Income tax deduction for the Plaintiff’s special retirement allowance, etc.

The period of service prior to the Plaintiff’s transfer to class shall also be included in the number of years of income deduction for the instant special retirement allowance, etc.

Article 22 of the Income Tax Act

Suwon District Court 2017Guhap67415 Rejection of Disposition of Dismissal

AA

BB Director of the Tax Office

January 17, 2018

7 February 2018

1. The plaintiff's claim is dismissed.

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

1. Basic facts

A. On July 1, 2002, the Plaintiff was employed as contractual staff in the CCC, and thereafter became an office staff with no fixed contractual term (hereinafter referred to as “office staff”) of CCC, and according to the CCC and Trade Union agreement, the Plaintiff increased the number of regular staff members of L0 class newly established on January 1, 2014 (Evidence 1, 2).

B. On May 2015, the labor and management reached an agreement on the implementation of desired retirement (hereinafter referred to as “voluntary retirement”) around May 201 (Evidence 4-1). Accordingly, on June 17, 2015, the Plaintiff retired from the CCC seeking to pay 97,873,360,000, special retirement allowances in addition to the basic retirement allowances of 29,873,366, and 24,000,000, health care allowances of 1,120,000,000, and 118,000 won (hereinafter referred to as “the special retirement allowances, etc. of this case”). At that time, CCC was subject to the premise that the Plaintiff’s continuous retirement allowances, etc. of the instant special retirement allowances, etc. of 1.6 years (Evidence 5,200,000,0000,0000,0000) was withheld from 1.6 years (the date of 10, 27.6.15 days).

C. On November 14, 2016, the Plaintiff made a request for correction of retirement income tax reduction (hereinafter “instant request for correction”) stating that the Plaintiff’s continuous service life, which serves as the basis for calculating income tax on the special retirement allowances, etc. of this case, is not 1.6 years but 13 years (from July 1, 2002, the first membership date, to June 17, 2015, the retirement date). Thus, the income tax of this case should be reduced to 5,14,851 won calculated by 13 years’ continuous service life of the Plaintiff (hereinafter “instant request for correction”), and the Defendant made a disposition to dismiss the said request for correction against the Plaintiff (Evidence 1; hereinafter “instant disposition”).

D. On February 8, 2017, the Plaintiff filed an appeal seeking the revocation of the instant disposition, and the Tax Tribunal dismissed the Plaintiff’s appeal on May 11, 2017 (Evidence A2).

Facts that there is no dispute over the basis of recognition, Gap evidence 1 and 2, Gap evidence 4-1, Gap evidence 5, Gap evidence 16-1 and 2, the purport of the whole pleadings, and the purport of the whole pleadings.

2. The assertion and judgment

A. The party's assertion

1) Plaintiff’s assertion

Unlike the basic retirement allowances, the special retirement allowances, etc. of this case are money that has the nature of a contribution compensation for the long-term service from the date of initial employment to the date of retirement. As such, the number of years of continuous service, which serves as the basis of income deduction for the said special retirement allowances, etc. (hereinafter referred to as “income tax income deduction years”) must include all the period of employment before and after the Plaintiff’s regular employee conversion. The Defendant’s disposition of this case on the premise that the income deduction for the special retirement allowances, etc.

2) Defendant’s assertion

CCC received an application from the staff members who wish to convert to regular employment (including the settlement of retirement allowances), including the Plaintiff, and then dismissed them (including the settlement of retirement allowances), and then newly employed them to general service in L0 classes. Around June 2016, designated a person eligible for voluntary retirement based only on the date of birth, not the number of years of continuous employment of L0 classes employees at the time, and notified that high retirement income tax rate shall apply to the employees of L0 classes as of the time. As such, the period of service before the conversion to regular employment of L0 classes employees was decided whether to pay the instant special retirement allowance, etc. or not to be reflected in the calculation of the amount. Since the instant special retirement allowance, etc. cannot be deemed to fall under the amount of money of a public service compensation nature for the long-term continuous employment including the Plaintiff’s period of service before the full-time conversion to regular employment, the period of service income deduction for the said special retirement allowance

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Whether the instant disposition is lawful

1) Article 22 (1) 2 of the Income Tax Act provides that "retirement income shall be the income, etc. received as a result of actual retirement on the basis of employer contributions accrued in the pertinent taxable period." Article 48 (1) of the same Act provides that "retirement income shall be deducted from the amount of retirement income in the pertinent taxable period as classified in subparagraph 1 (the amount calculated by the method prescribed by Presidential Decree) and the amount shall be divided into the number of years of continuous service and deducted from the amount calculated by multiplying 12 by the number of years of continuous service." Article 105 (1) of the Enforcement Decree of the same Act provides that "The number of years of continuous service shall be from the date of commencement of the provision of labor or the date of interim payment of retirement income to the date of retirement shall be excluded from the number of years of continuous service: Provided, That when calculating retirement benefits, the period not included in the period of continuous service shall be counted from the date of interim payment of retirement benefits, etc., which is an administrative rule of the National Tax Service, which provides that "an interim retirement allowance for retirement allowance and interim retirement allowance for 215 years shall be counted."

