[1] Whether Article 3 (1) of the Customs Act on the preferential collection of customs duties for the collection of value-added tax on imports of goods applies (negative)

[2] Legislative intent of Article 35(1)3 of the Framework Act on National Taxes and the scope of “national taxes imposed on the property” under the proviso of Article 35(1)3 of the same Act

[3] Whether the value-added tax on the import of goods constitutes the corresponding tax under Article 35 (1) 3 of the Framework Act on National Taxes (negative)

[4] The time when the liability to pay value-added tax on the import of goods becomes final and its statutory date

[1] Article 4 (1) of the Customs Act on the preferential application of the provisions of the Customs Act only provides that the first application of the provisions of the Customs Act on the imposition, collection, refund, disposal, etc. of internal taxes imposed and collected by the head of the relevant customs office with respect to imported goods may facilitate the simplification of tax payment convenience and its procedures, and it does not provide for the first priority to the application of the provisions of the Customs Act on the substantive matters. Article 3 (1) of the same Act provides for the collection of customs duties on the goods subject to the payment of customs duties prior to other taxes, public charges, and claims. Thus, since Article 23 (3) of the Value-Added Tax Act provides that the value-added tax on the import of goods shall be collected in the same manner as the customs duties are collected, Article 3 (1) of the Customs Act does not apply to the collection of value-added taxes which

[2] Article 35(1)3 of the Framework Act on National Taxes provides that the legislative intent of Article 35(1)3 of the same Act is to properly harmonize the judicial request to guarantee the safety of transaction and the public interest request to secure the realization of tax claims with respect to the secured real rights accompanying the public disclosure. Thus, even if the pertinent tax has priority over the claims secured by the secured real rights, it shall not infringe on the essential contents of the secured real rights. Therefore, the term “national tax imposed on the property” under the proviso of the same Article (so-called “national tax”) refers only to national tax imposed by recognizing the ability to pay for the property owned by the person who acquired the secured real rights can be expected to impose on the property in the future

[3] The value-added tax is a tax imposed on the value-added tax that is created in all stages in which goods or services are produced, supplied or distributed, and is imposed by recognizing the ability to pay taxes in the fact that goods or services are purchased and consumed as a tax base. Thus, it is entirely different from the nature of the pertinent tax under Article 35(1)3 of the Framework Act on National Taxes, which recognizes the capacity to pay taxes, and there is no reason to regard the value-added tax on the import of goods only exercising the right to impose taxes for the simplification of the tax convenience and collection procedure.

[4] According to the proviso of Article 21(1)7 of the Framework Act on National Taxes, Article 22(1) of the same Act, and Article 10-2 of the Enforcement Decree of the same Act, the liability to pay value-added tax on the import of goods is fixed at the time when the head of a customs office files a tax base and tax amount. As such, the statutory due date for determining the priority of secured claims such as mortgage pursuant to Article 35(1)3(a) of the Framework Act on National Taxes shall be deemed the time of the determination. However, in cases where the tax base and tax amount are not reported, or the government determines or decides the tax base and tax amount due to any error or omission in the details of the declaration, the liability to pay taxes shall be determined at the time of determination, and such notified tax amount shall be deemed the date on which the statutory due date is delivered

[1] Articles 3(1) and 4(1) of the Customs Act, Article 23(3) of the Value-Added Tax Act, Article 71(1) of the Enforcement Decree of the Value-Added Tax Act / [2] Article 35(1)3 of the Framework Act on National Taxes, Article 18(1) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 18172, Dec. 30, 2003; Article 35(5) of the current Framework Act on National Taxes) / [3] Article 35(1)3 of the Framework Act on National Taxes, Article 18(1) (amended by Presidential Decree No. 18172, Dec. 30, 203; Article 35(5) of the former Enforcement Decree of the Framework Act on National Taxes) / [4] Article 21(1)7 and Article 22(1)3 of the Framework Act on National Taxes; Article 35(1)3 of the Enforcement Decree of the Framework Act on National Taxes

[1] Supreme Court Decision 78Da1689 decided Feb. 27, 1979 (Gong1979, 11850), Supreme Court Decision 2005Du10125 decided Mar. 9, 2006 (Gong2006Sang, 670) / [2] Supreme Court en banc Decision 96Da23184 decided Mar. 18, 199 (Gong199Sang, 715), Supreme Court Decision 2001Da44376 decided Nov. 10, 2003 (Gong203Sang, 606), Supreme Court Decision 2005Du9088 decided Nov. 24, 2005 (Gong2006Sang, 408) / [3608 decided Nov. 27, 2008] Supreme Court Decision 2008Da53789 decided Nov. 29, 2005

Korea

Korea Asset Management Corporation (Law Firm Dudi, Attorneys Kim Jung-chul et al., Counsel for the plaintiff-appellant)

