Suwon District Court 2008Guhap3938 (2010.06.03)

National High Court Decision 2007Du2421 ( October 11, 2008)

Definitions of an officer, such as a shareholder, in a disposition

The shareholders and investors of the company shall include persons who actively participate in the decision-making and execution of the management team or exercise the right to supervise the accounting and business, although they are not executives specified in the registration or the articles of incorporation.

2010Nu2017. Gross income and revocation of disposition

door-○

○ Head of tax office

Suwon District Court Decision 2008Guhap3938 Decided June 3, 2010

1. Revocation of a judgment of the first instance;

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s each disposition of imposition of global income tax of KRW 35,972,010 for the year 2002, global income tax of KRW 78,210,080 for the year 2003, and global income tax of KRW 176,600 for the year 2004 is revoked.

2. Purport of appeal

same as the entry.

1. Details of the disposition;

The following facts are either disputed between the parties, or found in Gap evidence Nos. 3, 4, 5, Eul evidence No. 1-3, Eul evidence No. 2-1, 2, 3, Eul evidence No. 4-2, Eul evidence No. 6-1, 2, and Eul evidence No. 7.

A. The head of Seoul Customs Office reported the price of the imported goods to the customs office at a level lower than the actual price and discovered the fact of evading customs duties, and notified the fact to the head of the Songpa District Tax Office having jurisdiction over the non-party corporation as taxation data, and filed a complaint against the Plaintiff with the prosecutor by deeming the non-party corporation as the actual manager of the non-party corporation. The head of the Seoul Customs Office, from around 2002 to around 2004, the head of the Seoul Customs Office (hereinafter referred to as the "non-party corporation") considered the Plaintiff as the actual manager of the non-party corporation.

B. Accordingly, the head of the Songpa District Tax Office conducted a tax investigation on the non-party corporation on June 2006, and issued a notice of increase, correction, and notification of corporate tax and value-added tax from 2002 to 2004, deeming the Plaintiff as the actual representative of the non-party corporation, and notified the Defendant of the taxation data on July 4, 2006. Meanwhile, the director and the representative director of the non-party corporation in the corporate register are KimA, NewBB, directors, and DaD, and the non-party corporation was completely liquidated on June 14, 2004.

C. On January 2, 2007, the Defendant decided and notified the Plaintiff of KRW 50,581,550 of global income tax for the year 2002, KRW 79,779,620 of global income tax for the year 2003, and KRW 176,600 of global income tax for the year 2004, and the Plaintiff’s objection thereto was filed on February 16, 2007 with the National Tax Tribunal on June 21, 2007.

Although a request was made, it was rejected on January 11, 2008.

D. In the case of revocation of the disposition imposing customs duties, etc., brought by the non-party corporation at the Suwon District Court 2005Guhap9140, the Defendant decided on January 28, 2010 and notified the total income tax for the year 2002, among the above disposition imposing global income tax on April 1, 2010, when the judgment partially revoking the disposition became final and conclusive on January 28, 2010, the Defendant determined and notified the reduction of the total income tax for the year 2002, and the total income tax for the year 2003 as KRW 78,210,080 (hereinafter referred to as the “reduction each disposition imposing tax and the total income tax for the year 204,” and “the instant disposition imposing tax”).

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff argues that it is unlawful to treat the plaintiff as a representative of the non-party corporation and impose a comprehensive income tax on the non-party corporation's income accrued from the omission of the non-party corporation by considering the plaintiff as the actual representative of the non-party corporation and imposing the income tax on the plaintiff on the non-party corporation, and that even if the plaintiff is the actual representative of the non-party corporation, the defendant estimated the tax base of the non-party corporation on the ground that the liquidation procedure of the non-party corporation was completed and the account book was destroyed. This is because the estimation was made in accordance with the proviso to Article 68 of the Corporate Tax Act, since the difference between the net income tax base and the balance sheet of the non-party corporation's tax base determined by the estimation should be the other outflow from the company under the proviso to Article 106 (2) 2 of the Enforcement Decree of the Corporate Tax Act.

B. Relevant statutes

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

C. Determination by issue

1) Whether the representative is a requirement for bonus disposal

Article 106 (1) 1 (proviso) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 2, 2008; hereinafter the same) provides that the upper limit on the recognition of a representative for disposal of income pursuant to the proviso to Article 106 (1) 1 shall not be placed on the basis of the fact that such income has accrued to the representative, but shall be deemed as a bonus to a de facto representative without regard to a certain fact which can be recognized as such act in order to prevent an unfair act under tax laws by the corporation. In such a case, the representative of the corporation which is subject to disposal of bonus shall be strictly interpreted without due consideration to driving away from his/her face (see, e.g., Supreme Court Decision 92Nu3120, Jul. 14, 1992). The proviso to Article 106 (1) 1 shall be deemed as belonging to the representative if he/she is not clear who has been actually engaged in the business or has de facto a special relationship with the representative.

According to the health class, evidence No. 2, evidence No. 1, and evidence No. 1-3 of this case, the plaintiff did not have been registered as the representative director or director on the corporate register of the non-party corporation. The KimA on the corporate register of the non-party corporation established from January 2, 2002 to August 6, 2002, the date of incorporation, and from August 7, 2002 to March 19, 2004, the newB was registered as the representative director. However, it is recognized that the plaintiff was registered as the non-party corporation. On the other hand, considering the overall purport of arguments No. 5, 10, 11, and 12 (including each number), it is determined that the plaintiff was dismissed by exercising the right to manage the non-party corporation's total issued stocks or the right to manage the non-party corporation as the representative director, and the plaintiff was also dismissed by exercising the right to manage the non-party corporation's own stocks or the right to manage the non-party corporation.

Therefore, the instant disposition that deemed the Plaintiff as the counterpart to the disposition is legitimate because it is recognized and accepted as prescribed by the proviso of Article 106(1)1 of the Enforcement Decree. Therefore, this part of the Plaintiff’s assertion is without merit.

2) Whether the method of estimated investigation is lawful

In full view of the purport of each statement in Eul evidence Nos. 1 through 8 (including each number), the defendant was unable to secure the necessary account books or documentary evidence in calculating the amount of income upon the completion of liquidation of the non-party corporation. The defendant's calculation of the amount of income can be acknowledged as the method of estimating the amount of income as the plaintiff did not request the plaintiff to submit the account books or documentary evidence. This constitutes "where there is no necessary account books or documentary evidence in calculating the amount of income, or where the important part of the account books or documentary evidence is incomplete or false," under the proviso of Article 66 (3) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) and Article 104 (1) 1 of the former Enforcement Decree of the Corporate Tax Act. Thus, the plaintiff's assertion on this premise is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is unfair with different conclusions, so the defendant's appeal is accepted and the judgment of the court of first instance is revoked and the plaintiff's claim is dismissed as per Disposition.