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

Cheong-gu Office

The Defendants’ imposition of global income tax for the business year 2013, as shown in the separate sheet, shall be revoked.

A. The Plaintiffs are those who worked as executive officers of Magdong Co., Ltd. (the trade name was changed in △△ Co., Ltd.; hereinafter referred to as △△).

B. On July 25, 2010, the Plaintiffs acquired and held 180,000 won per share of the shares of △△ (hereinafter referred to as “instant shares”) assigned by put options, which are the right to sell shares under certain conditions from Japanese corporate ○○○○, a shareholder of △△ (hereinafter referred to as “instant shares”). On September 17, 2013, upon exercising put options, transferred the instant shares to ○○○○○, and reported and paid capital gains tax by taking into account the following as capital gains.

다. ◌◌지방국세청장은 2016. 3. 31.부터 2016. 4. 29.까지 원고들에 대한 2013년귀속 종합소득세 통합조사를 실시한 후, 쟁점이익이 양도소득이 아닌 근로소득에 해당한다는 이유로 과세자료를 피고들에게 통보하였고, 그에 따라 피고들은 별지 기재와 같이 원고들에게 2013년 귀속 종합소득세를 각 경정・고지하였다(이하 '이 사건 처분'이라 한다).

D. The Plaintiffs dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on August 8, 2016, and the Tax Tribunal dismissed the decision on December 15, 2016.

Facts that there is no dispute over the basis of recognition, entry in Gap evidence 8, Eul evidence 1 and 2 (including each number in the case of additional evidence) and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. The plaintiffs' assertion

Even after the acquisition of the instant shares, the Plaintiffs received the same benefits as before, as a shareholder, bear the risk of loss due to the decline in the value of the instant shares as a shareholder, and received dividends, and disposed of the instant shares by exercising put options, thereby gaining gains from the increase in the value of the shares. The key interest was received from ○○○, a shareholder of the Plaintiff, rather than the ○○, working for the Plaintiffs, and ○○, was neither included in the deductible expenses nor was the key interest was included in the deductible expenses, and the profits arising from the increase in the value of the shares cannot be deemed as earned income on the ground that the acquisition of the shares was made due to the decline in the supply of labor or on the premise of the maintenance of labor relations. The acquisition of the instant shares and the receipt of put options are different from that of receiving the stock option. Accordingly, the key interest is a transfer income, and thus, the instant disposition

B. Facts of recognition

1) On June 29, 2010, the Korea Deposit Insurance Corporation established a public tender on June 29, 2010 for the sale of 259,560 shares (shares 21%) held by the above company, and ○○A, a corporation Austria, transferred the said shares in KRW 161,042 per share to ○○F.

2) Around that time, Kim △△ was operating the △△△△ in a 358,440 share of 29% of the shares issued by the △△△△, and was in operation of the △△△△. On June 25, 2010, when entering into a contract with Kim △△△ on the purchase of the above shares owned by the △△△△△△ for KRW 180,000 per share, the agreement was reached that the Plaintiffs, an existing officer of the △△△△△, who continued to operate the △△△△△

3) Accordingly, Article 8.1 of the △△△ Agreement (Evidence 1) entered into between ○○○ and △△△△△△△, provides that “○○○○ and △△△△△△△△” parties to the contract (referring to the Plaintiff) agree that the officers of the △△△△△ branch (referring to the Plaintiff) are core factors in the future success of the △△ branch, and that ○○○○○ will contribute to the continuous success of the △ branch as the executive officers of the △ branch. In order for ○○○○ to facilitate the future success of the △ branch through a contract with the executive officers, the ○○ branch shall not cooperate, support, and engage in any act contrary to the interest of ○○○○○.” The parties to the contract provide that “○○○ and Schedul A shall enter into an agreement with the executive officers on the contents set forth in the Section 1, and that an employment condition shall be terminated when the ○○ branch provides 10% of the stocks to the executive officers.

