The legitimacy of the claim that the designation of the secondary tax obligor is improper because shares were already paid.

The designation of a person liable for secondary tax payment is legitimate because he/she fails to submit other evidence proving cash flow, etc. in addition to the register of shareholders and the contract.

Article 39 (Secondary Liability for Tax Payment of Contributors)

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

We examine the grounds of appeal in comparison with the records and the judgment of the court below. Since it is clear that the grounds of appeal by the appellant fall under Article 4 of the Act on Special Cases Concerning the Procedure for Appeal, it is dismissed under Article 5 of the same Act. It is so decided as per Disposition by the assent

[Seoul Administrative Court 2006Guhap25759 (2007.01)]

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of KRW 1,492,359,140 on August 10, 2005 against the Plaintiff on August 10, 2005 is revoked.

1. Details of the disposition;

On August 10, 2005, the Defendant imposed value-added tax 1,492,359,140 won on the first preliminary return for the year of 2005, calculated by multiplying the value-added tax on the non-party company’s first preliminary return by the Plaintiff’s share ratio, on the ground that the Plaintiff is an oligopolistic shareholder of the non-party company holding 90,000 shares of 1.4 million shares issued by the non-party company (the non-party company was changed to △△△△△△△△△△△△△△) and thus, constitutes the second taxpayer (hereinafter the instant disposition imposing value-added tax).

(A) Evidence No. 1-5, Evidence No. 1, and the purport of the whole pleadings)

2. Whether the disposition is lawful;

A. The plaintiff's assertion

(1) Transfer of shares

On January 15, 2005, the Plaintiff transferred 130,000 shares to ○○○ out of 90,000 shares of a non-party company owned by the Plaintiff to 280,000 shares, and paid capital gains tax and securities transaction tax to ○○ Tax Office, which is the competent tax office.

Therefore, since the Plaintiff got out of the oligopolistic shareholder of the non-party company due to the transfer of the above shares, there is no reason to assume secondary tax liability for the amount of delinquent taxes of the non-party company.

(2) Failure to participate in the management of the non-party company

The Plaintiff was holding the shares of the non-party company for the purpose of securing the money loaned to the non-party company or the shareholders of the non-party company to △△△ and △△△△, and the non-party company did not constitute the second taxpayer for the amount of delinquent taxes.

(3) Disposition of imposition on the supply of formal goods or services;

(a)the supply of formal goods or services;

The non-party company receives only funds without the supply of goods, not through the supply of goods or services, not through the multi-stage sales of goods or services. As such, the disposition of this case imposed on the receipt of funds, which is ice the supply of goods, is unlawful.

(b)the supply of goods or services by criminal conduct;

Value-added tax is levied on the substantial supply of goods or services, and the supply of goods or services due to crimes such as fraud or embezzlement does not constitute a substantial supply of goods or services subject to civil invalidation or revocation, and thus is not subject to value-added tax.

Therefore, the instant disposition imposing value-added tax on the supply of formal goods or services through criminal acts such as ○○○ and △△△△△△△, a real operator of the non-party company, is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On April 25, 2005, the non-party company made a preliminary return of value-added 1 in 2005 with the aggregate of the output tax amount of KRW 25,502,391,675, the aggregate of the input tax amount of KRW 2,551,108,238, and the tax amount of KRW 2,295,128,349.

(2) On June 2, 2005, the Defendant imposed the value-added tax on the non-party company as the value-added tax for the first quarter of 2005,295,128,349, plus 26,124,463, plus 26,321,292,810 won for the first quarter of 2005.

(3) On August 10, 2005, the Defendant imposed 1,492,359,140 won (==2,321,292,810 X 0.6429, 10 won) by multiplying the Plaintiff’s shares (64.29%) by the 2,321,292,810 of the value-added tax amount in arrears of the non-party company, on the ground that the Plaintiff is an oligopolistic shareholder of the non-party company and the secondary tax obligor.

(4) On December 31, 2004, the Plaintiff’s ownership of 90,000 shares (holding shares 64.29%) out of 1.4 million shares of the non-party company as of December 31, 2004, in the statement of stock change (Evidence A7) and inquiries about the current status of shareholders by corporation (Evidence B 3).