Daegu High Court Decision 2003Na10026 delivered on January 12, 2005

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

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1, 2, and 3

Article 4 (1) of the Customs Act on the preferential application of the provisions of the Customs Act provides that the first application of the provisions of the Customs Act on the imposition, collection, refund, disposal, etc. of internal taxes imposed and collected by the head of the relevant customs office on imported goods shall be made to the effect that the first application of the provisions of the Customs Act on the imposition, collection, refund, disposal, etc. of internal taxes imposed and collected by the head of the relevant customs office may facilitate the simplification of the tax payment convenience and its procedures, and shall not give priority to the application of the provisions of the Customs Act on substantive matters (see Supreme Court Decision 2005Du10125, Mar. 9, 2006). Article 3 (1) of the Customs Act provides that the collection of customs duties on imported goods shall take precedence over other taxes, public charges, and claims arising from the unique nature of the customs duties (see Supreme Court Decision 78Da1689, Feb. 27, 197).

In the same purport, the court below is just in holding that Article 3 (1) of the Customs Act does not apply to the collection of the value-added tax on the instant machinery and the additional dues thereon (hereinafter “value-added tax, etc.”), which is imported goods, and there is no error in the misapprehension of legal principles as to the interpretation of Articles 3 (1) and 4 (1) of the Customs Act, the nature of value-added tax on the import of goods, and the interpretation of the collector.

2. As to the fourth ground for appeal

Article 35(1)3 of the Framework Act on National Taxes aims to properly harmonize the judicial request to guarantee transaction safety and the public interest request to realize tax claims with respect to the secured real rights accompanying the public disclosure. Thus, even if the pertinent tax is priority over claims secured by the secured real rights, it shall not be infringed on the essential contents of the secured rights. Therefore, the term “national tax imposed on the property” in the proviso of Article 35(1)3 of the same Act refers to a national tax imposed solely on the property owned by the person who acquires the secured real rights, which can be expected to be imposed on the future property to a considerable extent and can be predicted to be imposed on the property in the future, and only on the property owned by the person who owns the pertinent property by recognizing the taxable capacity (see, e.g., Supreme Court en banc Decision 96Da23184, Mar. 18, 199; Supreme Court Decision 2001Da44376, Jan. 10, 2003).

A value-added tax is a tax imposed on the basis of value-added generated in all stages of production, provision, or distribution of goods or services, and constitutes so-called consumption tax imposed by recognizing the capacity to pay taxes in fact to purchase and consume the goods or services. Therefore, the ownership of the pertinent property itself is entirely different from the nature of the pertinent tax under Article 35(1)3 of the Framework Act on National Taxes, which recognizes the capacity to pay taxes, and the value-added tax on the import of goods merely exercising the authority to impose and collect taxes for the simplification of the convenience of tax payment and collection procedures is not different. In addition, Article 18(1) of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 18172, Dec. 30, 2003) provides that “national taxes imposed on the goods” under Article 35(1)3 of the former Enforcement Decree of the Framework Act on National Taxes shall be inheritance tax, gift tax, and revaluation tax, and it is clear that the value-added tax on the import of goods does not constitute “national taxes imposed on the property” under the above provision.

In the same purport, the court below is just in holding that the value-added tax of this case does not fall under the above provision, and there is no error in the misapprehension of legal principles as to the pertinent tax as otherwise alleged in the ground of appeal

3. As to the grounds of appeal Nos. 5, 6, and 7

According to the proviso of Article 21(1)7 of the Framework Act on National Taxes, Article 22(1) of the same Act, and Article 10-2 of the Enforcement Decree of the same Act, the liability to pay value-added tax on the import of goods is finalized at the time when the head of a customs office files a return on the tax base and amount of tax. As such, the statutory due date for determining the priority of secured claims such as mortgage pursuant to Article 35(1)3(a) of the Framework Act on National Taxes is also deemed the time of the determination. However, in cases where the government determines or decides the tax base and amount of tax due to absence of the tax base and amount of tax or errors or omissions in the details of the return, etc., the duty to pay taxes becomes final and conclusive at the time of determining the tax base and amount of tax and the notified amount of tax shall be deemed the date of sending the tax payment notice (see Supreme Court Decisions 97Da12037, Sep. 8, 198; 98Da53646, Jan. 28, 2000).

In light of the above legal principles and the records, the court below acknowledged the fact that ○○○ Co., Ltd. (hereinafter “ ○○○○”) declared that the value-added tax was exempted on the instant machinery as the bonded construction goods under Article 106(2)4 of the Restriction of Special Taxation Act at the time when the instant machinery was carried into ○○○ Construction Construction Work site from a foreign country. However, since ○○○○’s default, etc., it did not meet the requirements for the exemption of value-added tax under Article 106(2)4 of the Restriction of Special Taxation Act on September 27, 2001, on the grounds that the instant machinery did not meet the requirements for exemption of value-added tax under Article 106(2)4 of the Restriction of Special Taxation Act. The court below determined that the statutory date of the value-added tax of this case was September 27, 2001, which is not the date of the import declaration, and it did not err in the misapprehension of legal principles as to the interpretation and increased additional tax amount.

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 Kim Young-ran (Presiding Justice)