Whether or not excessive personnel expenses paid to officers who are members of a family enterprise are excluded from deductible expenses.

Benefits paid to executive officers of a related party can not be considered as "market price which is the basis for the avoidance of wrongful calculation," and it is not clear that retirement allowance payment regulations are unclear.

Article 43 of the Enforcement Decree of Corporate Tax Act

2016 Gohap63323 Revocation of Corporate Tax Imposition Disposition, etc.

△ corporation

Maak Tax Office et al.1

September 7, 2016

September 30, 2016

1. The imposition disposition of each corporate tax on August 3, 2015, which the director of the tax office of Maak-gu against the plaintiff on August 3, 2015, is revoked.

2. The notice of change in each income amount listed in the separate sheet No. 2 issued by the director of the Seoul Regional Tax Office against the plaintiff shall be revoked.

3. The costs of lawsuit shall be borne by the Defendants.

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a corporation that is established on March 28, 1969 and located in ○○○○○○○, engaged in market management business, large store business, and general commodity sales business for public interest in △○○○.

B. The deceased KimA, along with his spouse KimB, owned 100% of the Plaintiff’s share and served as the representative director from around 2010. The KimCC, KimD, KimE, KimF, and KimGG are children of the deceased KimA and JeongB, and Kim H is the husband of the above KimH, and Kim II is not a relationship between the deceased KimA and the deceased KimA day, and the deceased Kim II is a relationship between the deceased KimA day and the deceased around 1987.

Around December 2013, 2013, he/she re-entered in around 1999 and retired from office. KimA died on March 8, 2014.

The Plaintiff’s shares held by the KimA, which were due, are due BB, KimCC, KimD, KimE, KimF;

They were succeeded to KimG.

C. KimCC, KimD, KimE, KimF, KimGG, and Kim II were in office as an executive officer or employee of the Plaintiff and were paid a salary and bonus in return for their duties. On the other hand, KimF, KimCC were paid a retirement allowance according to the Plaintiff’s retirement allowance payment regulations, around 2009, around 2009, for KimG, around 2010, for KimG, around 2010, for KimG, and around 2011, for Kim H, around 2012, around 2012, for Kim H, KimF, KimF, Kim II, and JeongB.

D. From June 1, 2015 to June 20, 2015, the Seoul Regional Tax Office conducted a corporate integration investigation on the Plaintiff’s business year 2009 to June 20, 2013, and notified the Plaintiff of the fact that the personnel expenses paid by the Plaintiff to JungB, KimCC, KimD, KimD, KimE, KimF, KimG, Kim H, Kim H, and Kim II (hereinafter referred to as “ disputing executives and employees”) are excessive and imposed non-deductible expenses in deductible expenses.

E. The head of the Defendant Gwanak Tax Office deemed the amount of reasonable remuneration that the Plaintiff paid to the KimF Auditor, one of the key executives and employees, as the amount of wages paid to the Plaintiff, and disposed of KRW 351,00,000 as a total of the salaries paid by the KimF during the business year 2009 through 2013 as the amount of wages paid to the executives and employees in excess of the amount that he received by KimF

F. In addition, on April 2, 2009, the director of the tax office having jurisdiction over the defendant's directors excluded the total amount of KRW 951,802,133 from the retirement allowances of officers from deductible expenses and disposed of the bonus to the income earner.

G. On August 3, 2015, as the above amount of remuneration and the above retirement allowance were excluded from deductible expenses, the head of the tax office having jurisdiction over the company was imposed and notified of the corporate tax (including additional tax) as stated in the table 1 below.

H. On June 26, 2015 and June 29, 2015, the director of the Seoul Regional Tax Office issued a notice of change in the amount of income (in addition to the disposition imposing the above corporate tax, hereinafter referred to as the "disposition") to the Plaintiff on the ground that the amount of the retirement allowance was disposed of as a bonus as a bonus.