(5) On January 15, 2005, the list of shareholders (Evidence A 8-2) states that 300,000 weeks (21.43%) among the shares of the non-party company, among the shares of the non-party company, the Plaintiff owns 30,000 weeks (21.43%), 490,000 weeks (35%) by the Plaintiff, 000 weeks (20%) by ○○, 100,000 weeks (14.28%) and 130,000 weeks (9.29%) by △△△△.

(6) On January 15, 2005, the Plaintiff stated that the Plaintiff transferred 280,000 shares of a non-party company to ○○○○○ on January 15, 2005, and 130,000 shares to △△△△△△△△, respectively.

(7) The Plaintiff filed a return on May 10, 2005, respectively, on May 10, 2005, which was after the statutory deadline for filing of securities transaction tax ( February 10, 2005), and the preliminary return date of capital gains tax ( May 31, 2005), and paid securities transaction tax on July 28, 2005.

(8) At the time of filing an objection, the Plaintiff asserted the date and time of the transfer of shares of the non-party company on December 2004, and submitted a share transfer agreement by asserting that it was January 15, 2005 at the time of filing an objection.

(9) On May 10, 2004 (registration May 11, 2004), the Plaintiff was appointed respectively to the director of the non-party company, the representative director of the non-party company on July 20, 2004 (registration July 21, 2004), and on March 24, 2005, resigned the director and the representative director (registration date).

(10) On March 24, 2005, the Plaintiff was appointed as an auditor of the non-party company and maintained his position until now.

(11) In the investment contract concluded on May 3, 2004 between the Plaintiff and the dedicated deposit, the purpose of B (Plaintiff) is to ensure the management stability of the company by investing funds in the company and to promote the development of the company by participating in the management (Article 1). In this case, B (Plaintiff) shall register B as a legal director of the non-party company, and its position shall be vice-chairperson (Article 4).

(12) The Plaintiff was working in the position of the vice-chairperson in the non-party company, and inspected and reported the management status of the non-party company from time to time by its employees, and received KRW 43 million in total as wages in 2004.

(13) The non-party company received KRW 990,00 from a person who wishes to become a salesperson and provided low-price goods as a price, and accordingly registered as a salesperson.

(14) Seoul ○○ District Prosecutors’ Office was indicted on September 23, 2005 on the charge of violating the Act on Fraud and Door-to-Door Sales, etc., relating to the non-party company’s business.

(15) On July 26, 2005, the Seoul ○ District Court issued a summary order of KRW 7 million to the Plaintiff on a charge of violating the Door-to-Door Sales, etc. Act relating to the business of the non-party company.

(A) Evidence Nos. 1 to 22, and 1 to 4, respectively, and the purport of the whole pleadings)

D. Determination

(1) As to the assertion of stock transfer

In full view of the following circumstances, the Plaintiff’s assertion on this part cannot be accepted, since it cannot be seen that the Plaintiff’s shares of the non-party company were legitimately transferred to ○○○, etc. on January 15, 2005.

(A) In light of the fact that the number of ○○○○○ on the register of shareholders does not coincide with the number of stocks in the share acquisition agreement, the above evidence alone seems insufficient to recognize the fact of transfer of Plaintiff’s shares, in light of the fact that the number of ○○○○ on the register of shareholders in the register of shareholders (a evidence No. 8-2) and the share acquisition agreement (a evidence No. 3-2) on the register of shareholders was

(B) The fact that the Plaintiff failed to submit objective evidentiary data, such as financial data proving the transfer of shares, in addition to the above shareholder registry and the stock acquisition agreement.

(C) The fact that there is no reason to transfer the above shares to ○○○ et al. when the loan was not fully refunded if the loan was made for the purpose of collateral for the loan to the non-party company shares held by the Plaintiff.

(D) The fact that the Plaintiff reported the securities transaction tax to be paid from February 10, 2005 to May 10, 2005, which is the statutory deadline for filing the securities transaction tax.

(E) At least two months after the date of the transfer of the instant shares, or on March 24, 2005, the Plaintiff resigned from the director and the representative director of the non-party company, and even thereafter, has maintained the audit position of the non-party company until now.

(f) The Plaintiff alleged that the date and time of the transfer of shares of the nonparty company was around December 2004 at the time of filing an objection, and the Plaintiff filed a written contract for the transfer of shares at that time, claiming that it was January 15, 2005.

