act of not recording in books for a long period of time in the name of family account constitutes fraud or other improper act.

It is reasonable to see that the fee has been paid by the overseas company for a long time in the name of family and the total amount of the fee is not entered in the account book, etc., and it is reasonable to 10 years of the exclusion period for imposition as it constitutes fraud or other illegal acts.

Article 26(2) of the Framework Act on National Taxes

2018Guhap17381 Revocation of Disposition of Imposing global income tax, etc.

IsaA

BB Head of the tax office,CC Head of the tax office

2019.08.20

oly 22, 2019

1. Of the Plaintiff’s lawsuit against Defendant BB director, the part of the Plaintiff’s claim for revocation of the entry column is dismissed. The Plaintiff’s claim for revocation is dismissed as follows: (a) imposition of penalty tax for unfair underreporting of global income tax for the tax years 5, 6-2012 and 2013.

2. The plaintiff's remaining claims against the defendant BB director and the defendantCC director's claims are dismissed.

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

Cheong-gu Office

The imposition of each global income tax (including additional taxes) accrued from No. 1 through No. 4-208 through No. 2011 among the details of the attached Form 1’s disposition against the Plaintiff on January 3, 2018 shall be revoked, and each part of the “in the disposition of imposition of unfair and under-reported global income tax for each of the tax years 5, 6-201 and 2013” shall be revoked. The imposition of each of the respective value-added tax (including additional taxes) shall be revoked by the head of the relevant tax office on January 3, 2018, which was made by the head of the relevant tax office on the Plaintiff on January 3, 2018.

1. Details of the disposition;

A. From March 1, 2004, the Plaintiff has been engaged in wholesale trade business and consulting business for an overseas manufacturer company of aircraft parts by importing aircraft parts under the trade name of ○○○○○○○○ 36 from March 1, 2004 to ○○○○ 36.

B. The Commissioner of the National Tax Service, from October 18, 2017 to December 8, 2017, confirmed that the Plaintiff’s account in the name of the Plaintiff and the Plaintiff’s spouse and children (hereinafter “instant family name”) did not report the profits from the consulting fees between 2007 to 2016, and notified the Defendants of the relevant taxation data.

C. On January 3, 2018, Defendant BB director of the tax office revised and notified the Plaintiff of KRW 171,928,80 as the total global income tax (including additional tax) for the year 2008 through 2011, 25,173,030 as the global income tax for the year 2012, and KRW 1,013,229 as the additional tax for the unlawful underreporting for the global income tax for the year 2013 (hereinafter collectively referred to as “the imposition disposition of global income tax of this case”; and the imposition disposition of the additional tax for the unlawful underreporting of the tax amount for the global income tax for the year 2013).

D. On January 3, 2018, the director of the tax office issued a notice of correction and notification of the total amount of KRW 3,274,950 (including additional tax) of each value-added tax (including additional tax) between February 2, 2007 and February 2, 2011 to the Plaintiff on January 3, 2018 (hereinafter “instant disposition of imposition of value-added tax”, and “the instant disposition” refers to the “disposition of imposition of global income tax” and “the instant disposition”).

E. On April 4, 2018, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition (it stated only KRW 171,928,800 of global income tax for the year 2007 through 2011, and KRW 3,274,950 of global income tax for the year 207 through 2011), and the Tax Tribunal dismissed the appeal on October 5, 2018.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 to 5 (including paper numbers), the purport of the whole pleadings

2. Judgment on the main defense of this case

A. The parties' assertion

Since Defendant BB Head of the tax office did not go through the necessary pre-trial procedure on the imposition of the unfair underreporting penalty tax in this case, the part of the Plaintiff’s lawsuit against Defendant BB Head of the tax office seeking the revocation of part of the imposition of the unfair underreporting penalty tax in this case is unlawful.

On the other hand, the Plaintiff asserts that the disposition of imposition of penalty tax for unjust underreporting is related to the disposition of this case and that the Tax Tribunal has already received the decision of the Tax Tribunal on the disposition of this case, and that the disposition of imposition of penalty tax for unjust underreporting may be subject to administrative litigation without going through the procedure of the preceding trial pursuant to Article 18 (3)

B. Determination

1) Although Article 18(3) of the Administrative Litigation Act does not apply to a tax lawsuit pursuant to the provisions of the Framework Act on National Taxes, the provisions of Article 18(3) of the same Act does not apply. However, if there are justifiable grounds, such as where two or more administrative dispositions for the same purpose were conducted in a phased and advanced manner, and are related to each other, or where the tax authority changed the taxation disposition subject to such disposition during the proceeding of a tax lawsuit and the grounds for illegality are common, or where several persons are subject to the same obligation through the same administrative disposition, the preceding disposition or where one of the relevant taxpayers is given an opportunity for the Commissioner of the National Tax Service and the Tax Tribunal to re-determine the basic facts and legal issues, and where it appears that the taxpayer would be harsh to have caused the taxpayer to undergo the preceding trial procedure, the taxpayer may file an administrative lawsuit claiming the revocation of the taxation disposition without undergoing the preceding trial procedure (see, e.g., Supreme Court Decision 9Du1557, Sept. 2

