Cho High Court Decision 2010Du2819 ( November 17, 2010)

It does not constitute "a case of evading national taxes by fraudulent or other unlawful means."

The exclusion period of imposition should be five years, since it cannot be said that it constitutes "a case of evading national tax by fraud or other unlawful act with the act of failing to pay the corresponding tax by passive omission of the tax return."

2010Guhap467777 Such revocation as value-added tax

Maximum XX

O Head of tax office

June 9, 2011

June 23, 2011

1. Defendant XX Head of the tax office’s imposition of KRW 187,181,520 on February 1, 2010 against the Plaintiff and KRW 93,827,870 on the first term value-added tax for the second term of 2001 and KRW 11,382,140 on the global income tax for the year 201, and for the first term of 2002 by the head of the tax office on February 8, 2010 and KRW 34,772,540 on the global income tax for the year 201 and global income tax for the year 202.

2. The costs of lawsuit are assessed against the Defendants.

On August 18, 2010, the appeal was not accepted, and the Tax Tribunal dismissed the appeal on November 17, 2010.

[Ground of recognition] Facts without dispute, entry in Gap evidence 1, 3 through 5, and 10 (in the case of documentary evidence with several numbers, including each number, unless the number is separately specified) and the purport of the whole pleadings

2. Determination on the lawfulness of each of the dispositions of this case

A. Summary of the plaintiff's assertion

Each of the dispositions of this case shall be revoked on the grounds that the disposition of this case is either ambiguous or unlawful for the following reasons.

(1) Each disposition of this case imposed the exclusion period of the imposition of national taxes on the following grounds: (a) five to seven years have elapsed from the date on which the value-added tax and the comprehensive income tax are to be imposed.

(2) Since △△△D Co., Ltd. that received a contract for the new construction of the building of this case (hereinafter “△△D”) ceased the construction, the Plaintiff provided labor services to △ as a field manager in the course of directly performing the remaining construction after suspending the construction, and the Plaintiff did not independently provide the said services, and there is no ground to deem that the Plaintiff received a payment of the construction cost of 1.8 million won from △, and thus, there is no object of taxation of each of the instant dispositions.

(3) The director of the Seoul Regional Tax Office decided to convert the acquisition value in calculating transfer income tax on the ground that it is unclear whether the UAA actually paid the price for the construction of the building of this case to the Plaintiff. The Defendants’ imposition of each of the instant dispositions on the grounds that the Defendants failed to file a return on the said amount on the premise of actual payment of the price for the construction of the new building of this case is unreasonable in terms of equity

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination as to whether the exclusion period for the imposition of national taxes is expired

(1) According to Article 26-2(1) of the former Framework Act on National Taxes (amended by Act No. 10219, Mar. 31, 2010; hereinafter “former Framework Act on National Taxes”), national taxes shall not be imposed after the lapse of five years from the date on which they can be imposed ( Subparagraph 3); where only every taxpayer evades national taxes, is refunded, or deducted by fraudulent or other unlawful means, ten years ( Subparagraph 1); where the taxpayer fails to file a tax base return by the statutory due date of return, seven years ( Subparagraph 2) shall not be imposed; and where the taxpayer fails to file a tax base return by the statutory due date of return, the imposition of national taxes after the expiration of the exclusion period of the imposition of national taxes shall be null and void (see, e.g., Supreme Court Decision 2008Du10522, Dec. 23, 2010).

In this regard, "Fraud or other unlawful act" under Article 26-2 (1) 1 of the former Framework Act on National Taxes can be interpreted as a uniform meaning with "Fraud or other unlawful act" under Article 3 of the Punishment of Tax Evaders Act. "Fraud or other unlawful act" here refers to an affirmative act that makes it impossible or considerably difficult to impose and collect taxes by making false entries in books, such as preparation and receipt of false evidence or false documents, destruction of books and records, concealment of assets, fabrication or concealment of income, profits, profits, acts and transactions, or failure to intentionally prepare or keep books, or failure to intentionally prepare or keep books, or a statement, a list of invoices or invoices, a list of total tax invoices, a manipulation of a list of total tax invoices, an operation of facilities for enterprise resource planning, an operation of electronic tax invoices, or any other act or unlawful act by fraudulent means, which falls under any of the following acts (Article 3 (6) of the Punishment of Tax Evaders Act).

