[1] The time when national tax refund claims are finalized due to erroneous payment, excess payment, refund, etc. of national taxes

[2] The standard for determining the validity of national tax refund appropriation under Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes

[3] Scope of the transferor’s delinquent national taxes, etc. to be appropriated for national tax refund under Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes

[1] A tax refund claim of a taxpayer seeking return of unjust enrichment is already determined at the time of payment or collection, since there is no legal ground from the beginning. In the case of excess payment, it shall be determined at the time when all or part of the tax liability is extinguished by revocation or correction of a return or disposition. In the case of tax refund, it shall be determined according to the requirements for refund under

[2] If the chief of a tax office appropriates a national tax refund under Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes, he/she shall appropriate it without delay from the time when the request for transfer of the national tax refund claim is received. Whether the appropriation is effective should be determined on the basis of whether the refund claim was appropriated without delay from the time when the request for transfer was received where the request for transfer was made after the national tax refund claim becomes final and conclusive, or from the time when

[3] Article 35 of the Framework Act on National Taxes and Article 31 of the Local Tax Act provide that national taxes, local taxes, additional dues, and disposition fees for arrears shall be collected in preference to other claims in order to efficiently secure taxes which constitute a financial basis for the existence of the State or a local government. The Constitutional Court, on April 24, 1997, declared that tax priority provisions do not violate the Constitution, and the head of a tax office, upon receipt of a legitimate request for transfer from a taxpayer, does not have the effect of such appropriation. In light of the above, the head of a tax office may appropriate other national taxes, additional dues, or disposition fees for arrears to be paid by the transferor at the time of appropriation.

[1] Articles 51(1) and 52 of the Framework Act on National Taxes / [2] Articles 51 and 53 of the Framework Act on National Taxes, Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes / [3] Articles 35 and 51 of the Framework Act on National Taxes, Article 31 of the Local Tax Act, Article 42(2) of the Enforcement

[1] Supreme Court en banc Decision 88Nu6436 delivered on June 15, 1989 (Gong1989, 1096) Supreme Court Decision 97Da26432 delivered on October 10, 1997 (Gong1997Ha, 3442) / [2] Supreme Court Decision 2002Da31834 delivered on September 26, 2003 (Gong2003Ha, 2069)

Plaintiff (Attorney Han-dong, Counsel for the plaintiff-appellant)

Korea

Seoul High Court Decision 2007Na109604 decided April 25, 2008

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. As to the assertion that the instant disposition is null and void as a matter of course

A. A tax disposition imposed on a person who does not have all the factual relations, such as the legal relations, income, or act, which are subject to taxation, shall be deemed to be significant and obvious, but in a case where there are objective circumstances that could mislead him to believe that he is subject to taxation with respect to any legal relations or factual relations which are not subject to taxation, if it is possible to accurately investigate the factual relations, the determination of whether it is subject to taxation can only be clearly identified, even if the defect is serious, and thus, it cannot be deemed that the illegal taxation disposition that misleads the fact subject to taxation is void automatically (see Supreme Court Decision 2001Du7268, Sept. 4, 2002, etc.).

Upon examining the reasoning of the judgment below, the court below found facts as stated in its decision after compiling the evidence of employment, and found out the facts in light of the circumstances of the establishment, the method of operation, and the flow of funds of the non-party 1 corporation. The defendant was an objective circumstance to mislead the non-party 1 corporation to be a disguised business entity established under the non-party 3, a substantial manager of the non-party 2 corporation. Under the above circumstances, whether the non-party 1 corporation is a disguised business entity or a normal business entity, and whether the tax invoice received from the non-party 2 corporation from the non-party 1 corporation was prepared based on normal transaction can only be identified by investigating the facts accurately. Thus, the disposition of this case cannot be deemed to have any apparent apparent defect in appearance, and there is no significant and obvious defect in the disposition of this case on the grounds of the plaintiff's assertion in the procedure. The judgment of the court below is justified in light of the records, and there is no error in the misapprehension of legal principles or the rules of evidence as to the requirements and criteria for the judgment to be void.

