Ulsan District Court-2018-Gu Partnership-5288 ( September 13, 2018)

No formal trade rights shall be recognized.

A person who actually controls and manages the subject of taxation in accordance with the substance over form principle shall not be a person who is nominal as a taxpayer on the ground of form or appearance.

Article 14 of the Framework Act on National Taxes

Busan High Court 2018Nu23206 global income and revocation of disposition

500

The Director of the Z Tax Office

5. Judgment of the court of the previous trial

Ulsan District Court Decision 2009No. 26, 2019 decided September 13, 2018

June 21, 2019

July 26, 2019

1. The plaintiff's claim that the court changed in exchange is dismissed.

2. Of the total litigation costs, 2/3 shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

1. Purport of claim

On May 22, 2019, the Defendant revoked the imposition of global income tax of KRW 64,914,130 (including additional tax), global income tax of KRW 110,583,280 (including additional tax), global income tax of KRW 110,583,280 (including additional tax), global income tax of KRW 96,191,470 (including additional tax) for the year 2015 (the Plaintiff sought revocation of the imposition of global income tax of KRW 271,68,88,880 for the year 2015 (the Plaintiff sought revocation of the imposition of global income tax of August 1, 2017), but the Defendant revoked the imposition of global income tax ex officio and again made the imposition of global income tax again on May 22, 2019. In this regard, the judgment of the first instance court became null and void following the alteration of the Plaintiff’s lawsuit to seek revocation of each global income tax of May 22, 2019).

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

A. The Plaintiff and Aa are dentists as married couple.

B. After completing business registration on January 1, 2006, the Plaintiff entered into a contract for business transfer and takeover with the content that the Plaintiff transfers the above dental business to KRW 830,000,000 between the Plaintiff and the Plaintiff on December 31, 2010 while operating the hospital with the trade name of 00,000 Dong-dong-gu, Ulsan-gu, 00-0, and bB dental clinic. Aa has completed business registration with the trade name of 'bbB dental clinic' as of November 1, 201 with the second floor of the building located at 00,000 Dong-gu, Ulsan-gu, 00-00 (hereinafter referred to as the "previous dental clinic after completing business registration; and hereinafter referred to as the "the instant dental clinic after completing business registration").

C. Aa treats 320,000,000 of the acquisition price for the instant dental operations as necessary expenses (the depreciation cost of the business license, the amount of KRW 64,000,000 in 201, KRW 128,000 in 2014, KRW 128,000 in 200, and KRW 128,000 in 200 in 2015), and filed a comprehensive income tax on income accrued from the instant dental operations.

D. As a result of the investigation conducted from April 20, 2017 to May 19, 2017, the Defendant entered into a formal contract for the transfer and acquisition of the instant dental services from 2013 to 2015. The Plaintiff and Aa entered into a contract for the transfer and acquisition of the instant dental services in order to avoid global income tax burden upon deducting necessary expenses. The actual business operator of the instant dental services determined as the Plaintiff, and notified the Plaintiff of global income tax of KRW 64,914,130 (including additional tax), global income tax of KRW 110,583,280 (including additional tax), global income tax of KRW 110,583,280 (including additional tax), global income tax of KRW 96,191,470 (including additional tax), total amount of KRW 271,68,80 (including additional tax) for the year 2015.

E. On September 12, 2017, the Plaintiff dissatisfied with the above disposition, filed an appeal with the Tax Tribunal, but the Tax Tribunal dismissed the appeal on December 8, 2017.

F. On February 2, 2018, the Plaintiff filed the instant lawsuit, and the first instance court rendered a favorable judgment of the Plaintiff on September 13, 2018. The Defendant appealed against this on September 27, 2018.

G. On March 14, 2019, when the instant lawsuit was pending, the Defendant discovered procedural defects in the process of omitting the notice of notice of taxation to the Plaintiff, and revoked the said notice of correction and notification ex officio on August 1, 2017, and on the same day, notified the Plaintiff of the prior notice of taxation identical to the said notice of correction and notification.

H. On April 16, 2019, the Plaintiff appealed to the Commissioner of the Busan Regional Tax Office for the review of the legality of the taxation before taxation, but was decided as non-adopted on May 16, 2019.

