The meaning of “a person who acts for or has been entrusted to a withholding agent or payer and bears the obligation to submit a tax withholding or payment record within the scope of the delegation or authority” under Articles 127(2) and 164(9) of the former Income Tax Act, and the requirements for deeming that there exists “explient delegation” such as withholding duty or submission of a payment record and payment record, etc.

Article 127 (1) 5 (see current Article 127 (1) 6), Article 164 (1) 5 (see current Article 164 (1) 6), and (9) (see current Article 164 (8)) of the former Income Tax Act (Amended by Act No. 7528, May 31, 2005)

Plaintiff

Head of Namyang District Tax Office

Seoul High Court Decision 2010Nu18309 decided November 11, 2010

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Article 127(1) of the former Income Tax Act (amended by Act No. 7528 of May 31, 2005; hereinafter “Act”) provides that “Any person who pays any of the following income to a resident or a nonresident in the Republic of Korea shall withhold income tax from such resident or nonresident,” and subparagraph 5 of Article 127(2) provides that “other income amount” shall be “the act of a person liable to withhold income pursuant to the provisions of paragraph (1) on behalf of the person liable to withhold income or who is delegated by such person shall be deemed the act of the principal or his delegate within the scope of the delegation or authority and thus the provisions of paragraph (1) shall apply.”

In addition, Article 164(1) of the Act provides that “A person who pays an individual liable to pay income tax in the Republic of Korea the following income amount shall submit a written payment statement to the head of the competent tax office having jurisdiction over the place of tax withholding by the end of February of the year following the year in which the date of payment falls, as prescribed by the Presidential Decree.” Article 164(1)5 of the Act provides that “The act of a payer pursuant to the provisions of paragraph (1) acting on behalf of or delegated to the payer pursuant to the provisions of paragraph (1) shall be deemed to be the act of the principal or the mandator

In full view of the language, purport, etc. of the above provisions, it is reasonable to deem that “a person who is a withholding agent or payer or a person delegated by him/her, and is obligated to submit a tax payment record or payment record within the scope of delegation or authorization” under Articles 127(1) and 164(1) of the Act refers to a person who is obligated to pay the income to a source taxpayer in addition to the payment of the income amount to the source taxpayer and who has submitted a payment record for withholding income tax and has received the payment record for withholding income tax at the competent tax office (hereinafter “Delegation”). In addition, in light of the nature, effect, etc. of withholding tax, it is reasonable to deem that the delegation of withholding tax, etc. can be explicitly and explicitly made, but in order to deem that there is an implied delegation of the duty to withhold tax, etc., a person who is obligated to pay the income amount to the same extent as the case where an implied delegation exists, barring special circumstances, such as a person who is obligated to do so, must do so.

2. citing the reasoning of the judgment of the court of first instance, the court below accepted the claim for compensation for the land incorporated into a river from the Nonparty as an attorney-at-law through the Nonparty, and the Plaintiff received the full amount of compensation from the Defendant in the case at the time of winning the contract from the Plaintiff, 27% of which is the Plaintiff’s remuneration amount, and 10.5% of which is the Plaintiff’s holding, and the Nonparty paid to the Nonparty, and the remainder 62.5% of which is the fact that the Plaintiff entered into the agreement of this case to transfer to the prop.

Based on the aforementioned factual basis, the lower court determined that the instant disposition was lawful on the ground that the Plaintiff was obligated to withhold the income tax on the instant income amount corresponding to the non-party’s other income and submit a written payment statement, on the grounds that the Plaintiff was delegated the right to pay the instant income amount from the props and paid it to the non-party.

3. However, we cannot accept such a determination by the court below.

According to the aforementioned legal principles, even if the Plaintiff was delegated by the props with the authority to withhold income tax on the instant income amount, in order to deem that the Plaintiff has the obligation to withhold income tax on the said income amount and the obligation to submit a written statement of payment, there should be circumstances to deem that the Plaintiff was delegation of the duty to withhold income tax on behalf of the props, such as explicitly delegated the payment of the said income amount and entering into a vertical and non-party-party payment agreement, which is the cause of the instant income

Nevertheless, the lower court, without examining these circumstances further, concluded that the Plaintiff had the obligation to withhold income tax and the obligation to submit a payment record on the instant income amount solely based on its stated reasoning. In so doing, the lower court erred by misapprehending the legal doctrine on the obligation to withhold income tax and the obligation to submit a payment record by proxy or delegation, thereby failing to exhaust all necessary deliberations, thereby affecting the conclusion

4. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ko Young-han (Presiding Justice)