B. Meanwhile, according to the provisions of Article 51(1) of the Framework Act on National Taxes, the head of a tax office must immediately determine the amount of erroneous payment, excess payment, or tax refund out of the amount paid by a taxpayer as a national tax, additional dues, or disposition fee for arrears. Here, the amount of erroneous payment refers to the amount of tax paid or collected, regardless of the absence of a return (in the case of a tax return) or a disposition for imposition (in the case of a tax return), which serves as the basis of the payment or collection, or of the tax refund. The amount of excess payment means the amount of tax paid or collected, and the amount of tax reduced in whole or in part, due to revocation or correction, even though the return or disposition is not null and void as a matter of law, and the amount of tax refund means the amount of tax to be refunded under each tax law because the State has no justifiable reason to hold thereafter. Thus, the amount of tax refund, the amount of excess payment, and the amount of tax refund constitute unjust enrichment which the State has received or held without legal grounds.

In light of the above legal principles, as long as the instant disposition cannot be deemed to be null and void as a matter of course, the lower court’s determination that the instant claims for national tax refund became final and conclusive only on March 7, 2006, when the National Tax Tribunal rendered a decision to decide to revoke the instant disposition.

2. As to the assertion that the appropriation of the national tax refund of this case is invalid

In full view of the provisions of Articles 51, 53, and 42 of the Enforcement Decree of the Framework Act on National Taxes, when a taxpayer requests a transfer of the national tax refund to another person by notifying the head of a tax office in writing stating the address and name of the transferor and transferee after transferring the national tax refund to him/her, and the details of the right to transfer, etc., the head of a tax office shall immediately appropriate the national tax in arrears if the transferor is delinquent and the amount of the national tax is not paid without delay. If the transferee fails to appropriate the refund without delay even if he/she receives a legitimate request for transfer from the taxpayer due to the violation of the provisions, the transferee's claim for the national tax refund that the transferee acquires shall be reverted to the transferee, and even if the tax office appropriated the transferor's national tax in arrears, the appropriation shall be deemed to have become effective in the future as the result of collecting the tax claim for the property not owned by the transferor, and if the request for transfer of the national tax refund becomes final and conclusive after the request for transfer of the national tax refund becomes final and conclusive (see Supreme Court Decision 2002Da31834, etc.).

In addition, Article 35 of the Framework Act on National Taxes and Article 31 of the Local Tax Act provide that national taxes, local taxes, additional dues, and disposition fees for arrears shall be collected in preference to other claims in order to efficiently secure taxes which serve as a financial basis for the existence of the State or local governments. The Constitutional Court declared that the legal provisions governing the priority of taxation are not in violation of the Constitution by the decision of April 24, 1997, and as seen above, if the head of a tax office fails to appropriate the funds without delay even if he/she receives a legitimate request for transfer from a taxpayer, the head of a tax office may appropriate the funds for other national taxes, additional dues, or disposition fees for arrears that the transferor shall pay at the time of appropriation

In light of the above legal principles, it is proper that the court below was justified to have appropriated all of the national taxes in arrears to be paid by non-party 2 corporation at the time of the national tax refund of this case on March 7, 2006, when the transfer of claims to the national tax refund of this case and its notification procedures were made on November 2003, but the national tax refund of this case became final and conclusive on March 7, 2006, and immediately thereafter, on March 29, 2006, and there is no error of law

3. As to the assertion that Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes violates the Constitution and Acts

Under Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes, the right to make a prior appropriation of national tax refund claims is stipulated by Article 42(2) of the Enforcement Decree of the Framework Act on National Taxes. This is not only based on delegation under Article 53 of the Constitution, but also on delegation under Article 75 of the Framework Act on National Taxes, and reflects the right to preferential collection

The judgment of the court below to the same purport is just, and there is no violation of the principle of no taxation without law.

4. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Park Si-hwan (Presiding Justice)