A special bonus paid to an officer in excess of the officer without any special reason shall not be included in the calculation of losses.

Where a corporation pays bonuses to executives in excess of the amount paid according to the standards for payment of benefits determined by a resolution of the articles of incorporation, the general meeting of shareholders, the general meeting of partners or the board of directors, such excess amount shall not

Article 43 (Non-Inclusion of Bonuses in Deductible Expenses)

2015Guhap2062 Revocation of Disposition of Imposing corporate tax

00 Holdings Co., Ltd.

Cz superintendent of the tax office

July 11, 2017

December 19, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing corporate tax of KRW 423,329,560 on the Plaintiff on March 27, 2014 exceeds KRW 14,370,557 among the disposition of imposing corporate tax of KRW 423,329,560, and the disposition of imposing corporate tax of KRW 374,469,570 on the Plaintiff on April 1, 2014 exceeds KRW 42,971,272 among the disposition of imposing corporate tax of KRW 374,469,570 on the Plaintiff for the business year 209, and the disposition of imposing corporate tax of KRW 220,109,983 on the Plaintiff for the business year 2010 is revoked.

1. Details of the disposition;

A. The Plaintiff (mutual name before the change on December 1, 2013: 00 Jeju Steel Co., Ltd.) was an unlisted corporation that produces double steel. From 2008 to 2010, the Plaintiff paid the following general bonuses and special bonuses to AA, a representative director and a major shareholder, in addition to ordinary salaries.

(unit: source)

B. On September 8, 2005, the Plaintiff established the BB Food Limited Corporation (hereinafter “Overseas Subsidiaries”) with a 100% share in the Plaintiff’s 100% shares in China, and provided a payment guarantee when an overseas subsidiary intends to obtain a loan from a financial institution.

C. The Seoul regional tax office conducted a tax investigation with respect to the Plaintiff from November 21, 2013 to February 14, 2014, and then notified the Defendant that the amount of income should be adjusted after deducting the normal payment guarantee fee reported by the Plaintiff from the gross income of each corresponding year after calculating the amount of income of each business year on the grounds that the special bonus out of the bonus that the Plaintiff paid to AA constitutes excessive expenses beyond the provisions of the officer’s bonus provided by Article 26 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010) was included in the calculation of the amount of income of each business year; and

D. The Defendant, according to the Seoul Regional Tax Office’s notification, adjusted the following income amount as follows, served a notice of tax payment of KRW 463,447,490 of corporate tax in March 27, 2014, and served a notice of tax payment of KRW 452,262,680 of corporate tax in April 1, 2014, corporate tax in 2009, KRW 282,217,70 of corporate tax in 2010, KRW 86,840,790 of corporate tax in 2011, and KRW 56,651,710 of corporate tax in 201 (hereinafter “instant disposition”).

E. The Plaintiff filed a request for a national tax adjudication on June 13, 2014 regarding the instant disposition. However, the tax adjudication dismissed on December 26, 2014, and the Plaintiff was served with a written decision on December 17, 2014.

F. On August 30, 2017, this Court had agreed on the payment guarantee fees between the original and the Defendant during the instant lawsuit, and reflected them, upon recommendation of mediation, the Defendant partially revoked the part of the payment guarantee fees included in the calculation of the instant disposition on June 1, 2017. From 2008 to 40,117,93,110 won, from 209 to 77,793,110 won, from 2010 to 62,107,717, from 2011 to 57,92,110, from 2012 to 54,864,140 won, from 2012 to 54,864,140 won, and the previous amount of tax notified was modified as follows. The Plaintiff did not dispute the imposition of corporate tax on the portion of the payment guarantee fees reduced, and did not dispute only the portion of the non-deductible bonus in deductible expenses (hereinafter referred to as “instant portion”).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 4, 6, Eul evidence Nos. 1 through 3 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Relevant statutes;

Attached Form is as shown in the attached Form.

3. The plaintiff's assertion

A. The Plaintiff asserts that: (a) the payment of special bonus to AA satisfies the requirements prescribed by Article 43(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012; hereinafter the same) and thus, it is improper to include the special bonus in deductible expenses; and (b) the special bonus paid to AA is reasonable.