2) In light of the above legal principles, the disposition of this case and the disposition of imposition of unfair underreporting additional tax of this case are common in that the issue in this case is whether the plaintiff's act constitutes "Fraud or other unlawful act". It does not coincide with the individual transaction that becomes a different issue in the taxable year. It is difficult to say that the statement in the evidence No. 2 of this case sufficient opportunity for the plaintiff to determine facts and legal issues that are the basis of the disposition of imposition of unfair underreporting additional tax of this case to the tax Tribunal in the previous trial procedure of the disposition of this case, and there is no reason to deem that it is harsh for the plaintiff to be subject to separate trial procedure for the imposition of unfair underreporting additional tax of this case. Thus, the plaintiff cannot file a lawsuit seeking revocation of the disposition of imposition of unjust underreporting additional tax of this case without going through its own prior trial procedure.

3) Therefore, the part of the Plaintiff’s lawsuit against Defendant BB head of the tax office seeking partial revocation of the imposition of unfair underreporting penalty tax in this case is unlawful.

3. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

The Plaintiff received consulting fees from the family name account of this case for business convenience, not for concealing business income. Thus, the Plaintiff’s failure to report and pay the global income tax and value-added tax of this case does not constitute a case where the Plaintiff under-reported the tax base and tax amount due to fraud or other unlawful act. Therefore, the disposition of this case imposed on the Plaintiff by applying the exclusion period of ten years, even though the exclusion period of ten years should be applied to the Plaintiff.

B. Relevant statutes

Attached Form 2 shall be as shown in attached Table 2.

C. Determination

1) The exclusion period of national tax assessment is five years from the date when the national tax can be imposed (Article 26-2(1)3 of the former Framework Act on National Taxes). In the event a taxpayer evades national tax, or obtains a refund or deduction by fraudulent or other unlawful means, it is ten years from the date when the national tax can be imposed (Article 26-2(1)1 of the former Framework Act on National Taxes). Here, the term “Fraud or other unlawful acts” refers to deception or other active acts that make it impossible or considerably difficult to impose and collect taxes impossible (Article 12-2(1) of the former Enforcement Decree of the Framework Act on National Taxes), and Article 3(6) of the Punishment of Tax Evaders Act. Therefore, it is different

Although it does not constitute mere failure to report under the tax law or making a false report without accompanying acts, in cases where the circumstance where the intention of active concealment appears, such as failure to report or underreporting the taxable object and intentionally failing to enter the income or sales in the account book, etc., it may be recognized that the imposition and collection of taxes are impossible or remarkably difficult (see Supreme Court Decision 2013Do13829, Feb. 21, 2014).

2) In the case of this case, the following circumstances can be acknowledged in light of the purport of the entire evidence presented earlier, i.e., (i) the Plaintiff received consulting fees paid by an overseas manufacturer for a period of 10 years or longer in the name of the family of this case, and (ii) the Plaintiff did not enter the full amount in the account book despite the ratio of the above consulting fees to the income amount. (iii) The Plaintiff asserted that the Plaintiff continued to use the Plaintiff’s account under the name of the Plaintiff’s spouse because it was difficult to change the name of the existing account due to the nature of the transaction because it was the Plaintiff’s business registration in 2004 and continued to operate the same business in the name of the Plaintiff. However, there is no evidence to deem that it is difficult to change the name of the account compared to other transaction, and (iv) the Plaintiff’s spouse received consulting fees from the Plaintiff’s spouse for a long time until December 2005, and (iii) the Plaintiff’s so-called “family company” did not receive any more trust in the name of the Plaintiff’s family member.

3) Therefore, the ten-year exclusion period is applied to the Plaintiff, and the Defendants were subject to the instant disposition against the Plaintiff on January 3, 2018, which was prior to the lapse of the said period. As such, the Plaintiff’s assertion is without merit.

4. Conclusion

Therefore, the part of the Plaintiff’s lawsuit against Defendant BB Tax Director seeking revocation of the imposition of the unfair under-reported additional tax is unlawful, and thus, it is dismissed. The remainder of the claim against Defendant BB Tax Director and the claim against DefendantCC Tax Director are dismissed as it is without merit. It is so decided as per Disposition.