Busan District Court 2009Guhap400 ( October 09, 2009)

Cho High Court Decision 2008Da2074 ( November 03, 2008)

A nonprofit corporation received services from a founder of the designated education center shall be deemed a profit-making business.

Revenues earned by a non-profit corporation from sales to its members of fees received from new founders of the designated education center and from tuition fees received from membership fees, etc. shall constitute profit-making business.

The contents of the decision shall be the same as attached.

1.The judgment of the first instance shall be modified as follows:

A. The Defendant’s disposition of imposition of KRW 1,874,539, corporate tax for the year 2001 against the Plaintiff on March 14, 2008, corporate tax for the year 2002, corporate tax for the year 2002, corporate tax for the year 117,659,930, corporate tax for the year 2003, and corporate tax for the year 2004 54,325,400 shall be revoked.

B. The plaintiff's appeal is dismissed.

2. The total costs of the lawsuit shall be divided into two parts, and one part shall be borne by the plaintiff, and the remainder by the defendant, respectively.

1. Purport of claim

The Defendant’s disposition of imposition of value-added tax for the year 2001 against the Plaintiff on March 14, 2008: (a) KRW 1,874,530; (b) KRW 46,228,330; (c) corporate tax for the year 2002; (b) KRW 117,659,930; (c) corporate tax for the year 2003; (d) KRW 54,325,40; (b) value-added tax for the year 2001; (c) KRW 3,850,970; (d) value-added tax for the year 2002; (e) KRW 11,45,190; and (e) value-added tax for the year 202, value-added tax for the year 203; and (e) KRW 46,079,60; (e) value-added tax for the year 2003;

2. Purport of appeal

The judgment of the first instance shall be revoked. The plaintiff's request shall be dismissed.

1. Facts of recognition;

The following facts are not disputed between the parties, or can be acknowledged by taking into account the whole purport of the pleadings in each entry in Gap evidence 1-1, 2, 4-1 through 4, Gap evidence 7, 13-2 through 9, 13-14, Gap evidence 15-1 through 4, Gap evidence 16, 17, Eul evidence 1-1, Eul evidence 2-1 through 11, Eul evidence 3-1, Eul evidence 9-1, Eul evidence 11-6, and Eul evidence 1-1 or 6.

A. The Plaintiff is a non-profit corporation established on February 17, 1992 with the permission of the Superintendent of the Office of Education, pursuant to Article 32 of the Civil Act and Article 5 of the Regulations on the Establishment and Supervision of Non-Profit Corporations under the jurisdiction of the Ministry of Education for the purpose of encouraging reading campaigns through the development of reading abilities and logical reading reading.

B. On April 1, 200, the Plaintiff: (a) held an extraordinary general meeting on April 1, 200, and appointed Y as the president and YB as directors; and (b) thisCC, from around 2001 to February 2005, was established on March 21, 2002, as the Plaintiff’s head of the Plaintiff’s ○○ Training Institute, and registered as directors on the registry by August 16, 2006.

C. On May 12, 2001, the Plaintiff held a board of directors to make a resolution with the following contents.

- The membership fee of the designated education center shall be 300,000 won.

- A person who intends to operate an education center shall undergo the education designated by the Plaintiff, and the expenses for the education and training.

shall be paid directly without connection with the Association.

- Central educational training costs shall be KRW 5,000,000 (the full disbursement of educational instructor costs) and the president shall be the logical and continuous proposer and shall be the unified education upon concluding a contract for the provision of the education entrusted with the GB who is the developer of the educational program.

D. On May 15, 2001, the Plaintiff entered into an educational consignment agreement with the NA on May 15, 2001, as follows.

E. On May 22, 2001, the Plaintiff, among school members, announced a company (ju) that consulted and consulted on the requirements for the designation of a school council at the time of establishing a new education center and the regulations on facilities of the designated education center to the head of Si/Gun/Gu as a new educational center. However, on April 27, 2002, the Plaintiff publicly notified the company that provided consultation and consulting to the head of Si/Gun/Gu (ju).

바. ☆☆(주)의 대표이사 이CC은 원고의 지정교육원 개설희망자들에게 학원설립 및 컨설팅 등 용역을 제공하면서 원고를 대신하여 입회비 300,000원 및 중앙교육연수비 5,000,000원을 받아 원고와 교육위탁계약을 체결하고 실제 교육을 실시한 임BB에게 송금하였는데, 2001. 10. 19.부터 2004. 11. 4.까지 임BB이 지정한 임BB 및 원고의 전 이사장인 임AA, 도서출판 ♤♤의 대표인 엄DD(이하 '소외인들'이라 한다) 명의의 계좌로 합계 1,138,731,000원(이하 '이 사건 쟁점금액'이라 한다)을 송금하였다. 한편, 원고법인은 신한은행 법조타운지점에 ☆☆연구학회 임AA의 계좌를 개설해두고 있었으나, 이 CC이 송금한 금액은 위 계좌에 입금된 바는 없었다.