I. On May 22, 2019, the Defendant notified the Plaintiff of the amounting to KRW 64,914,130 (including additional taxes), global income tax for the year 2014, KRW 110,583,280 (including additional taxes), global income tax for the year 2014, KRW 96,191,470 (including additional taxes), total amounting to KRW 271,68,880 (hereinafter “instant disposition”).

[Ground of recognition] Facts without dispute, Gap 1, 2, 4-1, Gap 24 (including provisional numbers), Eul 3, 13, and 14, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) procedural illegality

The Defendant, while conducting a simultaneous investigation with the Plaintiff as the subject of the tax investigation under Aaa in the course of the tax investigation, did not go through a general investigation procedure, such as a prior notice of tax investigation as stipulated in Article 20(3) of the Regulations on the Management of Tax Investigations, and received a written answer by selecting the Plaintiff as the subject of the tax investigation, and the defect is serious and clear. As such, the instant disposition is null and void (the Plaintiff did not separately determine the Plaintiff’s allegation of the defect in the previous procedure as to the imposition of global income tax as of August 1, 2017, because the Defendant omitted the procedures for the prior notice of taxation or the review of legality prior to taxation, and the defect is significant and apparent. However, the Defendant asserted that each of the above dispositions was null and void. However, the Defendant, ex officio revocation of each of the above dispositions and re-ex officio, changed the lawsuit by the Plaintiff to seek the cancellation of the instant disposition, and it cannot be deemed that the procedural defect alleged by the Plaintiff succeeded to

2) substantial illegality

The Plaintiff: (a) received and transferred the money for transfer, including the cost of business license, from Aa in accordance with the previous contract for transfer and takeover of the dental business; and (a) returned and paid comprehensive income tax by reflecting the depreciation cost of the business license that was acquired as an actual business operator of the instant dental business as necessary expenses. This is a tax-free act permissible under tax law; and (b) the previous contract for transfer and takeover of the dental business does not constitute name, wrongful calculation, fraud, or other unlawful act; and thus, the instant disposition issued on the premise that the actual business operator of the instant dental business

B. Determination

1) Determination as to the assertion of procedural illegality

The Regulations on the Management of Tax Investigations cannot be deemed unlawful on the sole basis of such reasons, even if the Defendant received a written answer against the Plaintiff without undergoing general investigation procedures, such as prior notice of tax investigation, as prescribed in the above provisions, in conducting the instant tax investigation, even though it is merely merely merely a business rule within the administrative agency, and it is difficult to view it as an external binding legal order.

Therefore, we cannot accept this part of the plaintiff's argument.

2) Determination as to the assertion of substantive illegality

A) Relevant legal principles

Article 14(1) of the Framework Act on National Taxes declares the principle of substantial taxation by stating that “if the ownership of income, profit, property, act, or transaction subject to taxation is merely nominal and there is another person to whom such income, profit, property, act, or transaction belongs, the person to whom such income, profit, act, or transaction belongs shall be liable to pay taxes.” Therefore, if there is another person who substantially controls and manages such income, profit, property, act, transaction, etc. different from the nominal person to whom such income, profit, act, or transaction belongs, the nominal person to whom such income, etc. belongs shall not be the person to whom such income, profit, or appearance belongs, but the person who actually controls and manages the relevant taxable object shall be the person to whom such income, etc. is liable to pay taxes (

Meanwhile, barring special circumstances, such as where an administrative agency received a written confirmation from the other party to an investigation to a specific offense in the course of conducting an on-site investigation, such written confirmation cannot be readily denied the value of evidence of the written confirmation, barring special circumstances where it is difficult to take the written confirmation as evidentiary materials for specific facts due to lack of details, etc. (see, e.g., Supreme Court Decision 2015Du2864, Jul. 11, 2017).

B) the facts of recognition

① On December 31, 2010, the Plaintiff and Aa entered into a contract for transfer and takeover of business with a content that the Plaintiff would make subsequent settlement of the goodwill after the evaluation (244,900,000 won including lease deposit, 30,000,000 won including medical institutions, and 55,10,000 won including goodwill).