(2) As to the non-party company's non-participation in management

Article 39(1)2(a) of the Framework Act on National Taxes provides that the secondary tax liability under Article 39(1)2(a) of the same Act requires the actual exercise of rights to shares or equity shares, but does not require the exercise of management rights by oligopolistic shareholders. Thus, the Plaintiff’s assertion that the Plaintiff did not exercise management rights by Nonparty Company is without merit without further review.

However, even if the plaintiff was employed as the representative director of the non-party company, in light of the investment contract between the plaintiff and Kim ○○, the contents of the investment contract between the plaintiff and the non-party company, and the circumstances where the plaintiff received benefits from the non-party company, the plaintiff does not seem to have taken part in the management of the non-party company at all. Therefore,

(3) As to the assertion on the supply of goods and services in formality

(A) As to the assertion on the supply of goods or services in formality

In general, the burden of proof regarding the facts requiring taxation in a lawsuit seeking revocation of a tax imposition disposition shall be deemed to be a taxable person. However, if it is revealed that the facts alleged to have been subject to taxation in light of the empirical rule in the course of a specific lawsuit, it cannot be readily concluded that the pertinent tax disposition was an unlawful disposition that failed to meet the requirements for taxation, unless the other party proves that the facts in question were not subject to application of the empirical rule (see, e.g., Supreme Court Decisions 97Nu9895, Mar. 24, 1998; 97Nu2429, Oct. 24, 197).

① In light of the fact that the instant disposition was based on the scheduled return of the value-added tax of the non-party company, ② the Plaintiff served as the representative director of the non-party company until March 24, 2005 as the major shareholder of the non-party company, ③ the non-party company provided multi-stage salesmen with goods at a low price below the sales price to the multi-stage salesman, etc., it is presumed that the non-party company actually provided low-price goods to the multi-stage salesman, etc., and there is insufficient evidence to conclude that the instant value-added tax was imposed only on the money transaction without any supply of goods or services, and there is no other evidence to acknowledge this otherwise. The Plaintiff’s assertion on this part is without merit.

(B) As to the assertion that goods or services are supplied by criminal acts

Whether a person becomes an income subject to imposition shall be deemed to have a means to control and manage benefits in reality in terms of economic aspect, and it is sufficient to determine that there is a tax-bearing force, and the legal assessment of the causal relationship in which the person has gained such income does not necessarily have to be lawful and effective (see, e.g., Supreme Court Decisions 95Nu758, Nov. 10, 1995; 81Nu136, Oct. 25, 1983).

Therefore, this part of the Plaintiff’s assertion on the premise that the supply of goods or services by criminal act is not subject to value-added tax because it is an act subject to civil invalidation or cancellation, and is not subject to substantial supply of goods or services, is without merit without further review.

3. Conclusion

Thus, the defendant's disposition of this case is legitimate, and the plaintiff's claim is dismissed as per Disposition.

public official law, order of law,

Framework Act on National Taxes (amended by Act No. 7930 of April 28, 2006)

Article 39 (Secondary Liability for Tax Payment of Contributors)

(1) Where the property of a corporation (excluding a corporation whose stocks are listed on the Korea Stock Exchange) is not sufficient to cover the national taxes, additional dues, and delinquent dispositions imposed on or to be paid by the corporation, the persons falling under any of the following subparagraphs as of the date on which the liability to pay the national taxes is established shall be subject to the secondary liability to pay the shortage: Provided, That in the case of an oligopolistic stockholder under subparagraph 2, it shall not exceed the amount calculated by multiplying the amount obtained by dividing the shortage by the total number of stocks issued (excluding non-voting stocks; hereafter the same shall apply in this Article) or total amount of investment of the corporation, by the number of stocks owned (excluding non-voting stocks) or investment amount (in the case of

1. General partners;

2. An oligopolistic stockholder who falls under any of the following items:

(a) A person who exercises a substantial right over the stocks or investment shares in excess of 51/100 of the total issued stocks or total investments of the relevant corporation;

(b) An honorary chairperson, chairperson, president, vice president, senior managing director, managing director, director, or any other person who actually controls the management of the corporation, notwithstanding the title thereof;

(c) The spouse (including the person in de facto marital relations) of the persons under items (a) and (b) and the lineal ascendants and descendants sharing their living

(2) omitted.