Changwon District Court-2017-Gu 50544 ( October 17, 2018)

Revocation of the designation of the secondary taxpayer;

The shares of the instant corporation owned by the Plaintiff are title trust shares, and the Plaintiff could not exercise its shareholder's rights because it was not the actual shareholder.

Article 39 of the Framework Act on National Taxes

(original)Revocation of revocation of designation as a person liable for secondary tax payment, 2018Nu11848

GG

BB Director of the Tax Office

on October 26, 2019

on October 24, 2019

1. The defendant's appeal is dismissed.

2. The Intervenor joining the Defendant’s part resulting from the participation in the appeal cost, and the remainder, respectively, are borne by the Defendant.

1. Purport of claim

On January 13, 2016, the Defendant designated the Plaintiff as the secondary taxpayer of N Industry Co., Ltd. on January 13, 2016 and revoked all of the imposition dispositions listed in attached Table 1 against the Plaintiff.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

A. The N Industry Co., Ltd. (hereinafter referred to as the “N industry”) was established for the purpose of processing and selling stones on November 25, 1994. The Kim Sea Tax Office imposed total of KRW 753,000,000 and value-added tax on the aggregate of the corporate tax from the first half of 2011 to the first half of 2015, which was 543,000,000,000, after conducting an integrated investigation into the N industry as to the N industry, and confirmed the omission of sales and issuance of false tax invoices, etc.

B. On January 13, 2016, the Defendant: (a) determined that the N industry, the principal taxpayer, was incapable of paying the above delinquent tax due to its own property; and (b) notified the Plaintiff, the Intervenor, the Intervenor, and the Intervenor joining the Defendant, and the PPP, as indicated in the table below, that the N industry’s representative director, in-house director, the Intervenor, and the Defendant were oligopolistic shareholders of the N industry as of the date on which the principal liability for tax payment was established pursuant to Article 39 subparag. 2 of the Framework Act on National Taxes, that the Plaintiff, as indicated in the table below, designated the Plaintiff, the Intervenor, and the PP as the secondary taxpayer; and (c) to pay the Plaintiff KRW 228,620,380, total corporate tax

C. On July 22, 2016, the Plaintiff filed a request for examination with the Commissioner of the National Tax Service, but the Commissioner of the National Tax Service dismissed the Plaintiff’s request for examination on November 15, 2016.

D. On June 14, 2018, the Plaintiff and PPP were charged with violating the Punishment of Tax Evaders Act by issuing false tax invoices in relation to the operation of the N industry. The lower court found the Plaintiff and the PPP as guilty on June 14, 2018, and found the Plaintiff as the major shareholder of the N industry, the actual operator, and the Plaintiff as the representative director under the direction of the PPP, on the grounds of the judgment.

2. Relevant statutes;

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

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

The actual owner of the N Industry shares in the name of the plaintiff is the defendant joining the defendant, and the plaintiff merely lent the name to the defendant joining the defendant, and there is no management of the N Industry or no actual exercise of shareholder's rights. Thus, the plaintiff does not constitute the second taxpayer under Article 39 of the Framework Act on National Taxes.

B. Relevant legal principles

Article 39 of the Framework Act on National Taxes provides that a person who falls under any of the following subparagraphs as of the date on which the liability to pay national taxes is established shall be subject to secondary tax liability for the shortage, if the property of a corporation is insufficient to cover the national taxes,00 won, and expenses for disposition on default, which the person prescribed by Presidential Decree among a shareholder or a partner with limited liability and his/her related parties, who actually exercises his/her rights to the total amount of stocks held or investments exceeds 50/100 of the total number of stocks issued or investments made by the relevant corporation. Articles 20 and 18-2 of the Enforcement Decree of the same Act provide for one of the related parties prescribed by Presidential Decree among the related parties under Article 39 subparagraph 2 of the same

Meanwhile, in a case where there is no room for the shareholders to exercise their rights to the shares in the form of lending only the name of the shareholders who is not the actual shareholders, but only the shareholders are not the secondary taxpayers. As to whether the shareholders are oligopolistic shareholders, the tax authorities should prove the facts that the secondary taxpayers cannot be the secondary taxpayers, such as where the shareholders submit data that can be seen as the oligopolistic shareholders by the list of shareholders, the statement of stock transfer, or the register of shareholders, etc., and the tax authorities should prove the facts that the secondary taxpayers are not the shareholders but the shareholders are merely the shareholders in form (see Supreme Court Decision 2009Du7578, Feb. 25, 2010).

