In a case where a tax investigation is conducted on a specific item in a specific taxable period of a certain item, whether conducting a tax investigation again for the same taxable period of the said item constitutes a reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes (affirmative), and whether the same applies to cases where the content of a tax investigation is not overlapped by conducting a tax investigation again only for other items except the specific items originally conducted (affirmative)

Comprehensively taking account of the following: (a) Articles 81-4(2), 81-7(1), 81-9(1), and 81-11 of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter “former Framework Act on National Taxes”); (b) a repeated tax investigation for the same item and taxable period may seriously infringe on taxpayers’ freedom of business or legal stability as well as may lead to the abuse of their right to tax investigation; and (c) thus, it is necessary to be prohibited, except in cases where there is substantial exceptional violation of the principle of fair taxation; and (d) the legislative intent of prohibiting re-investigation includes advanced tax investigation technology. Even if a tax official has conducted a tax investigation for only a specific item in the taxable period of a certain item, it constitutes prohibition under Article 81-4(2) of the former Framework Act on National Taxes again for the same taxable period, and thus, it does not constitute a separate tax investigation for the same item or scope of tax investigation for another item other than the same item or scope of tax investigation.

Articles 81-4(2), 81-7(1), 81-9(1), and 81-11 of the former Framework Act on National Taxes (Amended by Act No. 11604, Jan. 1, 201);

Seoul High Court Decision 201

Seoul Regional Tax Office

Seoul High Court Decision 2013Nu20921 decided August 20, 2014

The part of the lower judgment against the Plaintiff regarding the disposition of corporate tax investigation for the business year 2010 shall be reversed, and that part of the case shall be remanded to the Seoul High Court. The remaining appeals shall be dismissed

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the decision of investigation of corporate tax for the business year 2010

A. Article 81-4(2) of the former Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter the same) provides that “tax officials shall not conduct reinvestigations on the same items of taxation and the same taxable period, unless any of the following applies.” In addition, Article 81-7(1) of the former Framework Act on National Taxes provides that “tax officials shall conduct reinvestigations on the basis of the items of taxation and the taxable period.” In addition, Article 81-9(1) of the former Framework Act on National Taxes stipulates “tax items subject to investigation” as one of the matters to be notified before commencing a tax investigation, and Article 81-9(1) provides that “Tax officials shall not extend the scope of a tax investigation while conducting an investigation, except in cases where it is confirmed that specific suspicion of tax evasion exists for several taxable periods or is related to other items of taxation.” Furthermore, Article 81-11 of the former Framework Act on National Taxes provides that “In principle, a taxpayer’s duty to report and pay tax shall be conducted in accordance with tax laws.”

In full view of the language and structure of the relevant provisions, and the same tax investigation, repeated for the same tax item and taxable period, may seriously infringe on taxpayers’ freedom of business and legal stability as well as may lead to abuse of their right to tax investigation. The legislative intent of prohibiting re-audit lies in the advancement of tax investigation technology. In full view of the fact that a tax official has conducted a tax investigation over any specific taxable period of a certain tax item, as well as in the case where a tax official conducts a tax investigation over all items and conducts a tax investigation for the same taxable period of a certain tax item, it constitutes a re-investigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes, and it does not change to the effect that the contents of a tax investigation overlap by re-audit only for other items except for the specific items initially conducted by a tax official. Provided, That it is recognized that there is an identical error or tax evasion in the relevant tax item or taxable period during the initial tax investigation for another tax item or for another taxable period, and thus, it does not constitute a further re-audit under Article 81-4 of the former Framework Act.

B. According to the evidence duly admitted by the court below, the following facts are revealed: ① the tax items to be investigated by the Defendant to the Plaintiff on July 6, 201; ② the investigation period from January 1, 2006 to December 31, 2010; ② the tax investigation period from January 1, 2006 to December 31, 201; ② the investigation scope was conducted as “matters related to the temporary special tax reduction or exemption due to the relocation of the headquarters; ② the tax investigation was conducted accordingly; ② the Defendant again conducted the tax investigation on March 21, 2012; ② the tax items to be investigated to the Plaintiff as “corporate tax integration investigation”; and the instant tax investigation disposition was conducted as “from January 1, 2009 to December 31, 2010.”

Examining these facts in light of the legal principles as seen earlier, the portion of corporate tax for 2010 business year in the instant disposition of tax investigation constitutes a reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes (the Plaintiff’s claim seeking revocation of corporate tax for 2009 business year portion was accepted by the lower court, and the Defendant did not appeal to the same), and the subject of the tax investigation conducted earlier was limited to the portion related to the temporary special tax reduction for relocation of the head office, and the subject of the investigation conducted earlier was excluded from the subject of the instant disposition of tax investigation determination.

C. Nevertheless, the lower court rejected the Plaintiff’s assertion that the portion of corporate tax for 2010 business year in the instant tax investigation disposition constitutes an illegal reinvestigation on the grounds that the investigation conducted again for the same tax item and taxable period does not constitute a reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes, even if the content of investigation is substantially different. In so doing, the lower court erred by misapprehending the legal doctrine on the scope of reinvestigation prohibited under Article 81-4(2) of the former Framework Act on National Taxes, thereby adversely affecting the conclusion of the judgment. The allegation contained

In addition, Supreme Court Decision 2004Du10470 Decided January 14, 2005 cited by the court below is not appropriate to be invoked in this case due to different cases.

2. On the investigation and disposition of value-added tax for the business year 2010

The ground of appeal on the purport that the part of value-added tax for the business year 2010 among the instant tax investigation decision disposition was unlawful since there was no legitimate ground for selecting the object of tax investigation. This part of the ground of appeal is asserted only in the final appeal, and it cannot

3. Conclusion

Without further proceeding to decide on the remaining grounds of appeal, the part of the judgment below against the plaintiff concerning the disposition of tax investigation for the business year 2010 shall be reversed, and this part of the case shall be remanded to the court below for a new trial and determination. The remaining grounds of appeal shall be dismissed. It is so decided as per Disposition by the assent of all participating Justices

Justices Kim Yong-deok (Presiding Justice)