estate sales business, shall acquire the instant land along with AA, BBB, and the Plaintiff completed the registration of ownership transfer in the future of the Plaintiff, BB, and CCC’s spouse DD with respect to the instant land on December 27, 2013, and the Plaintiff completed the registration of ownership transfer in the said BB and D name on the same day.

B. On January 15, 2014, the Plaintiff entered into a contract to sell the instant land to ○○○○○○○○○○○ Company (hereinafter referred to as “acquisition corporation”). On January 15, 2016, the Plaintiff completed the registration of ownership transfer in the future for the instant land to be acquired by transfer corporation.

C. On March 31, 2016, the Plaintiff: (a) filed a preliminary return on gains from trading land, etc. with the Defendant on the sales price of the instant land at KRW 00,000,00,000 for acquisition price; (b) necessary expenses at KRW 00,000; and (c) profit margin at KRW 00,000 for gains from trading land. The amount reported by the Plaintiff included KRW 1.7 billion for consulting service costs for the instant land (hereinafter “instant consulting costs”).

D. On February 14, 2017, the Defendant considered income from the instant land transaction as “transfer income” and considered the instant consulting cost reported as necessary expenses as “false expenses” and considered as necessary expenses.

A tax notice was issued on capital gains tax of 2016, which was calculated except in the case of ○○○.

E. On February 20, 2017, the Plaintiff filed a request for a trial with the Tax Tribunal on May 24, 2017 after filing an objection against the Defendant on the income from the instant land transaction, rather than “transfer income”, and the instant consulting expenses should be included in “necessary expenses.” On October 27, 2017, the Tax Tribunal revoked the disposition of imposition of transfer income tax for the year 2016, on the ground that the instant consulting expenses are not “transfer income” but “business income” rather than “business income”. However, the instant consulting expenses cannot be considered as “business income”, on the ground that the Defendant’s disposition of imposition of transfer income tax for the year 2016.

F. Accordingly, the Defendant’s income from the instant land transaction on November 20, 2017 is “business income”.

However, the consulting costs of this case were assessed as global income tax for the year 2016 when the total amount of 00 ○○○○ (hereinafter referred to as the “instant disposition”), which is calculated as excluded from necessary expenses, the unjustly underreporting penalty taxes due to the false report on necessary expenses, and the penalty taxes due to bad faith in payment

G. After January 5, 2018, the Defendant need to add ○○○○ in the process of calculating the global income tax.

In addition to rain, ○○○ source was reduced or corrected among global income tax for the year 2016.

[Based on Recognition: Gap evidence Nos. 1, 8, 9 and Eul evidence No. 1 (including paper numbers; hereinafter the same shall apply)]

2. Summary of the plaintiff's assertion

A. A actually issued a tax invoice with the value of supply as to the consulting cost of this case at ○○○○. On December 8, 2016, Daejeon District Court rendered a judgment in favor of Ghana that A is obligated to pay the Plaintiff the remaining ○○○○○○○○○ Won, excluding the consulting cost already paid, among the consulting cost of this case, the consulting cost of this case ought to be recognized as necessary expenses in calculating the income arising from the land transaction of this case. Therefore, the instant tax disposition imposing a comprehensive income tax on the basis of the tax amount calculated not including the consulting cost of this case as necessary expenses but as calculated as necessary expenses, should be revoked illegally. Preliminaryly, the instant tax disposition imposing an unfair underreporting additional tax should be revoked on the ground that the Plaintiff filed a false declaration of necessary expenses, and the part of ○○○○○○○○○, among the instant tax disposition imposing an unfair underreporting additional tax on the ground that the Plaintiff filed an unfair underreporting additional tax on the ground that the Plaintiff sought revocation of the disposition imposing additional tax on global income tax and the Plaintiff’s claim for revocation.

3. Relevant statutes;

The entries in the attached statutes are as follows.

4. Judgment on the defendant's main defense of safety

A. The Defendant asserts that the part seeking revocation of ○○○○○○○ upon which the reduction was decided in the lawsuit of this case is unlawful as there is no benefit in the lawsuit.

