Seoul Administrative Court 2007Guhap28946 ( October 25, 2008)

National High Court Decision 2006No4544 (Law No. 25, 2007)

Whether the representative disposition is unfair because the amount omitted in sales is used as internal personnel expenses, etc.

The representative's bonus disposition is legitimate in the amount not belonging to the sales expenses and management expenses when comprehensively considering the fact that it was not included in the sales expenses and management expenses at the time of the corporate tax return even though the total amount of sales expenses, including personnel expenses, and management expenses, etc. were used.

The contents of the decision shall be the same as attached.

Article 67 of the Corporate Tax Act [Disposition of Income]

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant shall revoke the disposition of imposition of KRW 38,774,290 against the plaintiff on March 17, 2006.

The court's explanation on this case is identical to the entry of the cause column of the judgment of the court of first instance, except for the dismissal of the cause column of the judgment of the court of first instance as follows. Thus, it is acceptable in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act

ｏ 제5쪽 아래에서 6번째 줄의 "91,285,50원" ⇒ "91,285,500원"

Therefore, the judgment of the first instance court is legitimate, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

[Seoul Administrative Court 2007Guhap28946, Jun. 25, 2008]

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the Plaintiff

1. Circumstances of dispositions;

(1) Sales (income amount) 145,354,546 won, ② Sales expenses and management expenses 218,657,556 won (including salary u300 91,417,993 won),

(3) -73,303,010 won [145,354,546 won (Sales)-218,654,556 won (sales expenses and u300 management expenses)];

(4) Non-business profits 6,827, and 5,00 won 642,813

(6) Ordinary profits -73,938,996 won [73,303,010 won (business profits) + 6,827 won (business profits - u300 - 642,813 won (business expenses)];

(7) Current net income - 73,938,96 won [73,938,996 won (ordinary profits) -0 won (corporate tax expenses)];

(8) Tax base-71, 795, 731 [-73, 938, 996 (net profit per books) +2,143,265 [300 won for income adjustment]

(9) 0 won calculated tax amount.

A. The Plaintiff was established on January 8, 2003 and operated a film production and digital content development business. On March 31, 2004, the Plaintiff reported the corporate tax base and its tax amount to the Defendant for the business year 2003 (from January 8, 2003 to December 31, 2003) as follows:

B. However, at the time of reporting the tax base and the amount of corporate tax for the business year 2003, the Plaintiff omitted not only the business subsidy of KRW 146,991,00 (hereinafter “instant account”) received from the Korean Cultural Content Promotion Agency through the national bank account (431801-01-054724, hereinafter “instant account”) in the Plaintiff’s name, but also did not record the payment of KRW 146,91,000 in the sales account book.

C. Since July 31, 2004, the Plaintiff included 146,91,000 won in gross income as well as 80,002,00 won which was appropriated as intangible assets in the business year 2003 as deductible expenses, and filed a revised corporate tax for the business year 2003. However, on December 20, 2005, the Defendant recognized only the above 146,91,000 won as gross income and notified the Plaintiff of corporate tax 15,59,250 won in corporate tax for the business year 2003, and the Plaintiff did not pay the said amount to the Plaintiff by 30 years of bonus (amended by Act No. 7838, Dec. 31, 2005; hereinafter referred to as the “Act”), Article 67 of the former Corporate Tax Act, Article 106(1)1 of the Enforcement Decree of the Income Tax Act, and the Defendant did not pay the amount to the Plaintiff by 00,000.

Facts without dispute over the basis of recognition, Gap evidence 1, 2, Gap evidence 7-1, 2, and Gap evidence 8-1, 2-3, and 5-3, respectively, and the purport of the whole alteration

2. Whether the disposition is lawful;

A. The plaintiff's assertion

Although the Plaintiff omitted the omitted sales amount of KRW 146,91,00 in sales revenue when filing a report on the corporate tax base for the business year 2003, the disposition in this case was unlawful on the premise that the Plaintiff’s internal personnel expenses of KRW 42,324,00, external personnel expenses of KRW 43,889,50, and the amount transferred to another account under the Plaintiff’s name to the other account under the Plaintiff’s name was used as the total amount of KRW 91,285,50, and the credit card use settlement amount of KRW 567,428, and the settlement amount of KRW 5,238,432, and other expenses of KRW 1,98,420, and the omitted sales amount of KRW 146,91,00 was discharged from the account under the agreement with the Korea Cultural Content Agency, and thus, the disposition in this case was unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

(1) On the other hand, if a corporation fails to enter its sales in its account book despite the fact of sales, the total amount of the omitted sales including the cost of sales and other response expenses shall be deemed to have been leaked to the company, barring any special circumstance. In this case, the special circumstance that the omission in sales should not be disclosed to the company, barring any special circumstance, such as the cost of sales and other response expenses, should be proved by the corporation asserting the omission in sales (see Supreme Court Decision 2000Du3726, Jan. 11, 2002). In addition, as long as the revenue of a corporation leaked to the company other than the company is not entered in the account book and the ownership of the revenue is unclear, the tax authority shall have no choice but to dispose of the revenue as it belongs to the representative as bonus, and in this case, the burden of proving that the ownership is clear shall be asserted to the taxpayer (see Supreme Court Decision 92Nu6747, Aug. 14, 192).