In full view of the above provisions, the term "Fraud or other unlawful act" under Article 26-2 (1) 1 of the former Framework Act on National Taxes means a deceptive scheme or other active act that makes it impossible or considerably difficult to impose and collect taxes as a means of tax evasion, and without accompanying such an act, the fact that a tax return under the tax law is not simply filed or a tax base is underreported by underreporting, does not constitute an unlawful act (see, e.g., Supreme Court Decision 2005Do370, Mar. 25, 2005).

Meanwhile, according to Article 26-2(5) of the former Framework Act on National Taxes and Article 12-3(1)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 22038, Feb. 18, 2010), the exclusion period for imposition of national taxes, in cases of national taxes, the tax base and tax amount of which are reported, shall be calculated from the day following the deadline for filing a return or a deadline for filing a return on the tax base and tax amount of the relevant national taxes. Article 70(1) of the former Income Tax Act (amended by Act No. 10175, Mar. 22, 2010) provides that a resident having global income in the relevant taxable period, shall file a return on the global income tax base with the head of the tax office having jurisdiction over the place for tax payment from May 1 to 31 of the year following the relevant taxable period, and Article 19(1) of the former Value-Added Tax Act (amended by Act No. 10409, Dec. 27, 205) provides that the tax base and tax amount for each taxable period.

(2) According to the purport of each of the statements and arguments in Evidence Nos. 2, 3, and 5 returned to the instant case, it can be acknowledged that the UA received each of the tax invoices of 395,00,000 supply price for the construction of the instant building from △△D through the Plaintiff in the second half of 2001, and thereby received one tax invoice of 205,000,000 supply price for the first half of 202, and thereby received the refund of value-added tax. However, in full view of the overall purport of the arguments in Evidence Nos. 6, 11, and 4, the dispute between the Plaintiff and △△△△△△△△△ on July 30, 201, the construction contract for the instant building was concluded between the Plaintiff and △△△△△△△△△△ on the basis of the overall purport of the arguments, and thereafter, the dispute between the Plaintiff and △△△△△△△△ on the basis of the construction work and outer walls of the instant building.

According to each of the above facts, it is difficult to view that the Plaintiff directly supplied the construction work of the building of this case for business purposes, while falsely issuing each of the above tax invoices in the name of △△D. Rather, each of the above tax invoices in the name of △△D were issued with respect to the supply price of the construction work provided to △D to △D, and it is reasonable to view that the Plaintiff was not related to whether the Plaintiff independently supplied the construction work to △D for business purposes, “after the discontinuance of construction work of △D,” which is the first issue in the instant case.

Furthermore, in light of the aforementioned legal principles, even if the Plaintiff did not independently supply the remainder of the construction work on the instant building and did not file a final return on the tax base of value-added tax and global income, as alleged by the Defendants, it cannot be said that the Plaintiff’s passive omission of the said return and failure to pay the corresponding tax constitutes “the case of evading national taxes by fraud or other unlawful act” as provided by Article 26-2(1)1 of the former Framework Act on National Taxes, and there is no other circumstance to deem that the Plaintiff, as the means of tax evasion, committed a deceptive scheme or other unlawful act that makes it impossible or significantly difficult to impose and collect taxes as a means of tax evasion.

Therefore, the exclusion period of imposition of each global income tax for the second term portion in 2001, each value-added tax for the first term portion in 2002, and each global income tax for the year 2001 and 2002 against the plaintiff should be deemed five years in accordance with Article 26-2(1)3 of the former Framework Act on National Taxes.

(3) Ultimately, each of the instant dispositions was imposed on Plaintiff from January 26, 2002 and July 26, 2002, which was the initial date of the exclusion period for imposition of the value-added tax for the second period of 2001 and the first period of 2002, and from July 26, 2002, which was the initial date of the exclusion period for imposition of each of the instant global income tax for the tax years 2001 and 2002, five years have elapsed from June 1, 2002, which was the initial date of the exclusion period for imposition of each of the instant global income tax for the tax years 2002 and 2002, respectively. Accordingly, each of the instant dispositions was unlawful since the imposition period of each of the instant dispositions exceeded the exclusion period for imposition of the national tax.

3. Conclusion

Therefore, the plaintiff's claim of this case is without merit to examine the remaining points, and it is so decided as per Disposition.