C. Determination as to whether the Plaintiff’s secondary taxpayer is the secondary taxpayer

In light of the above legal principles, according to the overall purport of evidence Nos. 3, 1, and 2 as to this case, the number of N Industries shares in the Plaintiff’s name and the relationship under Article 20 of the Enforcement Decree of the Framework Act on National Taxes with the Plaintiff under the relationship under Article 20 of the Enforcement Decree of the Framework Act on National Taxes, and the total number of N Industries shares in the Defendant joining the Defendant (the Plaintiff’s form of the Plaintiff), and PP (the title of the Intervenor joining the Defendant), exceeds 50/100 of the total

However, in full view of the following circumstances, it is reasonable to view that the Plaintiff is merely a borrowed-name shareholder who lends the name to the Intervenor, and is not in a position to practically exercise his/her rights to the shares, taking into account the following circumstances as seen earlier: (a) the witness of the first instance trial, the Defendant’s Intervenor, the JJJ, the SS, and the KK’s testimony of the witness of the party concerned; (b) the witness of the first instance trial; and (c) the testimony of the Party concerned; and (d) the evidence of Nonparty 2 through 6, 8 through 11, 13, 17, 20 through 26; and (c) the entire statement of

1) Status of shares held at the time of establishment of the N Industry

① At the time of the establishment of the N Industry, the Plaintiff owned 2,000 shares of the N Industry (20% shares) in the name of the Plaintiff out of 10,000 shares issued by the N Industry. The Defendant’s Intervenor paid all the shares to that effect.

② At the time of the establishment of the N industry, K had testified that the NN industry had been established by investing funds in 1/3 around 1994, together with the Defendant’s recommendation, the Defendant’s Intervenor, the Defendant’s Intervenor, and the LLL, which had conducted the stone-related business, and that NN industry had to own 1/3 of the shares of the N industry and participate in the thickness management.

③ On November 25, 1994, when the N Industry was established, the status of N Industry’s stockholding on the list of shareholders in the N Industry appears to be as follows. According to this, the shareholding ratio of the Intervenor at the time of the Defendant appears to be merely 1% of the total issued shares, unlike the content of the above agreement. Accordingly, KK testified to the effect that “In fact, the N Industry was established and operated in accordance with the initial agreement on the investment, and that “the shares owned by the Plaintiff, the wife of the Defendant’s Intervenor, and 1,600 shares owned by the Plaintiff, the wife of the Defendant’s Intervenor at the time, were the shares owned by the Defendant’s wife at the time, and 2,00 shares owned by the Plaintiff, the wife of the Defendant’s Intervenor at the time.”

④ Meanwhile, the Intervenor joining the Defendant is the Plaintiff’s father (the Defendant’s principal).

Although the defendant joining the defendant asserts that he would pay the share price on behalf of the plaintiff, there is no evidence to confirm that the actual investor of the above 2,000ism is the plaintiff (in addition, the plaintiff was engaged in economic activities while working for the company for over 28 years and 5 years, so it seems that the meaning of the payment of share price and the acquisition of shares can be sufficiently recognized. Thus, the plaintiff's father, as his father, was able to allow the plaintiff to pay the share price directly, and there is no special circumstance to request the defendant to submit it to the defendant).

