CONTENTS
- 1. Tax Litigation | Definition
- - Structure of Tax Litigation: Plaintiff and Defendant
- 2. Tax Litigation | Representative Types
- 3. Tax Litigation | Tax Appeal System
- - Objection
- - Request for Review
- - Filing for Administrative Adjudication
- - Administrative Litigation (Tax Litigation)
- 4. Tax Litigation | Procedures
- 5. Tax Litigation | Core Issues and Points to Note
- - Methods for Self-Representation in Tax Litigation
- 6. Tax Litigation | Key Issues
1. Tax Litigation | Definition
Tax litigation is a litigation procedure that a taxpayer files to obtain correction when they determine that they have received an unjust disposition related to taxes.
Representative examples include a revocation lawsuit against a tax imposition disposition, an action for confirmation of nullity based on an assertion that the exclusion period for imposition has elapsed, and a lawsuit claiming payment of a refund amount.
Because a tax is a public charge that the State or a local government imposes and collects on the people on the basis of statute, the procedure for objecting to it also proceeds within a strict legal structure.
Tax litigation is not merely a matter of dealing with tax issues; it is a significant procedure for the remedy of rights aimed at guaranteeing property rights under the Constitution, and it is therefore highly important.
Structure of Tax Litigation: Plaintiff and Defendant
Unlike an ordinary civil lawsuit, a tax lawsuit is a dispute over the exercise of public authority, so the Administrative Litigation Act applies, and it generally proceeds as an appeal litigation (a revocation lawsuit, a lawsuit for confirmation of invalidity, etc.).
▶Plaintiff
The plaintiff in a tax lawsuit is a taxpayer who objects to various tax imposition dispositions such as national taxes, local taxes, and customs duties.
When contesting the imposition of taxes, the taxpayer may, through a tax lawsuit, request a legal determination on an unreasonable or excessive tax amount.
The plaintiff may be an individual taxpayer or a corporation, and where they raise dissatisfaction with a tax imposition or disposition, they may file a tax lawsuit to correct it.
▶Defendant
In a tax lawsuit, the defendant is the tax authority, mainly the National Tax Service, a local tax office, customs, and the like.
The defendant is the administrative agency that made the tax imposition disposition, and it argues and defends in the lawsuit that its disposition is justified.
Although the defendant in a tax lawsuit is the tax authority, legally the court determines the lawfulness of the disposition.
2. Tax Litigation | Representative Types
We will look at the representative types of tax litigation.
1. Litigation to revoke an imposition disposition
This is the most common type of tax litigation, and it is a lawsuit seeking the revocation of a tax imposed by the head of a tax office where the tax is judged to be unlawful or improper.
Example: Where Company A properly filed its value-added tax return but the tax office imposed an additional tax on the ground of an omission in sales, it files a lawsuit to revoke the imposition disposition in order to contest this.
2. Litigation to confirm invalidity due to expiration of the exclusion period for imposition
There is a certain statutory time limit for the imposition of tax (the exclusion period for imposition).
A disposition imposed beyond this period may be void, and in this case, a lawsuit seeking confirmation of invalidity may be filed.
Example: Tax imposed after the 5-year exclusion period under tax law has passed is, in principle, void.
3. Litigation to claim payment of a refund amount
Where a taxpayer has claimed a refund of tax overpaid by mistake but the tax authority refuses it, the taxpayer may file a lawsuit before the court claiming the refund.
Example: Where the actual tax paid is excessive due to a notice of change in the income amount after filing an income tax return, a refund may be demanded.
4. Litigation for a stay of execution and revocation against a disposition for arrears, such as attachment or public auction
Where compulsory execution procedures such as attachment or public auction on the ground of tax arrears are judged to be unlawful, a lawsuit may be filed to stay or seek revocation of them.
3. Tax Litigation | Tax Appeal System
Let us look at the tax appeal system through which tax litigation may be filed.
The tax appeal system is a system under which a taxpayer, when the taxpayer believes that a tax authority such as a tax office or the National Tax Service has issued an unjust tax notice or disposition, raises an objection requesting that the disposition be corrected.
The appeal procedure consists broadly of four stages.
Objection
-Filed with the head of the tax office or the commissioner of the regional tax office
-An optional procedure that may be selected
-Filed within 90 days from the date of notice of the disposition
-Decision notified within 30 days (subsequent procedures available if delayed)
Request for Review
-Filed with the Commissioner of the National Tax Service or the Board of Audit and Inspection
-Possible directly, even without an objection
-Decision within 90 days from the date of filing
Filing for Administrative Adjudication
-Filing with the Tax Tribunal
-Also possible without an objection
-Decision within 90 days from the date of filing the appeal
See More
Administrative Litigation (Tax Litigation)
-Filed where the matter remains unresolved even after a review or an adjudication request
-If an objection has been raised, a review request to the Board of Audit and Inspection cannot be chosen
-The filing period is within 90 days from the date of receiving the written decision or the date the decision period elapses
See More
4. Tax Litigation | Procedures
An overview of tax litigation is as follows.
Tax litigation is a procedure conducted to obtain a final judgment from the court when a taxpayer and a tax authority differ in opinion on a tax matter.
Where a person has overpaid by filing too much tax, the taxpayer files a request for correction asking for a refund, and if this request is not accepted, it may lead to a request for adjudication or to litigation.