4) After acquiring the above shares from Kim △△△△, ○○, ○○, ○○A, △△, and the Plaintiffs entered into a management agreement on July 30, 2010 (hereinafter “instant management agreement”). In order to clarify the terms and conditions of the instant management agreement, ○○, ○○○, and the Plaintiffs entered into six subsidiary agreements, including employment contracts, loan contracts, stock acquisition contracts, and put options contracts. The main contents of the instant management agreement are as follows.

A) The Preamble stated that ○○○○ and ○○○F want to provide incentives in the form of △△ shares on the premise that the employment relationship with the Plaintiffs continues, and that “the Plaintiffs will enter into an employment contract with △△.” Article 1 of the employment of executives” provides that “the Plaintiffs will enter into an employment contract with △△ for three years.” (B) In the case of loans to executives, and stock sale, ○○○ shall lend the Plaintiffs’ share purchase fund; ○○○F shall transfer the shares of △○ to the Plaintiffs at KRW 180,00 per share; and ○○F shall not hold the said shares after the termination of the employment contract. According to the subsidiary loan contract, ○○○ may not hold the said shares after the termination of the employment contract. According to the subsidiary contract, ○○ has the authority to directly lend the purchase price to the Plaintiffs, and the dividends paid to the Plaintiffs by △○○○ shall be immediately used to repay the principal of the loan to ○○○○ (Article 31 of the balance).

C) According to Article 3’s “Pledge creation; Right to Transfer”, the Plaintiffs should set up a pledge on the instant shares for ○○○F immediately after acquiring the instant shares, and the shares certificates are kept by ○○F. The Plaintiffs are prohibited from doing any act of transferring, selling, disposing of the instant shares without the prior written consent of ○○F, or creating a security right.

D) According to Article 4(1) of the Act, the Plaintiffs shall not exercise any voting right relating to the shares of this case during the contract period, and shall delegate the voting right to the ○○F upon the request of the ○○F and deliver the power of attorney.

E) According to Article 5’s put option during the employment period, the Plaintiffs have the right to sell all of the instant shares to ○○○○○○ from April 1 to June 30 each year. When exercising put option, the trading unit price is assessed under the Inheritance Tax and Gift Tax Act (hereinafter “Inheritance Tax and Gift Tax Act”) based on the financial statements for audit conducted by ○○○. In the event of exercising put option in 2013, which is the last year of the employment contract, the trading unit price is the higher between the appraised value under the Inheritance Tax and Gift Tax Act and the acquisition unit price of the Plaintiffs, and the employment contract is deemed terminated when exercising put option.

F) Article 6: 'Compulsory Purchase'; 'Confiscation' means a compulsory purchase (Buyoutout) of the instant shares when the Plaintiffs retire before the end of three years, which is the employment contract period. The purchase price at this time is the appraised amount under the Inheritance Tax and Gift Tax Act. In the event that the insurance contract is terminated due to the reasons attributable to the Plaintiffs, ○○F shall confiscate the instant shares to the same amount as the loan balance borrowed by the Plaintiffs from △△, and the confiscation price shall be used for the repayment of the loan to △△.

5) On July 30, 2010, the Plaintiffs entered into an employment contract with the instant management agreement for three years with the △○○○ and the instant shares acquired at KRW 180,000 per share. The Plaintiffs entered into a loan agreement with the △○○ and the instant shares acquired at KRW 180,000 per share, and entered into a loan agreement with the △△ and the instant shares acquired at interest without interest.

6) After the plaintiffs acquired the shares of this case from ○○○○, the shares ratio of ○○ shareholders of ○○○, 50% of ○○○○, 40% of ○○○, and 10% of the total shares ratio of the plaintiffs. ○○ and ○○○F are all affiliates of a U.S. legal entity.

7) On September 17, 2013, the Plaintiffs, by exercising put options, transferred the shares to 336,230 won per share pursuant to the Inheritance Tax and Gift Tax Act assessment method.