2) Title trust of NP’s NP stocks to the Intervenor joining the Defendant and the PPP LCC

LCC, the representative director of NN industry from around 200 to July 2008, was only the representative director of NN industry, and did not participate in NN industry management. The actual ownership of NN industry’s shares (15 per cent equity ratio) held by NN industry from around 201, was the defendant joining the defendant and the PPP. Around 2011, the defendant joining the defendant and the PPP made a statement to the effect that the name was changed in the form of selling the shares in his name to the plaintiff and PP, and that there was no money received as the purchase price of shares in the process (Evidence A No. 13). It is consistent with the plaintiff’s assertion that the defendant joining the defendant held shares in the name of NN industry-related persons, including the plaintiff.

3) Receipt of shareholders’ dividends on the Plaintiff’s shares held by the Intervenor joining the Defendant

On December 28, 2006, the Plaintiff received dividends of KRW 80 million from the N industry, and received 67,680,000,000,000, excluding the withholding tax amounting to KRW 12,320,000 from the N industry, from the Plaintiff’s corporate bank account (Account Number: 000-00-000), and then remitted KRW 00,000,000 to the ZZ as of December 29, 2006, which is an employee of the N industry, of the N industry. In this regard, the Defendant asserted that the Plaintiff did not use the money under the name of the Party joining the Defendant’s own name, for the purpose of paying the annual final payment amount to KRW 12,320,00,000 for cash, and that the Defendant did not use the money as a performance bonus under the name of the Plaintiff’s corporate bank account (Evidence 200-0,000,0000).

4) The receipt of the transfer price of the Plaintiff’s shares in the Intervenor joining the Defendant

① On December 9, 2013, PPP requested the Plaintiff to send a copy of a bank account in the name of the Plaintiff, which is entitled to receive two copies of a share sales contract and a share price, to the Plaintiff. Then, on December 13, 2013, the Plaintiff requested the Plaintiff to immediately transfer the purchase price of KRW 60 million to the Defendant’s agricultural bank account in the Defendant’s Intervenor (Evidence 5-1).

② On December 12, 2013, the Plaintiff drafted a contract to transfer 200 million won out of the shares in the NUE under the Plaintiff’s name to HUE to 60 million won (Evidence 3-1). On the same day, the Plaintiff received the transfer of the said transfer proceeds from HUE to the bank account in the Plaintiff’s name. On December 13, 2013, the Plaintiff transferred the full amount of the said transfer proceeds to the Defendant joining the Defendant (Evidence 5-2), which appears to be in compliance with the said PP’s request (Evidence 5-2).

③ As to this, the Defendant asserted to the effect that the transfer of money related to the business between the Plaintiff, the Intervenor, and the PP was frequent from its original point of time, and that the payment of KRW 60 million was made by the Intervenor not by the Intervenor but by the Intervenor for the Intervenor for the Intervenor for the Intervenor for the Intervenor for the Intervenor for the Intervenor for the Defendant’s business purpose. However, there is no evidence to confirm that the Defendant used the above remittance amount as business fund, and in light of the above contents and the point of time, it is reasonable to view that the Defendant’s Intervenor for the Intervenor for the Intervenor for the Plaintiff as the transferor for the share transfer,

5) The defendant joining the defendant, the NPP's N industry management right

① On June 1, 2013, the Defendant’s Intervenor and PP ordered the N Industry’s division manager at N Industry’s operating division (Evidence 6-2), and on January 2, 2015, the Defendant ordered the Plaintiff to serve as the representative director of N Industry (Evidence 6-1), and other circumstances are found that the Plaintiff provided various service instructions from time to time (Evidence 8, 9, 10, 23, 24).

② Employees of the N Industry (ZZ, capital gains, JJ, and SS) are the Defendant joining the Defendant and PPP to the N Industry, and the Plaintiff stated to the effect that the N Industry did not exercise the management rights of the N Industry (Evidence No. 11 of A, the JJ, and the SS’s testimony).

③ PPP was sent to the business partner a letter and note to the effect that the NN industry is the president of the SS industry and that the NN industry is the same as SS and Orners (Evidence 24 of the A). The Plaintiff prepared and issued a confirmation document to the effect that the Plaintiff is merely a representative director listed in the name of the business operation convenience and that the NN industry is responsible for the actual inspection of the NN industry (Evidence 17-1 of the A). In addition, on November 11, 2015, the Defendant Intervenor and the PP made a confirmation document to the effect that the NN industry is not responsible for all promissory notes issued by the NN industry against HUE on the part of the HUE company, and that the Defendant and the Defendant are responsible for the Defendant and the PPPP (Evidence 4 of the A).

