Early High Court Decision 2013J 1584 (Law No. 18, 2013)

It is reasonable to apply 5 years to the plaintiff the exclusion period for short-term loans that have been released from the company.

It is reasonable to deem that the amount was out of the company at the time of replacing the short-term loan account as a construction asset, and there is no evidence to deem that the plaintiff committed a fraudulent or other unlawful act, it is reasonable to view that the period of imposition of national taxes

The exclusion period for national tax assessment under Article 26-2 of the Framework Act on National Taxes

2013Guhap584 Global Income and Revocation of Disposition

Section AA

BB Director of the Tax Office

oly 16, 201

.02.06

1. The Defendant’s global income tax amounting to KRW 785,944,070 on December 11, 2012 for the Plaintiff on December 11, 2012

(2) The disposition of imposition shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. On May 28, 2007, AAA business established on October 25, 1996, merged ○○ Co., Ltd. (hereinafter referred to as “○○ prior to the merger”) and changed its trade name on September 7, 2007 to ○○ Co., Ltd. (hereinafter referred to as “○○ after the merger”). The Plaintiff is the substantial representative of each of the above corporations that owned the share share shares of each of the above ○○○ after the merger and the merger and was practically in charge of management.

B. On December 31, 2005, ○○ prior to the merger replaced the Plaintiff’s short-term loans of KRW 1,739,082,816 (hereinafter “instant key amount”) with the construction assets. After the merger, ○○ succeeded to the asset account during the construction, but replaced the said amount with the installation equipment on June 15, 2007.

C. After the merger, the Central Regional Tax Office confirmed that the above facilities and equipment, which are appropriated as assets in the accounting book of ○○ after the merger, are non-real assets. After the merger, on June 15, 2007, the point at which ○○○ was replaced with the assets during construction, the key amount of the instant case was leaked to the private facilities and was included in the calculation of the above amount, and the above amount was deemed to have been reverted to the Plaintiff, who is the actual representative, and notified the Defendant of the taxation data by disposing of it as bonus to the Plaintiff.

D. Accordingly, on December 11, 2012, the Defendant imposed global income tax of KRW 00,000 on the Plaintiff for the year 2007 (hereinafter “instant disposition”), and E. The Plaintiff appealed and filed a request with the Tax Tribunal on March 8, 2013, but the said request for a trial was dismissed on June 18, 2013.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 4 (including branch numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The time when the ○○○ prior to the merger replaced the short-term loans to the Plaintiff by the construction assets.

12. On December 31, 201, the point at which the collection of the loan to the Plaintiff was waived. As such, the Defendant should impose global income tax on the Plaintiff on the premise that the income accrued to the Plaintiff was reverted to the Plaintiff in 2005, and in such a case, the period of exclusion of five years as of December 11, 2012, which is the date of the instant disposition, the Defendant’s disposition should be revoked.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

The dispute amount in this case where ○○○ prior to the merger was appropriated as a short-term loan on December 31, 2005 in the accounting book was replaced by the construction assets. After the merger, ○○○ succeeded to the asset account in the above construction, but replaced with the facility equipment on June 15, 2007. As seen earlier, the intention to waive the collection of short-term loans was realized at the first time the above short-term loan account was replaced with a processed asset. After the merger, it is reasonable to view that ○○○ prior to the merger renounced the short-term loan amount as being replaced with another asset account, and that the time when the repayment of loans was waived does not vary because the substitute assets were replaced with another asset account. Therefore, it is reasonable to view that the short-term loan was renounced by the Plaintiff on December 31, 2005, which was the time when the short-term loan account was replaced with the construction assets. Accordingly, the issue amount in this case is deemed as having been leaked to the Plaintiff for the actual representative in 2005.

In regard to this, the defendant asserts that the issue amount of this case was leaked out of the private company when the asset account was replaced by the facility device during construction, and that the asset account was merely a temporary account with the intention to recover the short-term loan. However, there is no ground to see it.