2) According to the above provisions, the number of years of income tax deduction for retirement pay should be calculated on the basis of the "work period of the relevant retired worker" in determining the amount of retirement pay paid to the retired worker. The Plaintiff was employed as CCC staff on July 1, 2002; the Plaintiff increased the number of regular employees at L0 on January 1, 2014; and the Plaintiff was paid additional retirement allowance, etc. from CCC as well as the basic retirement allowance from CCC on May 2, 2015, according to the desired retirement agreement of this case, upon retirement agreement of this case, after the Plaintiff retired desiredly from the CCC on or around January 1, 2015, the fact that the Plaintiff was paid additional retirement allowance, etc. from CCC was as recognized in subparagraph 3(b) of the preceding 1. B. Accordingly, following evidence Nos. 3, evidence Nos. 4-1 through 5, evidence Nos. 11-1, 13-1 through 4, evidence Nos. 11 through 15 through 1 through 7, evidence Nos. 1 through 1 through 7 and 8-1 through 7.

A) On January 1, 2014, according to the labor-management agreement on the improvement of the personnel system for clerical staff, the CCC newly established L0 classes by changing the general service class system from the former fourth class system (L1, 2, 3, and 4) to the five class system (L0, 1, 2, 3, and 4). Of the clerical staff, the CCC converted the employees who applied for the full-time conversion, including the Plaintiff, from among the clerical staff, to the 0th class general service (Evidence 3).

B) On January 1, 2014, the change of the general service class L0, supra, was conducted in the form of new employment through the process of “the submission of private employees and the settlement of retirement allowances, the submission of new employment, and the preparation of employment contract. However, in the process, the full-time conversion employees including the Plaintiff continued to perform the same work as before the full-time conversion without suspending their duties (Evidence 16-1, 2, 17-1, 4).

C) On May 2015, the labor and management reached an agreement on voluntary retirement with the following "persons subject to voluntary retirement" to pay special retirement allowances corresponding to the number of months stated in the "number of months of payment of special retirement allowances" as listed below, in addition to the basic retirement allowances, and special retirement allowances corresponding to the number of months stated in the "number of months of payment of special retirement allowances" as listed below, and to pay the amount equivalent to 1,120,000 won of health examination expenses, and 118,000 won of special retirement allowances (the special retirement allowances of this case, etc.) (the evidence No. 4-1, 2).

D) On June 2015, CCC paid the basic retirement allowance and special retirement allowance, etc. to the prospective retirees including the Plaintiff, etc., and the portion of the special retirement allowance, etc. also withheld income tax calculated by including only the period of service from the date of conversion of L0 class as the basic retirement allowance that was completed interim settlement at the time of conversion of L0 class as well as the period of service from the date of conversion of L0 class as the amount of retirement allowance income

E) According to the instant desired retirement agreement, CCC calculated income tax deduction for the portion of special retirement allowances such as retirement allowances from the date of the first entry (A evidence 11-2, 11-2) by withholding the retirement income tax from the employees who did not convert into L0 among the employees who retired desired under the instant desired retirement agreement,

F) Meanwhile, the employee who has paid the retirement income tax in the same manner as the Plaintiff, filed a decision of acceptance with the tax authority for the same purport as the instant lawsuit (Evidence No. 13-1 through 4, Evidence No. 14-1 to 18-19, Evidence No. 14-1 to 9).

3) The facts acknowledged in the above paragraph 2 are as follows: (i) circumstances that can be known by the overall purport of arguments as to the above LCC 1 and evidence Nos. 4-1 and 2, i.e., the number of employees retired from the CCC 1 are not less than 10 years, considering the aforementioned voluntary retirement agreement, and (ii) the voluntary retirement agreement limits the desired retirement workers to 1, 2, and 3 as employees who did not have been employed for the same service period as the above 0-year period of 10-year-old employees, but it is reasonable to view that the aforementioned voluntary retirement workers were not employed for the same 10-year-old period of 10-year-old employees, including those who were employed for the above 10-year-old service period of 10-year-old employees; and (iii) there is no separate provision on the remaining 10-year-old employees who did not have been employed for the same 10-year-old employment period of 10-year-old employees.

The Defendant’s disposition that was based on the premise that the period of service before the Plaintiff’s full-time conversion is not included in the number of years of income deduction on the special retirement allowance, etc. is illegal.

3. Conclusion

The plaintiff's claim is reasonable, and it is so decided as per Disposition.