I. On October 26, 2015, the Plaintiff filed an appeal against the instant disposition with the Tax Tribunal. On June 14, 2016, the Tax Tribunal rendered a decision to accept part of the amount of 58,50,000 won converted into the gross amount of Kim F in 2009 for one year’s salary as an appropriate amount of remuneration. The details of benefits calculated by denying the aforementioned adequate portion of the amount of wages determined by the said decision of the Supreme Court (hereinafter referred to as “instant wage”) out of the amount of wages paid to the executives and employees at issue are as indicated in [Attachment 3], and the details of the retirement benefits subject to denial (hereinafter referred to as “instant retirement benefits”) are as listed in [Attachment 4] as indicated in [Attachment 1]. Accordingly, the Seoul District Tax Tribunal’s reduction and correction of corporate tax as described in attached Table 1, and the head of the Seoul Regional Tax Office notified the changes in each income amount as shown in attached Table 2 list.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The Defendants, based on the provision on the exclusion of excessive labor cost from deductible expenses (Article 26 subparag. 1 of the Corporate Tax Act and Article 43(3) of the Enforcement Decree of the same Act), and the provision on wrongful calculation (Article 52 of the Corporate Tax Act and Article 88(1)9 of the Enforcement Decree of the same Act) (Article 52 of the Corporate Tax Act and Article 88(1)9 of the Enforcement Decree of the same Act), excluded the key amount of remuneration for executive officers and employees in excess of the personnel expenses of KimF from deductible expenses. However, since KimF constitutes a "controlling officer, etc." and is not in the same position as the key executive officer and employee, Article 43(3) of the Enforcement Decree of the Corporate Tax Act cannot be applied on the basis of KimF’s remuneration, and the payment of remuneration does not fall under any of Article 88(1) of the Enforcement Decree of the Corporate Tax Act, and it cannot be deemed that the amount of remuneration of KimF is excessive solely on the basis of the nationwide average sales ratio of real estate rental businesses

2) The instant retirement benefits are retirement benefits paid in accordance with the provision on the payment of retirement benefits delegated by the articles of incorporation and constitute deductible expenses under the Corporate Tax Act. Moreover, since the Defendant excluded the amount of deductible expenses on the grounds that it was not a real retirement at the tax trial stage, this is a separate fact that is not recognized as identical to the original grounds for disposition, it cannot be newly asserted as the grounds for disposition. Accordingly, the instant disposition should

B. Relevant statutes

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

C. Determination

1) Determination on key remuneration

A) Whether it is subject to non-deductible expenses under Article 43(3) of the Enforcement Decree of the Corporate Tax Act

According to Article 43 (3) of the Corporate Tax Act, where a corporation pays remuneration to an executive officer who is a controlling stockholder to an officer or employee other than a controlling stockholder in the same position without justifiable grounds, the amount in excess shall not be included in the calculation of losses.

Since the fact that the deceased KimA is the plaintiff's single shareholder and the KimF is the plaintiff's arche of the deceased KimA is the same as the above, the deceased KimF constitutes "controlling shareholder" and the deceased KimF constitutes "person in a special relationship with the controlling shareholder, who is a controlling shareholder," it cannot be viewed as "executive or employee other than the controlling shareholder, etc." of the above provision. In addition, in light of the status and role within the plaintiff company of KimF, etc., it cannot be viewed that there is the same position as other executive officers and employees in other issues. Accordingly, from 2009 to 2013, the remuneration of KimF does not constitute "amount paid to executive officers other than the controlling shareholder, etc. who can be compared with the remuneration amount for the executive officers and employees at the same position", but it cannot be viewed as a similar remuneration under the principle of no taxation without law.

Therefore, since the remuneration of Kim FF cannot be considered as the basis of non-Inclusion of the remuneration of the executives and employees at issue, the disposition of non-deductible tax office's non-taxation based on Article 43(3) of the Enforcement Decree

B) Whether the calculation was based on a wrongful calculation

Article 52 (1) of the Corporate Tax Act provides that "the head of a tax office having jurisdiction over the place of tax payment or the Commissioner of a regional tax office having jurisdiction over the place of tax payment may calculate the amount of income for each business year of the corporation without regard to the act of the corporation or the calculation of the amount of income (hereinafter referred to as "unlawful calculation") where it is deemed that the tax burden of the corporation has been unjustly reduced due to transactions with a related party prescribed by Presidential Decree (hereinafter referred to as a "related party")." In applying Article 52 (1) of the Corporate Tax Act, "the amount of income for each business year of the corporation may be calculated regardless of the calculation of the amount of income of the corporation." In applying Article 52 (2) of the Corporate Tax Act, "the rate (including rate, interest rate, rent, exchange

In addition, according to Article 89 of the Enforcement Decree of the Corporate Tax Act, "market price" is based on the price generally traded between many and unspecified persons, other than specially related persons, or between third parties, other than specially related persons (Paragraph 1), and if there is no example or unclear transaction, it can be based on the appraisal price, etc. (Paragraph 2). In addition, the burden of asserting and proving "market price, which serves as the criteria for the avoidance of wrongful calculation, is unfair act."