Meanwhile, pursuant to Article 26-2(1) of the former Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006; hereinafter the same), national taxes shall not be imposed after five years from the date on which they can be imposed (Article 3). However, in cases where a taxpayer evades, is refunded, or deducted from national taxes by fraud or other unlawful means, ten years (Article 10) may not be imposed after the expiration of seven years (Article 12-3(1)1 of the former Enforcement Decree of the same Act (amended by Presidential Decree No. 19893, Feb. 28, 2007). Article 12-3(1)1 of the former Enforcement Decree of the same Act (amended by Presidential Decree No. 19893, Dec. 31, 2009) provides that the period of exclusion shall be calculated from the date following the deadline for filing a report on the tax base and amount of national taxes to the head of the competent tax office having jurisdiction over the place of tax payment for the year following year.

However, there is no evidence to deem that the Plaintiff’s act constitutes a case where the Plaintiff evades a national tax, obtains a refund or deduction, or fails to file a tax base return within the statutory due date of return due to a fraudulent or other unlawful act, it is reasonable to deem that the exclusion period for imposition of global income tax for the year 2005 is five years pursuant to Article 26-2(1)3 of the former Framework Act on National Taxes. Thus, the disposition of this case was made on June 1, 2006, which was the starting date of the exclusion period for imposition of global income tax for the year 2005, and on December 11, 2012.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

Related Acts and subordinate statutes

(1) The former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007)

Article 67 (Disposition of Income)

In filing a report on the corporate tax base on the income for each business year under the provisions of Article 60 or in determining or revising the corporate tax base under the provisions of Article 66 or 69, the amount included in the calculation of earnings shall be disposed of as bonus, dividends, other outflow from the company and internal reserve according to the person to whom it belongs, as prescribed

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

§ 106. Disposal of income

(1) The amount included in gross income pursuant to Article 67 of the Act shall be disposed of pursuant to the following subparagraphs:

The same shall also apply to non-profit domestic corporations and non-profit foreign 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 concerned 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 from among the officers who are stockholders, the reported person shall be the representative,

(a) Where the person of accrual is a stockholder (not including stockholders who are officers or employees), the dividends of the person of accrual;

(b) If the person to whom it belongs is an officer or employee, the bonus to the person to whom it reverts;

(c) Where the person to whom it belongs is a corporation or an individual operating the business, other outflow from the company: Provided, That it shall be limited to where the distributed profit constitutes the income for each business year of a domestic corporation or a domestic business place of a foreign corporation under the provisions of Article 94 of the Act or the business income of a resident or a non-resident under

(d) Other income of the person to whom it reverts, in case where the person to whom it reverts is the person.

(1) The former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009)

Article 70 (Final Return on Global Income)

(1) Any resident having global income amount in the current year, shall make a return on the tax base of global income to the chief of the tax office having jurisdiction over the place of tax payment from May 1 to 31 of the year following the current year,

(1) The former Framework Act on National Taxes (amended by Act No. 8139 of Dec. 30, 2006)

Article 26-2 (Period for Excluding Assessment of National Tax)

(1) No national tax may be levied after the period as provided in the following subparagraphs expires: Provided, That if the mutual agreement procedures are in progress under a treaty concluded to prevent double taxation (hereinafter referred to as a “tax treaty”), Article 25 of the Adjustment of International Taxes Act shall apply:

1. Where a taxpayer evades a national tax, or receives a refund or deduction by fraudulent or other unlawful means, for ten years from the date on which the national tax is assessable;

2. If the taxpayer fails to file a written tax base return within the legal return term, for seven years from the day on which the national tax is assessable;

3. If it does not fall under subparagraphs 1 and 2 above, for five years from the day on which the national tax is assessable; and

(1) The former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 19893, Feb. 28, 2007)

Article 12-3 (Initial Date in Counting National Tax Exclusion Period)

(1) The date when the national taxes may be assessed under the provisions of Article 26-2 (4) of the Act shall be as follows:

1. In cases of filing a return on the tax base and amount of national tax, the following day of the deadline for filing a return or a deadline for filing a return on the tax base and amount of the national tax (hereinafter referred to as "period for filing a return"). In such cases, interim prepayment, preliminary return