National Tax Service Review Income 2011-0063 (Law No. 19, 2011)

It is reasonable to see that it is business income since it has provided professional knowledge independently for one year or more as a certified public accountant.

Considering the fact that a party to a contract directly enters into a service contract with the company and independently provides consulting services, and that the service was performed as a part of creating profits by utilizing professional knowledge of certified public accountants, the period for providing services is about one year, and the service fee was at least four times the annual salary, and the service fee was at least a higher amount, it is reasonable to view it as business income.

2011Guhap39530 global income and revocation of disposition

Gue XX

Head of Nowon Tax Office

May 18, 2012

June 8, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of global income tax of KRW 000,000 for the year 2008 against the Plaintiff on October 1, 2010 (the amount of KRW 00 is a clerical error) shall be revoked.

1. Details of the disposition;

A. On November 25, 2007, the Plaintiff, a certified public accountant, entered into a contract with a corporation Aa (hereinafter referred to as a "non-corporate company") to provide services, such as establishment of a corporation and management consulting.

B. From November 25, 2007 to October 31, 2008, the Plaintiff provided services to the non-party company and received 000 won from the non-party company. This was classified as other income and filed a final return on global income in 2008.

C. On October 1, 2010, the Defendant, on the ground that the Plaintiff constituted “business income other than other income”, calculated the comprehensive income tax after reclassification from other income as business income, and subsequently corrected and notified the difference as global income tax for 2008 (hereinafter “instant disposition”).

D. The Plaintiff filed an objection on December 31, 2010, but received a decision of dismissal from the director of the Seoul Regional Tax Office on January 31, 201, and filed a request for examination on May 6, 201, but received a decision of dismissal from the Commissioner of the National Tax Service on August 19, 2011.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 12, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Service fees received from the non-party company are other income.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) The main contents of the service contract made between the Plaintiff and the Nonparty Company are as follows.

(2) The details of the Plaintiff’s final tax return on global income for the year 2008 are as follows.

(3) From 2003 to 2008, the Plaintiff’s certified public accountant’s business experience is as follows.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3, 7, 9, 10, 11, and the purport of the whole pleadings

D. Determination

(1) Article 19(1)15 of the Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009; hereinafter referred to as the "former Income Tax Act") provides that income generated from personal service business shall be classified as one type of business income, and Article 21(1) provides that "other income shall include income other than interest income, dividend income, real estate rental income, income, pension income, retirement income, and transfer income as follows." One of the provisions in subparagraph 19(c) provides that "an attorney-at-law, certified public accountant, certified tax accountant, certified tax accountant, certified tax accountant, patent attorney, or other person with special knowledge or special knowledge shall use such knowledge or skills and provide services for remuneration or other consideration." According to each of the above provisions, other income listed in each subparagraph of Article 21(1) of the former Income Tax Act shall be classified as other income only in the case of income falling under the type other than those listed in the main sentence of the above Article, and if it is clear that other income has accrued continuously and repeatedly in the name of such income, even if it refers to temporary income.

On the other hand, whether the income received by the provision of services in an independent qualification constitutes business income or other income, which is a temporary income, shall not be based on the form, name, and appearance of the transaction entered into between the parties, but rather on the basis of the substance of the transaction. The determination shall be based on ordinary social norms, considering whether the activity of the taxpayer, who is the party to the transaction, is for profit-making purposes in light of the substance of the transaction, the period, frequency, mode, and the other party, and whether the activity is continuously and repeatedly carried out to the extent that it can be seen as business activity, and the determination shall be made by taking into account not only the relevant activity, but also all the circumstances before and after the activity (see, e.g., Supreme Court Decision 200Du5203, Apr. 24, 201).

(2) In light of the following: (a) the Plaintiff served as a certified public accountant belonging to an accounting firm at the time of rendering services; (b) the Plaintiff, as a party to a contract, provided independent consulting services by concluding a service contract directly with the non-party company; and (b) the services performed also have considerable relation to the original activities of certified public accountant as a comprehensive consulting service for the new corporation that requires expertise in certified public accountants (Article 2 of the Certified Public Accountant Act); (c) the Plaintiff appears to have performed the services as a part of creating profits by utilizing the expertise of certified public accountants; (d) the scope of the services is broad to the extent that the scope of the services is continuously and repeatedly performed for a long period; (d) the actual service period is about one year; and (e) the service fees are more than four times the annual salary that the Plaintiff received while serving as a certified public accountant belonging to a Aa accounting firm and more than that of a certified public accountant belonging to the non-party company. Therefore, the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.