Tax authorities asserting the denial of accounting (see, e.g., Supreme Court Decisions 2012Du12006, Oct. 25, 2012; 2013Du1035, Sept. 27, 2013).

Article 52 (2) of the Corporate Tax Act provides that "market price shall be applied or deemed to be applied to normal transactions between persons who are not related parties," and KimF's payment to the plaintiff constitutes "specially related parties," from 2009 to 2013, the benefits paid by the plaintiff to KimF does not fall under "market price". In addition, it cannot be concluded that the plaintiff's establishment of business that simply compare other issues, contents, and authority of duties, and that the KimF's payment of KimF's payment to the plaintiff is the largest amount of KimF's work and importance, and there is no reasonable ground to believe that the payment of KimF should be reasonable remuneration. Therefore, just because the evidence submitted by the head of the defendant Gwanak-gu Tax Office and the assertion, it is difficult to view that the payment of KimF can not be determined as a legitimate calculation of the amount of remuneration to the plaintiff's executives and employees at issue," and there is no other evidence to prove that the payment of KimF's payment can be determined as a reasonable calculation of the amount of remuneration for the issue."

The Defendant asserts that the nationwide average rate of wages in comparison with the sales amount of the companies operating real estate leasing business of the same kind as the Plaintiff is 11% or 13%, while the Plaintiff’s rate of wages in comparison with the sales amount is 32.5% (2009 business year) or 50.1% (2010 business year) and most of the paid wages are against the employees and employees at issue such as KimF. Thus, the key amount of remuneration is that it does not meet the requirements of Article 19(2) of the Corporate Tax Act and thus becomes subject to the avoidance of loss.

Article 19 (1) of the Corporate Tax Act provides that "deductible expenses shall be the amount of losses incurred by transactions which reduce the net assets of the relevant corporation, except as otherwise provided for in this Act and other Acts," and Paragraph (2) of the same Article provides that "deductible expenses under paragraph (1) shall be losses or expenses incurred in connection with the business of the corporation which are generally accepted as normal or directly related to profits, except as otherwise provided for in this Act and other Acts."

Unless there exist any special circumstances, remuneration for executive officers may be freely determined by taking into comprehensive account the management performance, financial status, status, and duties of the corporation. Barring special circumstances, bonuses paid by the corporation according to the standards for payment of wages determined by the resolution of the general meeting of shareholders, general meeting of partners, or the board of directors may be recognized as losses. In the case of a same kind of enterprise whose number of employees is subject to comparison, income amount, etc. are different from the Plaintiff, it is difficult to deem that the criteria for the selection of the compared company by the director of the tax office of bad faith and the calculation of reasonable labor cost, and simply comparison of the average wage ratio compared to the amount of

D) Sub-committee

Therefore, the disposition of this case is unlawful because there is no ground for the disposition of this case since the corporate tax law does not include the amount of remuneration in the plaintiff's deductible expenses.

2) Determination on retirement allowances at issue

A) Whether a retirement benefit payment provision exists

The Defendants asserted that, upon delegation by the articles of incorporation, the amount exceeding the limit under Article 44 (4) 2 of the Enforcement Decree of the Corporate Tax Act is not included in deductible expenses because there is no additional statement or explanation about average wages, and therefore, it cannot be recognized as an employee retirement allowance payment provision under the Corporate Tax Act. The Defendants asserted that the amount exceeding the limit under Article 44 (4) 2 of the Enforcement Decree of the Corporate Tax Act cannot be included in deductible expenses.

Article 44 (4) of the Enforcement Decree of the Corporate Tax Act provides that "the amount exceeding any of the following amounts out of the retirement benefits paid to an executive of a corporation shall not be included in the calculation of losses." subparagraph 1 provides that "the amount prescribed in the articles of incorporation if the amount to be paid as retirement benefits (including retirement benefits) is determined by the articles of incorporation," and subparagraph 2 provides that "the amount calculated by multiplying the amount equivalent to 1/10 of the total amount of retirement benefits paid to the relevant executive during one year retroactively from the date of retirement by the number of years calculated by the method prescribed by Ordinance of the Ministry of Strategy and Finance shall be included in the calculation of losses." In addition, Article 44 (5) of the Enforcement Decree of the Corporate Tax Act provides that "the amount of retirement benefits delegated by the articles of incorporation shall be included in the calculation of losses."

