[1] Details of the duty of care to be borne by a certified tax accountant who has been delegated a tax return agent by a taxpayer

[2] In a case where: (a) a certified tax accountant Gap received all relevant documents, such as farmland ledger and abstract of resident registration record cards from Eul’s agent Byung, and directly cultivated them at the district tax office having jurisdiction over the district tax office having jurisdiction over the farmland district for at least eight years; (b) a tax office applied for exemption from capital gains tax pursuant to Article 69(1) of the Restriction of Special Taxation Act; (c) a tax office imposed penalty on Eul on the ground that it does not meet the requirements for exemption after a tax investigation; and (d) A breached the duty of care to provide appropriate explanation and advice to Eul, and sought compensation for damages, the case holding that the court below erred in the misapprehension of legal principles as to the duty of care to verify Eul’s genuine intent, or the duty of care to provide appropriate explanation and advice, and thereby, acknowledged liability for damages by Gap on the ground that he breached the duty of care to verify Eul’s genuine intent

[1] The legal relationship between a certified tax accountant and a taxpayer who has been entrusted with the duty of representation for a tax return is the same as that under the Civil Act. Therefore, a certified tax accountant shall manage the delegated affairs with the care of a good manager according to the terms and conditions of delegation within the scope of specific delegated affairs determined by a delegation contract, and shall comply with such delegation upon the client’s instructions. However, a certified tax accountant is a tax specialist with public nature and is responsible for protecting the rights and interests of a taxpayer and contributing to the faithful performance of a duty of tax payment. Thus, within the scope of closely related to the entrusted affairs, a taxpayer is unable to submit necessary materials for performing the duties requested by the client, even if the client’s specific instructions exist, or is unfavorable to the client or is unfavorable to the client. Thus, a certified tax accountant is obligated to explain and advise the client so that the client may take necessary measures to promote the benefit and prevent damage, even if there is no separate delegation.

[2] In a case where: (a) a certified tax accountant Gap received all relevant documents, such as farmland ledger and abstract of resident registration record cards, from Eul’s agent Byung, and filed a preliminary return of transfer income tax on Eul’s farmland transaction at the district tax office having jurisdiction over the district tax office having jurisdiction over the farmland for at least eight years and directly cultivated them; (b) a tax office applied for exemption of transfer income tax pursuant to Article 69(1) of the Restriction of Special Taxation Act; (c) where Eul breached the duty of care to verify Eul’s genuine intent after a tax investigation; and (d) Eul sought compensation for damages on the ground that Eul breached the duty of care to explain and advise that Eul did not meet the requirements for exemption; and (c) Byung sent all the documents necessary for application for exemption of transfer income tax to Gap; and (d) as long as remuneration was deposited under Eul’s name, it is clear whether Gap’s genuine intent and specific delegated affairs are definite; and (e) it is difficult to see that Gap breached the duty of care due to the misapprehension of the legal principles or the duty of care to explain of Gap’s genuine intent.

[1] Article 1-2 of the Certified Tax Accountant Act, Article 681 of the Civil Act / [2] Article 1-2 of the Certified Tax Accountant Act, Article 681 of the Civil Act, Article 69(1) of the Restriction of Special

[1] Supreme Court Decision 2003Da63968 decided Jan. 14, 2005 (Gong2005Sang, 282) Supreme Court Decision 2005Da38294 decided Oct. 7, 2005 (Gong2005Ha, 1776)

Plaintiff

Defendant (Law Firm Vindication, Attorney highest-soo, Counsel for defendant-appellant)

Suwon District Court Decision 2015Na1117 decided June 25, 2015

The part of the judgment of the court below against the defendant shall be reversed, and that part of the case shall be remanded to the Panel Division of the District Court.

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

1. The legal relationship between a certified tax accountant and a taxpayer who has been entrusted with the duty of proxy for a tax return is the same as that under the Civil Act. Therefore, a certified tax accountant is required to manage the delegated duties with the care of a good manager according to the terms and conditions of delegation within the scope of specific delegated duties determined by a delegation contract, and upon the client’s instruction, the delegated person shall comply with it first. However, as a tax specialist with the public nature and is responsible for protecting the rights and interests of a taxpayer and contributing to the faithful performance of a duty of tax payment, a certified tax accountant is responsible for performing the duty of tax payment. Thus, within the scope of closely related to the entrusted duties, where he is unable to submit necessary data for performing the duties requested by the client, even if the client’s specific instructions are given, or is disadvantageous to the client or disadvantageous to the client, a certified tax accountant is obligated to explain and advise the client to take necessary measures to seek the benefit and prevent damage (see, e.g., Supreme Court Decision 2003Da63968, Jan. 14, 2005).