(2) With respect to the instant case, when the Plaintiff reported the tax base of corporate tax and its amount of tax for the business year 2003, the Plaintiff reported the sales amount of KRW 145,354,546 (income amount) to KRW 218,657,556, including salary of KRW 91,417,993, and operating income of KRW 218,657,556, and operating income of KRW -73,91,000 (income amount of KRW 146,91,000) as seen earlier. Thus, in order to establish special circumstances, the Plaintiff’s report on the sales amount of KRW 146,91,000 should not be included in the sales amount of KRW 146,90,000 (income amount) for the period corresponding to the omission of the sales amount in light of the aforementioned legal principles as seen earlier. Furthermore, it is insufficient to prove that the Plaintiff had not spent the sales amount of KRW 16050,560,0,0065, etc.

(3) However, as seen earlier, the Plaintiff failed to keep the omitted amount of KRW 146,91,00 in its own account account even though it was remitted from the Korea Cultural Content Agency to its own account. ② Although the Plaintiff used KRW 146,991,00 in full for sales expenses and management expenses, including personnel expenses, as alleged by itself, the Plaintiff did not include KRW 146,991,00 used in the above business year’s corporate tax base return for 2003 business year in the sales expenses and management expenses and management expenses and KRW 218,657,56.3 Even if the Plaintiff’s assertion itself, the Plaintiff did not include the omitted amount of KRW 146,991,285,50 in the sales expenses and the corporate tax base return for the business year 2003 business year, and the Plaintiff did not have any other evidence that it had already been reflected in the management expenses and the management expenses that it had already been disbursed to the account transfer account of KRW 146,90,200 in the above account transfer account.

(4) Therefore, the disposition of this case based on the premise that the ownership of the omitted sales amount of KRW 146,91,00 is unclear, and thus, the disposition of this case is legitimate, and the plaintiff's assertion that differs from this premise is not acceptable.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

former Corporate Tax Act (amended by Act No. 7838 of Dec. 31, 2005)

○ Article 66 Correction and Correction

(1) Where any domestic corporation fails to report pursuant to Article 60, the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall determine the tax base and tax

(2) Where a domestic corporation files a report under Article 60, the head of the district tax office having jurisdiction over the place of tax payment or the Commissioner of the competent Regional Tax Office shall correct the tax base and amount of corporate tax on the income

1. Where there are errors or omissions in the contents of the report;

Article 67 (Disposition of Income)

In filing a report on the tax base of corporate tax on income for each business year under the provisions of Article 60 or in revising Article 66, the amount included in the calculation of earnings shall be disposed of as prescribed by Presidential Decree, such as bonus, dividend, and other outflow from the company and internal reservation according to

Enforcement Decree of the former Corporate Tax Act (amended by Presidential Decree No. 19328 of Feb. 9, 2006)

§ 106. Disposal of income

(1) The amount included in the calculation of earnings under the provisions of Article 67 of the Act shall be disposed of pursuant to the provisions of the following subparagraphs. The same shall also apply to non-profit domestic corporations

1. Where the amount included in the calculation of earnings has clearly leaked out of the company, the dividends, bonuses from the disposition of profits, other income, and other outflow from the company under each of the following items according to the person to whom they accrue: Provided, That where the accrual is unclear, it shall be deemed as accrual to the representative (where the total number of stocks held by an officer who is not a minority shareholder under the provisions of Article 87 (2) and persons with a special relationship under the provisions of paragraph (4) of the same Article is 30% or more of the total number of stocks issued or total investment amount of the relevant corporation and the officer actually controls the operation of the corporation, he shall be deemed the representative, and where a corporation which has been exempted from withholding taxes under the provisions of Article 46 (12) of the Restriction of Special Taxation Act reports that there is a separate representative among the officers of the relevant corporation, the reported person shall be the representative, and where there

former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005)

○ Article 20 Employment Income

(1) Earned income shall be the following incomes generated in the corresponding year:

1. Class A:

(c) Amount treated as a bonus under the Corporate Tax Act;

Article 127 (Liability for Withholding)

(1) Any person who pays the following income or revenue amount to a resident or nonresident in the Republic of Korea shall withhold income tax on the resident or nonresident pursuant to the provisions of this Section:

4. Employment income amount of Class A;

Before December 31, 2005, Amended by Presidential Decree No. 19254, Dec. 31, 2005

Article 52 (Fictitious Payment Date of Dividend, Prize and Other Incomes Obtained by Disposal of Income)

(1) When the head of a tax office or the director of a regional tax office determines or revises the corporate income amount pursuant to the Corporate Tax Act, he/she shall notify the corporation concerned by a notice on change of income amount as prescribed by the Ordinance of the Ministry of Finance and Economy within 15 days from the date of the determination or correction of the corporate income amount: Provided, That where the location of the corporation concerned is not clear or it is impossible to serve the notice, or where the corporation concerned falls under Article 86 (1) 1, 2 and 4 of the National Tax Collection Act, he/she shall notify the relevant stockholder and the resident who is subject to the disposition of the relevant bonus

(2) In cases under paragraph (1), the dividend, bonus and other income shall be deemed paid or recovered on the date when the notice is received.