② On December 31, 2010, the Plaintiff requested an appraisal corporation Na0 and Tae Tae 00 appraisal corporation to appraise the value of business right as of December 31, 201. The Na0 appraisal corporation assessed the value of business right as 604,00,000 won on May 6, 201, and Tae Tae 00 appraisal corporation as 622,00,000 won on May 11, 201.

③ On May 20, 201, the Plaintiff and Aa entered into a contract for business transfer and takeover with the content that the business appraisal value of each of the above appraisal corporations shall be converted into a monetary loan for consumption (hereinafter “instant contract for business transfer and takeover”). From KRW 830,00,000 to KRW 914,90,000 (business license 640,000), the remainder, excluding the down payment of KRW 83,000,000,000, which has already been paid, shall be paid until December 31, 201, and the remainder that has not been paid until then is converted into a monetary loan for consumption.

④ During the instant tax investigation conducted in 2010, the Plaintiff collected taxes for at least KRW 500 million, and the total amount of revenue was exposed to the problem of expenses. The Plaintiff created a business license by closing the business from the tax accountant and changing the name of the business, hearing the opinion that the defect in the handling of expenses was defective, and changed the name of the business operator. The nurse or employees did not change, there was no new facility investment, 50 million won out of the amount of transfer and takeover of the business, and a 500 million won out of the amount of transfer and takeover of the business, and stated that the remainder is well known, “The Plaintiff’s contribution to the instant dental revenue is at least 95%, and the remainder is also a contribution to aaaaa.”

⑤ From around 2007, the nurse ccccccc had been working for the previous dental and the instant dental surgery from 10 years to 10 years had worked every day in the instant tax investigation. Aa provides 1 to 2 medical treatment a day, 9% of the daily revenues are treated by the Plaintiff, 9% of the daily revenues are reported to the Plaintiff, and the hospital’s revenues are reported to the Plaintiff, and credit card is received from the Plaintiff, and bB dental clinic’s revenues, expenditures, wage negotiations are all conducted by the Plaintiff.”

6. On May 12, 2017, the Plaintiff and Aa signed each confirmation document stating that “The details of entertainment expenses not related to the duties and the omission of the revenue amount which were examined as a result of the instant investigation are different from the facts,” and each confirmation document contains a statement that “the name on the instant dental business registration certificate is Aa, but the actual business operator is the Plaintiff.”

[Ground of recognition] Gap evidence Nos. 4, 5, Eul evidence Nos. 1, 2, 4, and 5 (including branch numbers), the purport of the whole pleadings

C) Specific determination

Examining the aforementioned facts and evidence, in light of the legal principles as seen earlier, the following circumstances revealed by adding the overall purport of the arguments to the statements in Gap evidence Nos. 8 and Eul evidence Nos. 12 (including paper numbers), it is reasonable to view that the previous business transfer and takeover contract of the instant dental services with respect to the instant dental services was concluded formally in order to be recognized as necessary expenses when calculating global income tax by appropriating business operating rights, and that the actual business operator of the instant dental services is still the Plaintiff. Therefore, the instant disposition is lawful, and the Plaintiff’s assertion on the different premise is not acceptable.

① There is no change in the human composition and physical facilities of the previous dental and the instant dental license agreement. Moreover, the Plaintiff, while operating the previous dental and operated the hospital, was in full charge of the duties related to the operation of the hospital, including revenue and expenditure management of the hospital, wage negotiations, etc. The Plaintiff’s role appears to have been maintained without any change compared to that of the previous dental license agreement.

In this regard, the Plaintiff asserts that the Plaintiff’s statement in the course of the tax investigation was made under the conditions that the Plaintiff did not present specific evidence, and thus, the Plaintiff’s actual business operator cannot be recognized as the Plaintiff.

However, there is no evidence to acknowledge that the above statement made by the Plaintiff during the investigation process of the instant case was made by the Defendant’s conference, and even if a public official in charge did not present specific evidence to the Plaintiff during the investigation process, in light of the following: (a) the process of entering into the instant transfer and takeover contract; (b) the formation of human resources and physical facilities before and after the instant contract; (c) the details of receipt of transfer proceeds; and (d) the Plaintiff’s contribution to the instant dental revenue, etc., the Plaintiff’s above statement cannot be deemed

② The nurse CC reversed the above statements made in the course of the instant tax investigation, and aa took charge of a considerable portion of the medical treatment, and prepared a statement to the effect that the president did not report the import of the hospital, and that the portion of the expenditure was not entirely treated by the Plaintiff (Evidence A9-2).

