Review-Income-2012-0168 (Law No. 15, 2013.03)

A person registered as a representative director on the corporate register is presumed to have been actually operating the company.

Although it is apparent that the plaintiff is a representative under the name and is not the actual operator, it is reasonable to dispose of the plaintiff by deeming the plaintiff as the actual representative director.

Article 67 of the Corporate Tax Act

2013Guhap738 Global Income and Revocation of Disposition

○ Kim

○ Head of tax office

2014.03.27

2014.10

1. The plaintiff's claim is dismissed.

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

The disposition of imposition of global income tax of KRW 44,966,760, and local income tax of KRW 4,496,670, which was reverted to the Plaintiff on September 3, 2012 by the former Cheong-gu Defendant on September 3, 2012 is revoked.

1. Details of the disposition;

A. From September 3, 2004 to December 20, 2012, the Plaintiff was registered as the representative in the corporate register of AAG Co., Ltd. (hereinafter “instant company”).

B. Upon filing a report on the tax base and amount of corporate tax for the business year 2008, the instant company included and reported 148 million won as short-term loans to shareholders, directors, and affiliated companies (hereinafter “the instant loan”). The Defendant filed a request for re-determination with the Commissioner of the National Tax Service on September 31, 2015, for the following reasons: (a) the instant loan was not collected until August 31, 2008, and the ownership is unclear; (b) the Defendant disposed of the instant loan by recognizing the Plaintiff pursuant to Article 67 of the Corporate Tax Act and the proviso of Article 106(1)1 of the Enforcement Decree of the same Act; and (c) on September 3, 2012, the Plaintiff filed a request for re-determination and notification of global income tax amounting to KRW 44,96,760, local income tax amounting to 208, and KRW 496,670,000 (hereinafter collectively referred to as “the instant disposition”).

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 3-2, 5, 6-6, Eul evidence Nos. 1, 2, and 4 (including branch numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Plaintiff sold the instant company to NewB around April 7, 2004, and the Plaintiff was registered as the representative director of the instant company in form upon the request of the newB, and the actual operator of the instant company was merely a newB, and thus, the instant disposition against the Plaintiff, which was merely a representative, is unlawful.

2) Since the instant loan was substantially dissolved and liquidated while the instant company discontinued its business, and in the process, it was distributed as residual assets to the newB and its family members, a shareholder of the instant company, and thus, it was unlawful to dispose of the instant loan again by recognizing the Plaintiff.

3) The instant disposition is based on the General Rule 4-0, 6 of the Corporate Tax Act, which is merely an administrative rule, and thus is in violation of the principle of no taxation without law.

B. Relevant statutes

Attachment 'Related Acts and subordinate statutes' shall be as shown.

C. Facts of recognition

1) On April 7, 2004, the Plaintiff sold AAG corporation, which it had operated, to newB, a corporation for the construction industry ofCC (hereinafter referred to as the “previousCC construction industry”). On the same day, newB was appointed as the representative director after changing the trade name of the instant corporation to theCC construction industry (hereinafter referred to as the “CC construction industry”) (the Plaintiff resigned from the representative director September 3, 2004), and the previousCC construction industry was changed to the AG corporation (the instant company) on the same day, the newCC construction industry resigned from the representative director on the same day, and the Plaintiff was appointed as the representative director. (2) The Plaintiff had earned income of KRW 15.6 million received from the instant company in 204, and had shares of KRW 150,500 after the mutual change of the representative director.

3) The instant company closed its business on August 31, 2008, and was dissolved pursuant to Article 520-2(1) of the Commercial Act on December 3, 2012, and completed its registration on December 20, 2012. The Plaintiff was registered as the representative director until the date when the instant company was dissolved.

[Reasons for Recognition] Unsatisfy, Gap evidence 3, 5, Eul evidence 3 and 4 (including branch numbers), the purport of the whole pleadings

D. Determination

1) Determination on the first argument

A) The recognition contribution system for a representative under Article 106(1) of the Enforcement Decree of the Corporate Tax Act is not based on the facts that such a representative has generated income, but rather on the basis that a certain fact that can be recognized as such in order to prevent an unfair act under tax laws by a corporation should be deemed as a bonus for a unconditional representative regardless of its substance. The representative is substantially a representative who operates the company. Thus, even if the company was registered as the representative director in the corporate register, if there is no actual operation of the company, such recognition income shall not be attributed to the representative and shall not be imposed on the representative. However, since a person who is registered as the representative director in the corporate register can be presumed to substantially operate the company, the representative director in the corporate register must prove that he/she actually failed to operate the company (see, e.g., Supreme Court Decision 2006Du187, Apr. 24, 2008).

B) In the instant case, it is difficult to believe that the Plaintiff alleged that it did not actually operate the instant company, and there is no other evidence to acknowledge that the entry of the evidence No. 2 in the evidence No. 2 is difficult.

C) Therefore, the Plaintiff’s assertion on this part is without merit.

2) Judgment on the second argument

According to the facts found earlier, the instant company was deemed dissolved on December 3, 2012, and did not distribute residual assets by implementing the liquidation procedures at the time of closure of business on August 31, 2008. Therefore, the Plaintiff’s assertion on this part is without merit.

3) Judgment on the third argument

As seen earlier, the instant disposition is based on Article 67 of the Corporate Tax Act and Article 106(1)1 of the Enforcement Decree of the Corporate Tax Act, and thus, the Plaintiff’s assertion on this part is without merit.

3. Conclusion

The plaintiff's claim is dismissed. It is so decided as per Disposition.