B. If an administrative disposition is revoked, the disposition becomes null and void, and no longer exists, and a lawsuit seeking revocation against an unexistent administrative disposition is unlawful as there is no benefit of lawsuit (see, e.g., Supreme Court Decision 2017Du38621, Jun. 29, 2017). Of a tax imposition disposition, there is no benefit of lawsuit seeking revocation of the original disposition, and as such, there is no benefit of lawsuit seeking revocation of the original disposition (see, e.g., Supreme Court Decision 81Nu393, Nov. 23, 1982).

C. In light of the fact that the Defendant rendered ex officio a decision to reduce the ○○○○ Won after the instant disposition was rendered, the part of the instant disposition disputing the imposition of the said reduced amount of KRW 00,00 is sought for the revocation of the disposition already invalidated, and thus, it is unlawful as there is no benefit of lawsuit.

5. Judgment as to the remainder of the main claim

(a) Facts of recognition;

(1) AA discovered information that the transferee corporation is planning the apartment development project by purchasing the instant land and providing it to BB. BB recommended the Plaintiff to purchase the instant land, and the Plaintiff purchased the instant land, but the purchase fund was also raised by the Plaintiff, AA, and BB.

(2) Accordingly, the Plaintiff provided KRW 80 million with the instant land purchase fund and KRW 400 million by AA, respectively, and BB made investments in the instant land by obtaining loans of KRW 2.6 billion with the title holder on the security of the instant land. Thereafter, on January 27, 2014, the Plaintiff drafted a written agreement with the Plaintiff that the Plaintiff would settle 67% of the profits accrued from the instant land between AA and BB and his spouse DD and 33% of AA.

(3) On January 12, 2015, the Plaintiff entered into a real estate consulting agreement with A, the representative of BB, and between January 13, 2015 and July 31, 2015, to pay ○○○○○○○○○○○○○○ upon the instant land development method (hereinafter referred to as “instant consulting agreement”), and A, on March 7, 2016, issued a tax invoice with the Plaintiff as the supply price. The Plaintiff paid KRW 650,000,000 to A, and KRW 19,850,000,000 on March 24, 2016, KRW 2016,60,000 on April 1, 2016, respectively.

(4) On April 21, 2016, the Plaintiff prepared a written confirmation that the representative director would pay ○○○○○○○○ (excluding ○○○○○, which was already paid, out of the aggregate of value-added tax on the instant consulting cost) to BB by July 30, 2016. Accordingly, A filed a lawsuit against the Plaintiff at the Daejeon District Court on October 10, 2016 to pay the remaining consulting cost to the Plaintiff. As the Plaintiff did not submit any written reply, the Plaintiff was sentenced to a favorable trial by the Daejeon District Court on December 8, 2016.

(5) Meanwhile, in the course of the tax investigation, the Plaintiff was already receiving the instant land from BB from the initial stage of acquiring the instant land, preparing a business plan, and conducting a flood analysis, and the pertinent consulting cost was determined as KRW 10 billion on the ground that the pertinent income accrued from the instant land development was deemed to have been included in KRW 10 billion, and the instant consulting cost was not excessive, and the Plaintiff stated to the effect that there was no reason to confirm how A actually used the said ○○○ source.

(6) In the course of the tax investigation, BB introduced the instant land to the Plaintiff on a confidential basis with respect to the acquisition of the instant land, prepared a business plan, and made an analysis thereof, etc. On January 12, 2014, BB entered into a service contract with the Plaintiff. At the latest, BB entered into a written contract on January 12, 2014. The instant consulting cost was not based on specific expected expenditure but based on the agreement between AA and the Plaintiff, and the item of expenditure in the course of performing the service was not a specific receipt or documentary evidence, but a specific receipt or documentary evidence is not presented. Moreover, BB stated that it did not perform any work related to authorization or permission, such as changing the form and quality of the instant land.

(7) In the course of the Defendant’s investigation, AA did not know at all about the consulting relationship between the Plaintiff and A, or the consulting cost of the instant case, and the pertinent land permission-related business was stated to be the transferee corporation by itself until transferring the instant land to the transferee corporation.

(8) On the other hand, Ghana was registered as a business operator on January 10, 2015, and the details of the return of value-added tax for the first time in 2016 are reported as a transaction that was the reason for the instant consulting cost.