However, cc, as an employee working for the previous dental services and the instant dental services, may reverse the previous statements that are disadvantageous to the Plaintiff upon their request in the position of receiving instructions from the Plaintiff or Aa. Moreover, it is difficult to deem that ccc had made a false statement to the public official in charge under the circumstances where it was sufficiently recognizable that the circumstances such as the approximate content of the instant tax investigation and the fact that a disadvantageous disposition may be given to the Plaintiff due to its own testimony were sufficiently known.

③ The contract for the transfer and takeover of business with respect to the previous dental services prepared by the Plaintiff and Aaa on December 31, 2010 entered the amount of KRW 244,900,000 in addition to the operating right value of the medical institution and equipment kept within the hospital. The said price appears to have been determined on the basis of the value or initial acquisition value of the medical institution and equipment within the hospital at the time of May 201. However, the value of tangible assets recorded in the appraisal report by the 00 appraisal corporation and the 00 appraisal corporation is merely KRW 28,61,432 (the value of tangible assets indicated in the previous appraisal report by the 29 million appraisal report by the Pacific appraisal corporation). In the event of a contract for the transfer and takeover of business, it can be deemed that the value of tangible assets recorded in the appraisal report by the national appraisal corporation is substantially the same as the value recorded in the appraisal report by the 29 million won (the appraisal report by the Pacific appraisal corporation is generally made at the time of conclusion of the contract, but it is difficult to find reasonable reasons for determining the tangible assets.

In addition, 20 appraisal corporation has appraised 604,00,000 won with respect to the value of the previous dental business license, and 00 appraisal corporation has appraised 622,00,000 won with respect to the value of the previous dental business license. In the instant business transfer contract, it is difficult to understand the reason for determining the business license price as 640,000 won higher than the above appraisal value.

④ The Plaintiff asserts that, around 196, aa borrowed KRW 85 million to the Plaintiff in cash, the same amount was offset among the loan claims and the business transfer and takeover claims of this case, and that aa received KRW 500 million from a new bank and received KRW 915 million in total as the price for the business transfer and takeover contracts of this case.

However, there is no evidence to acknowledge the fact of lending Aa in addition to the Plaintiff’s assertion. Moreover, aa is deemed to have obtained a loan of KRW 500 million from a new bank on July 6, 201 and paid it to the Plaintiff on the same day. However, the fact that the Plaintiff created a pledge for the right of time deposit claims under the Plaintiff’s name to secure the above loan obligations under Aa is also acknowledged. In light of these circumstances, it is difficult to view that a considerable portion of the transfer proceeds claimed by the Plaintiff to have been paid was actually paid.

⑤ The purpose of the Plaintiff’s contract for the transfer and takeover of the instant dental business is to create a business license as stated in the instant tax investigation process and appropriate the depreciation amount to the cost for the instant dental license to avoid global income tax imposed on the instant dental revenues. In addition, it is difficult to find out any special reason to transfer a previous dental business to Aa and change the name of business registration when the Plaintiff additionally bears appraisal costs or the transfer and takeover of the instant dental business.

6. Aa under its own name entered into a lease agreement or an artificial surgery on the instant dental building, and prepared a written employment contract with nurses, and transferred money to the Plaintiff as a salary. However, in light of the aforementioned circumstances, it shall be deemed that this is merely a formal arrangement in accordance with the appearance with which business registration is modified in the name of Aaa, and the above circumstances alone entered into the instant contract for business transfer and takeover, and it is difficult for the instant dentist to reverse the determination that the Plaintiff is the Plaintiff.

3. Conclusion

Therefore, the plaintiff's claim that was changed to exchange in this court is dismissed as it is without merit. As to the costs of lawsuit, 2/3 of the total costs of lawsuit is assessed against the plaintiff, and the remainder is assessed against the defendant. It is so decided as per Disposition.