Facts that there is no dispute over the basis of recognition, entry of Gap evidence 1 through 7, 9, the purport of the whole pleadings

C. Determination

Article 20(1)1 of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016; hereinafter the same) provides that salary, salary, remuneration, tax, wage, bonus, allowance, and other benefits of a similar nature that a person provides labor as earned income. Such earned income includes not only all economic benefits, regardless of the form or name of payment, which are related to the provision of labor, but also all economic benefits that are related to the provision of labor, regardless of the form or name of payment (see, e.g., Supreme Court Decisions 2007Du1941, Oct. 25, 2007; 2016Du39726, Oct. 27, 2016).

Considering the following circumstances revealed from the facts acknowledged in light of the aforementioned legal principles, it is reasonable to view the key interest as an economic profit with which the Plaintiffs provided labor and quid pro quo, which constitutes an earned income under Article 20 of the former Income Tax Act. Therefore, the instant disposition is lawful, and the Plaintiffs’ assertion disputing such disposition is not acceptable.

A) The ○○F offered the instant shares in order to ensure the stable management of the △○○○○ in acquiring the shares of the △○○○. The Plaintiffs are entitled to retain the instant shares during the employment contract period of three years, and when exercising put options during the employment contract period, the employment contract is terminated. If the Plaintiffs retire even during the employment contract period, ○○F forced the purchase of the instant shares. If the employment contract is terminated due to a cause attributable to the Plaintiffs, ○○F would confiscate the instant shares, and the holding of the instant shares is closely connected with the maintenance of the ○○ employment relationship with the Plaintiffs. Furthermore, the Plaintiffs transferred the instant shares at a higher price of KRW 180,00,000, which is the acquisition price per share under the Inheritance Tax and Gift Tax Act after the termination of the employment contract of three years, and the economic benefits of the Plaintiffs can increase as the assessment amount for the instant shares by exercising put options during the employment contract period of one year, and thus, have an economic value of the instant shares to be transferred to the Plaintiffs.

B) The Plaintiffs acquired and held the instant shares, received dividends, and transferred the instant shares to ○○○○○ by using put options, and acquired the interest accrued therefrom, which is the difference between the transfer price and the acquisition price. However, when acquiring the instant shares, the Plaintiffs may transfer the instant shares to ○○○○○○ upon the expiration of the employment contract period of 3 years, which is the higher of the acquisition cost and the appraised value under the Inheritance Tax and Gift Tax Act. Only when the appraised value under the Inheritance Tax and Gift Tax Act is at least the acquisition cost, the Plaintiffs may avoid losses arising from forced purchase of the instant shares by selecting put options out of the employment contract, taking into account the appraised value under the Inheritance Tax and Gift Tax Act and the appraised value under the said Tax and Gift Tax Act. The Plaintiffs may not exercise voting rights as well as immediately pay the Plaintiffs the principal of the instant shares to ○○○○○○○○○ upon the termination of the employment contract due to the reasons attributable to the Plaintiffs. Moreover, the Plaintiffs are prohibited from exercising voting rights. Moreover, the Plaintiffs are actually being used to repay all of the instant shares.

As can be seen, the Plaintiffs do not actually bear any risk following the acquisition and holding of the instant shares, and cannot exercise their rights as a stock owner. Considering that it is possible to enter into a contract with the effect that the redemption of the instant shares was planned solely from the time when the Plaintiffs acquired the instant shares from ○○○F, and that the redemption time of the shares would be the time at which the employment relationship was terminated, and that it would be the time at which the Plaintiffs would immediately obtain the same benefits under the same conditions even without accompanying stock transactions, the value of the instant shares would be the basis for calculating the agreed amount to be paid to the Plaintiffs at the time of termination of the employment relationship, and that the transaction form of acquisition of shares between the Plaintiff and ○○

C) As long as the key interest is recognized to be in a certain quid pro quo relationship with the provision of the Plaintiffs’ labor, it cannot be deemed that the Plaintiffs obtained the key interest in the transaction with ○○○○, a major shareholder of △○, rather than the other party to the employment contract (see, e.g., Supreme Court Decision 2007Du1941, Oct. 25, 2007). The same applies to cases where the Plaintiffs continued to receive the same benefit even after the acquisition of the instant shares.

3. Conclusion

Therefore, the plaintiffs' claim is dismissed as it is without merit, and it is so decided as per Disposition.