Article 44 (4) (1) or (5) of the Enforcement Decree of the Corporate Tax Act provides that "the provisions on payment of retirement allowances for executive officers by articles of incorporation" means a general and specific standard that the corporation shall not pay retirement allowances (including retirement allowances) at will at will at each time of the retirement of executive officers as well as the procedures and details of resolution under the Commercial Act.

On the other hand, immediately after the establishment or amendment of the regulations on the payment of retirement allowances for officers, the articles of incorporation was applied to a specific executive, such as retirement of the representative director, by means of the controlling shareholder, etc., or the articles of incorporation stipulate the amount of retirement allowances to be paid to a specific executive without justifiable grounds, or the amount of retirement allowances to be paid to a specific executive at his/her discretion, or the amount of retirement allowances to be paid to a specific executive is set at a higher rate or at a differential rate in the amount of payment. Thus, the articles of incorporation is merely a means to pay a specific executive at his/her discretion, and it cannot be viewed as a general and specific provision that has been continuously and repeatedly used by the relevant corporation. Therefore, it cannot be viewed as a "the provisions on the payment

The following circumstances, which are acknowledged as comprehensive consideration of Gap evidence No. 21, Gap evidence No. 25 through 28's statements and arguments, i.e., ① The provision on the payment of retirement allowances for executive officers decided at a temporary shareholders' meeting on April 20, 191 shall be calculated by multiplying the amount calculated by adding up the monthly average amount of remuneration for the last three months and the monthly average bonus payment rate for the retirement allowances at the time of retirement. Article 5 provides that the representative director shall be 3 years, the directors shall be 2 years, the auditor shall be 2 years, the "the provision on the payment of retirement allowances for executive officers" as well as the "the provision on the payment of retirement allowances for 20 years, which was adopted at the temporary shareholders' meeting on January 10, 1997, which is the same as the "the provision on the payment of retirement allowances for executive officers" as the "the previous provision on the payment of retirement allowances for 20 years" as the "the provision on the payment of retirement allowances for 20 years" different from the previous provision on the payment rate of retirement allowances.

B) Non-deductible loss due to non-realistic retirement

(1) The identity of the disposition is, in principle, divided into “tax unit” and the period of taxation is applicable to the case of fixed-term taxation, such as corporate tax and income tax. In addition, even if there are errors or errors in part of the facts acknowledged at the time of the initial disposition, if the facts recognized thereafter do not change the basic fact of taxation within the scope of the same fact as the original cause of taxation, the identity of the disposition is maintained. Therefore, it is possible to add the grounds for the disposition that the Defendants’ retirement of the employees at issue is

(2) Considering the overall purport of evidence Nos. 2-1 through 5, evidence Nos. 4-1 through 5, evidence Nos. 5-1 through 5, and evidence Nos. 5-1 and 2, Defendant Seoul Regional Tax Office may recognize that the part of retirement income paid by the Plaintiff at the time of the payment of the retirement allowance was disposed of as "other outflow." However, if the total amount of retirement allowance was not included in deductible expenses for the reason that the Plaintiff did not actually retire, the amount of non-deductible expenses shall be the amount of provisional payment for the business, and the Plaintiff holds the claim against the disputed executives and employees, so the disposition of income shall be deemed as reservation, and if the purpose of the Defendant Regional Tax Office’s recommendation is that it is not a real retirement, the notice of change in the amount of income shall be revoked in its entirety.

In addition, in the case of a disposal ground that is not a real retirement, the corporate tax imposition disposition also should be deemed as a kind of money related to the business, and the recognized interest should be included in the calculation of the income and the paid interest should not be included in the calculation of the income. Therefore, there is no reasonable amount of tax even if the retirement of the executives and employees at issue is not a real retirement, even if the retirement of the executives and employees at issue is not a real retirement

C) Sub-determination

Therefore, the instant disposition that did not include the key retirement pay as deductible expenses of the Plaintiff is unlawful as the grounds for disposition do not exist.

3. Conclusion

Thus, the plaintiff's claim of this case is justified, and it is ordered to accept it.

The decision shall be rendered as above.