G. The Defendant: (a) conducted a tax investigation on the Jeju Special Self-Governing City and Do; and (b) determined and notified the value-added tax and corporate tax during the pertinent taxable period on KRW 4,004,325,50, excluding the issues of this case in return for providing the Plaintiff’s designated education center with services, such as the establishment

H. Meanwhile, the Defendant: (a) deemed that this case’s issue amount of KRW 1,108.71,00,000, which thisCC, the representative director of the Si/Gun/Gu, remitted to the Nonparty as the membership fee and central education training expenses, was subject to taxation related to the Plaintiff’s profit-making business; and (b) issued a disposition imposing corporate tax and value-added tax as stated in the Plaintiff’s claim (hereinafter “instant disposition imposing corporate tax on the portion of the corporation tax”; and (c) imposed value-added tax on

(i) On the other hand, in the course of the tax investigation into △B on June 1, 2007, the head of △△△ District Tax Office received KRW 427,20,000 in the aggregate of KRW 4,80,000 per private teaching institute (the amount obtained by subtracting 200,000 won from 5,000,000 won for central education training expenses) from △ in return for management consulting and operation from △ members, and received a written confirmation that the report was omitted even if the total of KRW 185,717,40,624,90 in the total of 185,717,40,624,90 in the materials, and the head of △△△△ District Tax Office sold KRW 494,00 in the total of 494,624,90 in the middle of July 18, 207.

2. Whether the imposition disposition of value-added tax on the instant case is made;

A. The plaintiff's principal

(1) The key issue amount in this case is the personal transaction between thisCC and the Nonparty, the representative director of the △△△ (ju), not the amount that the Plaintiff provided and received to the founder of a new designated education center.

(2) The Plaintiff’s approval of admission fees cannot be deemed as the offer of services subject to value-added tax, and even if the service is provided, it constitutes an object of value-added tax exemption.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) The supply of services under Article 7(1) of the Value-Added Tax Act refers to one transaction or act subject to the taxation of the Value-Added Tax Act, and the nonprofit corporation is a separate legal entity from its members and manages it by registering as its members a person who intends to join the legal entity and give management advice, or provides services by transferring technology to, or educating, its own programs constitutes a supply of services under Article 7(1) of the Value-Added Tax Act.

According to the above facts, thisCC collected admission fees and central education training expenses from the founder of a new designated education center in return for the transfer of management consulting and logical speed reading techniques, and paid them to a ever appointed B who is entrusted with education by the Plaintiff to the founder of a new designated education center. However, according to the Plaintiff’s resolution of the board of directors on May 12, 2001 and the education consignment agreement of May 15, 2001 between the Plaintiff and HaBB, it is originally paid by the Plaintiff from the founder of the designated education center and then paid the fees to the ever appointed B who was entrusted with education by the Plaintiff. However, it is merely paid directly for convenience, which constitutes the Plaintiff’s payment for the supply of services.

(2) The purpose of Article 12(1)16 of the Value-Added Tax Act is to promote public interest exempt from value-added tax under Article 12(1)16 of the Value-Added Tax Act refers to an organization with its own direct purpose of promoting the welfare of the general society, and an organization with a specific class, position or specific qualification, or with a specific purpose of promoting profit or protecting the rights of only those engaged in a specific type of business, does not constitute such organization. In order to encourage the development of reading abilities and to promote logic, the Plaintiff established with a designated educational institute as its member shall not be deemed to constitute an organization with a public interest purpose as prescribed in the above Act, and even if the Plaintiff obtained permission for incorporation with the permission of the competent authorities pursuant to Article 32 of the Civil Act and the Regulation on the Establishment and Supervision of Non-Profit Corporations under the jurisdiction of the Ministry of Education, it is merely that the Plaintiff satisfies the requirements for the establishment of an incorporated association under the private law,

(3) Therefore, it is legitimate that the Defendant imposed the value-added tax on the Plaintiff on the ground that the Plaintiff provided the founder of the designated education center with the services of learning and education management consulting and logic reading techniques and reported the key amount of the instant case as the value-added tax base, and the Defendant did not file a final report. Therefore, the Plaintiff’s above assertion

3. Whether the imposition and disposition of the corporate tax in this case is proper;

A. The plaintiff's principal

(1) The plaintiff is not a nonprofit corporation to take lessons of the amount of the dispute points in the case.