[Reasons for Recognition: Facts without a partial dispute, Gap evidence 2, 3, 4, 6, 7, Eul evidence 2, 3, 5, 6, 7, 8, 10, 11, and 12; the purport of the whole pleadings

B. Determination

According to the following circumstances, in light of the evidence and the circumstances surrounding the above facts acknowledged, the consulting expenses of this case cannot be deemed as having to be included in necessary expenses in calculating the business income of the land of this case.

① A’s representative BB had an economic interest in the acquisition and disposal of the instant land, such as entering into a memorandum of agreement with the Plaintiff that the Plaintiff would be the nominal lender for the purpose of raising the price necessary for the acquisition of the instant land, and that the profit accrued from the instant land is distributed.

② On December 27, 2017, the Plaintiff entered into a contract with the transferee corporation to sell the instant land again from 19 days to 19 days, and it is difficult to deem that the service of researching the methods, etc. for developing the instant land under the instant consulting contract was actually performed within the short period.

③ In fact, BB confirmed that A did not present the result of performing the instant consulting service under the instant consulting agreement, and confirmed that A could not present evidence or receipts. A’s report on value-added tax in the first half year of 2016 was only reported as a transaction based on the instant consulting cost, and any other transaction that can be deemed as having performed the instant consulting service cannot be deemed as having actually performed the instant consulting service. In light of these circumstances, A cannot be deemed as having actually performed the instant consulting service under the instant consulting agreement.

④ The Plaintiff or BB stated that the reasons for setting the consulting cost of the instant case was only based on the expected profits from the acquisition and disposal of the instant land, and that it is not specified as a specific expenditure item. According to the aforementioned statement, the instant consulting contract, which is a joint investor of the instant land, was actually concluded for the purpose of distributing and coordinating profits between the Plaintiff and BB, which is a joint investor of the instant land.

⑤ The Plaintiff asserted that the amount transferred from March 24, 2014 to April 21, 2014 to virtual account was part of the consulting cost of this case. However, it is only the time when the Plaintiff entered into a sales contract with the acquiring corporation of this case, and the Plaintiff was rendered a favorable judgment by filing a lawsuit against the Plaintiff seeking payment of the remaining consulting cost of this case. However, the said lawsuit was filed after August 23, 2016 when the Defendant entered into a tax investigation, and the said judgment was merely a non-contentious judgment on the ground that the said judgment was rendered on the ground that it did not dispute the Plaintiff’s assertion, and thus, it cannot be deemed that the A had actually rendered services and the instant consulting cost was paid in return for such services.

C. Sub-committee

Therefore, it cannot be said that the Defendant did not include the consulting cost of this case in the necessary expenses, but did not err in the disposition of this case that calculated the Plaintiff’s business income, as alleged by the Plaintiff.

6. Judgment on the conjunctive claim

A. The former Framework Act on National Taxes (Amended by Act No. 15220, Dec. 19, 2017; hereinafter the same)

According to Article 47-3(1)1(a) of the National Tax Act, where a taxpayer has filed a return on a tax base for national tax under the tax-related Acts by the statutory due date of return, and the taxpayer has filed a return on a tax amount less than the payable tax amount, the amount equivalent to 40/100 of the underreported tax amount due

B. As seen earlier, it is reasonable to see that the consulting cost of this case is not the price for the consulting service actually performed, but the necessary expenses for the land transaction of this case are presumed to be the most necessary expenses. According to the overall purport of the entries and arguments in the evidence Nos. 1, 2, and No. 2, according to the whole purport of the evidence No. 1, 2, and No. 2, the Plaintiff reported false necessary expenses by submitting to the Defendant at the time of the preliminary return of the land transaction profit by submitting the consulting contract of this case and the tax invoice with the price for supply issued by A as the price for supply. Thus, the Plaintiff under

C. Therefore, it cannot be said that the Plaintiff asserted that the consulting cost of this case is considered as an unfair underreporting and that the disposition imposing an unfair underreporting penalty pursuant to Article 47-3(1)1(a) of the former Framework Act on National Taxes is not erroneous

7. Conclusion

If so, the primary claimant of the instant lawsuit is 1,145,709,380 won of global income tax for the year 2016.

Since the part demanding the revocation of a disposition of imposition is unlawful, the part demanding the revocation of 486,932 won shall be dismissed. The remaining main claims and conjunctive claims of the plaintiff shall be dismissed since all of them are without merit.

D. The decision shall be made in accordance with the order.