Conversely, where a person has filed too little tax, the tax authority also imposes the deficient tax, and if the taxpayer objects to this, the taxpayer may go through an objection procedure or contest it through tax litigation.
Tax litigation generally proceeds in the following sequence.
1. The taxpayer (plaintiff) submits a complaint to the court
2. The head of the tax office or the head of the regional tax office that imposed the tax (defendant) submits an answer to it
3. Both sides present arguments and evidence over several hearings, and the case is examined
4. The court's judgment
▶Tax litigation operates on a three-tiered trial system.
First instance: the Seoul Administrative Court or the district court with jurisdiction over the relevant area
Second instance: the competent high court
Third instance: the Supreme Court
5. Tax Litigation | Core Issues and Points to Note
The following examines the key issues and points of caution in tax litigation.
▶Importance of proving the facts
In tax litigation, the taxpayer must prove that the tax authority's disposition is unlawful.
Securing supporting materials such as sales and purchase records, accounting books, contracts, tax invoices, and emails is very important.
▶Disputes over the interpretation of statutes
Even for the same facts, whether tax is imposed can vary depending on the interpretation of the tax law.
In particular, understanding authoritative interpretations and the trend of practical precedents is important.
▶The principle of good faith
If it is proven that the taxpayer knowingly violated the provisions of the tax law, it does not constitute grounds for reduction of the amount, and an act for the purpose of improper tax reduction can lead to losing the case.
▶Responding from the tax investigation stage
Because in tax litigation the basis for taxation is usually already organized at the tax investigation stage, legal response from the early stage is advantageous.
▶Strict observance of the filing period
If the filing period set by law (90 days) is exceeded, the lawsuit itself will be rejected, so schedule management is very important.
Methods for Self-Representation in Tax Litigation
Because tax litigation is a highly specialized area, it is advisable to obtain the assistance of an expert where possible, but if certain requirements are met, the procedure can be carried out on one's own.
The following are the key points that must be understood when preparing for tax litigation on one's own.
1. Lawfully Completing the Pre-Trial Procedure
To file tax litigation, it can be filed only after going through a request for review or a request for administrative adjudication.
All procedural records, such as the date of receipt, the date of decision, and the date of receiving the written ruling, should be secured as evidence.
2. Strictly Observing the Period for Filing
Because the rule on peremptory periods applies to administrative litigation, a filing made outside the statutory period will be rejected.
It must be carried out within 90 days from the date of becoming aware that the taxation disposition was made.
3. Points to Note When Preparing the Complaint
The complaint should meet the following requirements.
-Clearly state the parties, the address, and the disposition authority
-Specify the concrete content of the disposition and the grounds of illegality (for example, mistake of fact, procedural violation, or deviation from and abuse of discretionary power)
-Attach supporting materials (tax invoices, financial transaction records, contracts, and the like)
-State the fact that the pre-trial procedure was completed
4. Systematically Securing and Organizing Relevant Evidence
The core of tax litigation is "proof." The supporting materials that can substantiate the claims are as follows.
-Tax invoices, transaction statements, contracts, bankbook transaction records, emails, and the like
-Real estate certified copies of register, capital gains calculation records, and buyer confirmation statements
-Tax returns, value-added tax return records, and copies of account books
The materials vary by case, and organizing them in electronic file form is advantageous for submission and storage.
5. Searching Precedents and Organizing Arguments
When preparing a lawsuit on one's own, it is important to confirm similar precedents to establish grounds for one's arguments.
Search the National Law Information Center and the Supreme Court Comprehensive Legal Information website, focusing on the following content.
-Cases of revocation of taxation for similar tax items
-Cases of revocation of a disposition due to insufficient proof or unlawful procedure
-Cases recognizing a violation of the principle of substantial taxation
Arguments should be organized logically, and the matter should be thoroughly reviewed so that there are no errors in numerical calculations or the application of statutes.
6. Tax Litigation | Key Issues
Compared with other ordinary administrative litigation or civil litigation, tax litigation has the following structural and legal characteristics, which give rise to distinctive issues.
These issues extend beyond a simple clash of assertions into highly demanding legal problems that require a comprehensive assessment of the interpretation of tax law, the structure of proof, and the consistency between factual determinations and the application of tax law, so in practice the assistance of a law firm specializing in tax matters is particularly important.
2. Ambiguity in the interpretation of tax law and the determination of unlawfulness
3. The intersection of the lawfulness of tax investigation procedures and substantive examination
4. The connection with criminal proceedings
Tax litigation is a highly specialized legal area in which a case cannot be won through emotional assertions alone, such as the claim that ‘the tax is unfair.’
Because a tax authority's disposition is an administrative act based on law, any rebuttal must likewise precisely combine legal structure with proof of the facts to produce a meaningful result.
In particular, the core issues that frequently arise in tax litigation, such as the burden of proof, the complexity of tax law interpretation, the connection with criminal punishment, and proof of the unlawfulness of investigation procedures, present structural limitations for a taxpayer to handle alone.
At this firm, attorneys experienced in tax matters and attorneys experienced in administrative matters work together with the firm's in-house certified tax accountants to provide one-stop legal services for tax litigation, including responding to tax investigations, formulating tax adjudication strategies, coordinating criminal defense, organizing evidence, analyzing precedents, and designing logical argument structures.