In full view of all the above points, the Intervenor joining the Defendant and the PPP exercised substantial management rights over the N industry, and only formally appointed the Plaintiff as the representative director, and the Plaintiff seems to have been performing the NP duties under the direction of the Intervenor joining the Defendant and the PPP.

D. Judgment on the defendant's assertion

1) Summary of the assertion

A) Plaintiff’s exercise of voting rights

On December 28, 200, the Plaintiff: (a) the Defendant’s Intervenor, PPP and ① an agreement on the shareholder rights and management rights of the N Industry (see subparagraph 7 of this paragraph); (b) the agreement on the allotment of the purchase price of 11 parcels of land and the construction price of the factory to be constructed on the ground of the agreement (see subparagraph 4 of this Article); (c) the agreement on the payment of the production incentive for the patent on August 1, 2014 [see subparagraph 6 of this Article] on the payment of the production incentive agreement (see subparagraph 6 of this Article); and (d) the Plaintiff continued to exercise the shareholder rights agreement on the transfer of the Plaintiff’s shares (see, e.g., the Defendant’s Intervenor, PP, the PPE and HUE, and the NUE, and the Plaintiff’s share decision-making on the transfer of the voting rights to the Plaintiff’s shares] around November 2013.

B) Stockholders’ dividends to the Plaintiff

① It is confirmed that the Plaintiff transferred KRW 9,340,00, which was deposited into the Plaintiff’s account on March 30, 201, to the accounts of the Defendant joining the Defendant, PP, and the Plaintiff’s wife, according to the share ratio. ② The amount of income reported by the Plaintiff’s household to the National Tax Service from 2009 to 2016 is KRW 250,500,000,000, while the amount of income reported by the Plaintiff’s household to the National Tax Service is KRW 519,100,000,000,000, the difference is merely KRW 4 million per month, and the Plaintiff’s salary is deemed to have been paid as the Plaintiff’s shareholder of the N industry. Accordingly, the Plaintiff ought to be deemed to have received the dividends as the Plaintiff’s shareholder of the N industry.

2) Determination on the Plaintiff’s assertion of exercising voting rights

In light of the following circumstances in the above facts, Gap evidence Nos. 23, Eul evidence Nos. 4, 6, 7, 8, 10, 21, Eul evidence Nos. 1, 10, 21, Eul evidence Nos. 1 and 4, and the whole purport of the pleadings, the plaintiff shall enter into an agreement as stated in the defendant's intervenor, PPP and Busan Factory Operation Agreement, the fact that the plaintiff entered into an agreement on stock transfer around November 2013, and the fact that the plaintiff entered into an agreement on stock transfer as a shareholder of the NN industry. However, this part of the defendant's assertion cannot be accepted.

A) The Busan Factory Operation Agreement (No. 7) states that "the ratio of ownership shall be 40% for the Intervenor joining the Defendant, 30% for the 30% for the Plaintiff, and 10% for the 30% for the Plaintiff, and the Intervenor joining the Defendant and the PP shall allocate the shares of 10% for the Busan Employees within 20% for the 30% of the profits. The Intervenor joining the Defendant, the PPP, and the Plaintiff shall settle the factory profits and allocate them in proportion to the ratio of ownership (which shall be borne according to the ratio of ownership at the time of damages)." However, if the above operation agreement is an agreement on the shareholders' rights and management rights of the NP industry, it is no reason to newly prepare the operation agreement that confirms the status of the NP as an existing shareholder, and it is reasonable for the Plaintiff to periodically report the business of all factories such as factory operation to the PPP and the 20% of the price for the PNP to the 2013 NP from time to time to time in light of the above operation agreement.