2. A. Review of the reasoning of the first instance judgment cited by the lower court reveals the following facts.

1) Nonparty 1 (Plaintiff’s wife) who represented the Plaintiff sold the farmland of this case to Nonparty 2’s brokerage and completed the registration of ownership transfer; Nonparty 2, on April 30, 2013, proposed to the Defendant’s tax accountant office to act as an agent for reporting capital gains tax to the Plaintiff’s husband and wife and obtained consent.

2) On May 24, 2013, Nonparty 2 sent to the Defendant a sales contract on the farmland of this case, which he received from the Plaintiff on May 24, 2013, to the Defendant, stating that “The farmland ledger (as from December 10, 2002 in the farmland status column, it is written that the farmland of this case is self-chilled), the abstract of the resident registration card (as from November 23, 2002, it is written that ○○○, △△, and △△), and the sales contract on the farmland of this case, which he was under his custody, was sent to the Defendant by facsimile.”

3) On May 27, 2013, Nonparty 1 received contact from the Defendant’s office, and sent KRW 150,000 to the Defendant’s office account for tax agent business by designating the remitter as the Plaintiff.

4) On June 14, 2013, the Defendant represented the Plaintiff’s preliminary return of capital gains tax on selling the farmland in this case at the place where the address of the instant farmland was located, and applied for the exemption of total capital gains tax amounting to KRW 75,507,632 pursuant to Article 69(1) of the Restriction of Special Taxation Act, as the Plaintiff had cultivated the farmland in this case for not less than eight years, and attached a copy of the Plaintiff’s resident registration record card, sales contract, and farmland ledger to the application for preliminary return of capital gains tax and exemption.

5) As a result of a verification inspection conducted from September 16, 2013 to October 4, 2013, the head of the relevant tax office determined that the Plaintiff had resided in the farmland of this case for at least eight years and cultivated it directly. On October 21, 2013, the head of the relevant tax office notified the Plaintiff of each taxation of KRW 109,90,1350, which added KRW 100,000,000,000 to KRW 30,203,052 of the penalty tax due to bad faith in filing a return for capital gains tax on KRW 75,507,632, and the additional tax amount due to bad faith in filing a return, KRW 4,190,673 as income tax amount due to the sale of the farmland of this case, and KRW 10,90,130,000,000 of the tax amount as local income tax amount, the Plaintiff received each request from the head of the relevant tax office for pre-assessment review on November 13, 13, 19, 20.

B. The lower court, based on the foregoing factual basis, cited the first instance judgment and recognized the Defendant’s liability as follows.

1) Although the Plaintiff did not notify any person of the fact that he/she requested capital gains tax exemption, the Defendant is bound to compensate the Plaintiff for damages incurred by the Defendant, on the ground that only Nonparty 2’s horses and documents sent by Nonparty 2 via facsimile were based on the Plaintiff’s intent, in violation of the duty of care to verify whether he/she wishes to do so.

2) Furthermore, even if the Plaintiff requested the Defendant to be exempted from capital gains tax, the Defendant, a tax accountant, confirmed the facts directly and specifically with the Plaintiff whether the Plaintiff satisfies the requirements for exemption from capital gains tax under Article 69(1) of the Restriction of Special Taxation Act, and accordingly, in accordance with the result, the Plaintiff filed an application for exemption from capital gains tax on the basis of the documents delivered by Nonparty 2 and Nonparty 2, in violation of the duty of care to provide appropriate explanation and advice from the tax specialist’s position. Thus, the Defendant also is liable to compensate the Plaintiff for losses

3. However, in light of the above legal principles, we cannot accept the above judgment of the court below as it is.

A. According to the above facts, Nonparty 2 may be deemed to delegate the tax agent’s duty to the Defendant as the Plaintiff’s agent. Nonparty 2 sent all necessary documents related to the Plaintiff’s application for exemption of transfer income tax to the Defendant, and said, as long as remuneration was paid under the Plaintiff’s name, it can be said that the intent of delegation by tax agent and the details of specific delegated duties are clear. Therefore, it is difficult to deem that the Defendant had any special circumstance to confirm

B. In addition, according to the aforementioned factual relations, the content of the documents drawn up by Nonparty 2 satisfied the requirements for exemption from capital gains tax, and all documents necessary for application for exemption were provided. Therefore, it is difficult for the Defendant to doubt that there were special circumstances, such as that the application for exemption from capital gains tax is inappropriate for delegation or disadvantageous to the Plaintiff.

C. Nevertheless, the lower court acknowledged the Defendant’s liability for damages caused by breach of duty of care solely on the grounds as seen earlier. In so determining, the lower court erred by misapprehending the legal doctrine on breach of duty of care of a certified tax accountant, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the part against the defendant among the judgment below is reversed, and the case is remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench

Justices Noh Jeong-hee (Presiding Justice)