(2) The key issue amount in this case is the personal transaction between thisCC and the Nonparty, the representative director of the △△△△, and in particular, the amount of KRW 880,00,000 that thisCC remitted to △D is not related to the Plaintiff as the teaching materials cost of private payment.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) The Plaintiff’s new designated education center’s provision of services to transfer and educate logical accelerated reading techniques to the founder of a new designated education center and the entrance fee and central education training fee constitute the Plaintiff’s income.

(2) A non-profit corporation shall not be subject to corporate tax unless the income is derived from the profit-making business, and the relationship between the business and the objective business, such as whether the profit derived from the business is to achieve the proper purpose of the corporation in question, should not be considered. However, in order for the business to constitute a profit-making business, the business entity shall have the profitability or conduct the business for the purpose of profit-making (Supreme Court Decision 95Nu1435 delivered on June 14, 196).

On the other hand, according to the above evidence, the plaintiff was paid KRW 300,00 as a membership fee, KRW 5,000 as a central education training fee, KRW 5,000 as a monthly data from the operator of the designated education center, KRW 300,00 as a membership fee, KRW 300,00 as a membership fee, KRW 400,00 as a membership fee, and KRW 250,000 as a student promotional district, from KRW 200,00 as a membership fee, and KRW 250,00 as a student promotional district, from KRW 20,00 as a membership fee, from the new operator of the designated education center. As above, the plaintiff's revenue from the fees received from the education and training received from the new operator of the designated education center, as well as the membership fee received from the new members, from the new members, constitutes a business of a non-profit domestic corporation continuously conducted for a considerable period of time.

(3) Whether the taxation by estimation is appropriate or not

(A) The Defendant calculated the tax base by applying the proviso of Article 66(3) of the Corporate Tax Act and Article 104(2)1(c) of the Enforcement Decree of the same Act to standard expense rate of 37.1% relating to the pertinent type of business of the Plaintiff pursuant to Article 66(3) proviso and Article 104(2)1(c) of the same Act after having

(B) In principle, corporate tax base and tax amount should be determined by the actual amount revealed by the method of on-site investigation, and it shall be exceptionally permitted only when there is no taxpayer’s account books or documentary evidence in order to determine it by the method of on-site investigation, or when there is no other way for the tax authorities to disclose the actual amount of income without the credibility of the important portion being recorded therein or false. Thus, even if a taxpayer has no account books and records under the Income Tax Act, if the tax base can be calculated based on other documentary evidence, such as a contract, if the tax base and tax amount can be determined by the method of on-site investigation and shall not be determined by the method of on-site investigation (see, e.g., Supreme Court Decision 2006Du161

(C) First of all, while there is no direct account book or documentary evidence related to the occurrence of central education training expenses income, the determination of the tax base and tax amount of the instant disposition based on the taxation data, such as the details of remittance directly transferred by thisCC to the non-party in the course of the investigation into the Seoul Special Self-Governing Province (State), shall be based on a lawful field investigation method. Meanwhile, the plaintiff's resolution of the board of directors on May 12, 2005 and the education entrusted education between the plaintiff and the YB on May 15, 2001, which the plaintiff directly remitted the education instructor expenses to B and the non-party including Y, so the same expenses were proved by the field investigation method.

Therefore, the Defendant’s disposition of imposing corporate tax in this case is unlawful, even though the necessary expenses paid to the Nonparty, such as B, etc. from the income from the Plaintiff’s central education training expenses, are not deemed to have remaining income to be appropriated in the tax base.

(D) Next, given that it is impossible to determine the Plaintiff’s share of the Plaintiff’s membership fee income in the instant case’s key amount and classify the final membership fee income into a business year and quarterly, the reasonable amount subject to corporate tax cannot be calculated. The Defendant’s imposition disposition of corporate tax should also be revoked in entirety.

4. Conclusion

Therefore, the disposition of imposition of value-added tax is lawful, and the plaintiff's claim to seek it is without merit, but the plaintiff's claim to seek the revocation of the disposition of imposition of corporate tax is unlawful, and thus, the plaintiff's claim to seek the revocation thereof is accepted. The judgment of the court of first instance is unfair by partially accepting the defendant's appeal, and it is so modified as above.