B) The actual factory agreement (No. 4) states that the NNT agreement (No. 4) moved the place of business of NN industry and NN stones into 00,000,000-2 and 11 parcels of land in Kimhae-si, the Defendant joining the Defendant’s 48%, 32% of the PPP, and 20% of the Plaintiff, respectively. However, the ratio of shares on the NN industry’s list of shareholders in 2006 is inconsistent with the status of NN industry’s shares ownership at the time, and it is difficult to view that the Plaintiff agreed on the management of NN industry as the shareholder of the NN industry, in light of the fact that the aforementioned agreement states the Plaintiff as the “representative of NN stones,” the Plaintiff’s share ownership ratio as the Defendant’s 35%, PP 30%, 20%, and 15% of the LCC (No. 10).

C) The 00 production incentive agreement (Evidence 6) contains some of the earnings accruing from patents for the invention of "the method of processing the substitute surface" and "the substitute tin pattern formed on the surface (Evidence B, B, and 5)" as well as the agreement to pay 10% of the total amount of 50% to the inventor and patentee, and to the SSS (factory site) who contributed to the invention as a part of the invention, and 10% of the total amount of 50% to the Intervenor joining the Defendant, PP, and 00, and thus, it cannot be deemed that the Plaintiff exercised its authority as a shareholder.

D) The share purchase and sale agreement (No. 8) appears to contain a statement on the purport that the Plaintiff transferred part of the Plaintiff’s shares to HUE. The Plaintiff asserted that around November 201, 2013, the Plaintiff signed it under the direction of the Defendant’s Intervenor, a title truster of shares in the name of the Plaintiff, and on December 12, 2013, 200 of N industry’s shares 4,000 shares were transferred to HUE, and the transfer price was finally reverted to the Defendant’s Intervenor. In light of this, the Plaintiff’s allegation is deemed reasonable, and therefore, it cannot be deemed that the Plaintiff’s voting right was exercised.

3) Determination on the assertion of shareholder dividend against the Plaintiff

A) According to the statements in Eul and Eul evidence 6, among the 9,340,00 won deposited from the Z on March 30, 201 to the account in the name of the plaintiff, the plaintiff sent approximately 3,741,000 won to the defendant joining the defendant, about 2,801,000 won ( approximately 30%) to PPP, and about 2,001,000 won to GTA ( approximately 20%) to the plaintiff's wife, it is difficult to view that the share ratio on the list of shareholders of NN industry at that time was the defendant joining the defendant, 35%, PP 30%, PP 20%, LP 15%, LCC 30%, and 15% (Evidence 3), but it is difficult to view that the plaintiff's share ratio on the list of shareholders of N industry as the shareholder of the defendant joining the defendant under the above Busan factory operation agreement, as the shareholder's share ratio of 70% and 430%.

B) According to Eul evidence No. 12, it is recognized that there exists a difference equivalent to KRW 269,017,947 between the amount of Plaintiff’s reported income and expenditure by the National Tax Service from 2009 to 2016.

However, such facts alone cannot be deemed as having received cash dividends from the N industry. The Plaintiff asserted that the difference was caused by underreporting the import of N stones. According to the evidence No. 30, the Plaintiff confirmed that the Plaintiff received payment notice of income tax and 00 years of age on December 1, 2017 on the ground of unfair underreporting the revenue generated from N stones on December 1, 2017, and consistent with the Plaintiff’s assertion. Accordingly, this part of the Defendant’s assertion is difficult to accept [In addition, according to the Defendant’s assertion, the Plaintiff exercised the rights as a shareholder of the N industry for about 21 years from the date of establishment of the N industry (which November 25, 1994) to the date of cessation of business (which November 20, 2015), and there is sufficient room to deem that the Plaintiff did not have any objective financial status as a shareholder, other than the above circumstances cited by the Defendant, that the Plaintiff was not a shareholder of the Plaintiff.

E. Sub-decision

Therefore, the disposition of this case based on the premise that the Plaintiff is an oligopolistic shareholder as a beneficial shareholder of the N industry is unlawful.

4. Conclusion

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