B. Claim to meet the requirements of the former Enforcement Decree of the Corporate Tax Act

1) Article 43(2) of the former Enforcement Decree of the Corporate Tax Act provides that the amount in excess of the amount paid according to the standards for payment of benefits determined by the articles of incorporation, the general meeting of shareholders, the general meeting of partners or the resolution of the board of directors shall not be included in the calculation of losses among bonuses paid to the

2) Before the Plaintiff pays a special bonus to AA, the Plaintiff enacted a provision on the bonus of executives through a general meeting of shareholders to pay a special bonus as a resolution of the board of directors. However, the Plaintiff did not exceed the limit on the remuneration of executives as determined by the general

3) Therefore, as long as the Plaintiff paid a special bonus according to the officer bonus regulations and the resolution of the board of directors under the principle of strict interpretation, it cannot be deemed unlawful since it satisfies the requirements of Article 43(2) of the former Enforcement Decree of the Corporate Tax Act.

(c) argument that payment has reasonable grounds;

1) AA has contributed to its management while serving as the representative director of the Plaintiff by developing the Plaintiff as a superior company after establishing the Plaintiff in 1990.

2) While the Plaintiff was in bankruptcy with the IMF, and the composition procedure commenced in 1998 and the composition was completed on August 29, 2007, AA made a lot of contributions to the normalization of management by providing the Plaintiff’s real estate to repay the Plaintiff’s obligations, etc.

3) While the composition is in progress, AA has received small-sum benefits and bonuses, and thus special bonuses have been paid in consideration of them after the normalization of management.

4) AA introduced the HDR system to a steel plant, thereby contributing to the Plaintiff’s management normalization by reducing mits and mits (8.5 billion won in 2008, 6.9 billion won in 2009), while manufacturing steel products.

4. Determination

A. Whether the requirements under Article 43(2) of the former Enforcement Decree of the Corporate Tax Act are satisfied

1) Recognized facts

A) The plaintiff's special shareholders' meeting on October 10, 2007 presented the provisions on the bonus for officers as agenda items at the general shareholders' meeting.

and the contents of which have been approved are as follows:

B) The criteria for the payment of special bonuses determined by the board of directors of January 25, 2008 are as follows:

The same shall apply.

C) The Plaintiff’s regular general shareholders’ meeting on March 28, 2008 decided the limit of the amount of executive remuneration in 2008, including salary and bonus for all executives, as KRW 2 billion. The resolution was made on March 30, 2009 at KRW 3.5 billion at the regular shareholders’ meeting on March 30, 2009. The resolution was made on KRW 4.5 billion at the regular shareholders’ meeting on March 26, 2010.

D) On February 26, 2010, the board of directors on February 26, 2010 decided to pay the bonus of KRW 250,000 to the representative director A separately in consideration of the company’s management situation.

E) AA is a shareholder who owns more than 30% of shares from 2007 to 2009 and is a controlling shareholder under Article 43(7) of the Enforcement Decree of the former Corporate Tax Act.

[Grounds for recognition] Gap evidence Nos. 1, 3, 4, 6, Eul evidence Nos. 2, the purport of the whole pleadings

2) Determination

Article 43(2) of the former Enforcement Decree of the Corporate Tax Act provides that "if a corporation has paid bonuses to executive officers in excess of the amount paid according to the standards for payment of benefits determined by the articles of incorporation, the general meeting of shareholders, or the resolution of the board of directors, such excess amount shall not be included in the calculation of losses." The purport of the provision is to assign bonuses to the shareholders who are the principal owner of the company and the executive officers in charge of management in reality, thereby granting the motive for realizing the profit of the company and, at the same time, to prevent the act of breach of trust of executive officers who are not

With respect to the director bonus regulations set by the special shareholders' general meeting of October 10, 2007, the above regulations are 200% of annual salary, and the special bonus is determined by a resolution of the board of directors, and only the payment limit of bonus is limited to the amount approved by the general shareholders' meeting, and there is no content about the specific standard of allocating bonus to the officers.

However, as pointed out in the administrative appeal ruling, the Supreme Court’s resolution on the limit of executive remuneration cannot be deemed as constituting the standard for payment of benefits under Article 43(2) of the former Enforcement Decree of the Corporate Tax Act (see, e.g., Supreme Court Decision 2013Du4842, Jul. 12, 2013). In this case, the Plaintiff’s above executive bonus provision is difficult to be deemed as the standard for payment of benefits under Article 43(2) of the former Enforcement Decree

In addition, the Plaintiff’s special bonus payment standards set by the board of directors of January 25, 2008 are limited to the maximum amount of the annual average wage (the maximum amount of KRW 1.5 billion) for the representative director, and there are no specific payment standards, for example, management performance, career, personal work ability and performance evaluation, and shareholders’ dividends in the case of the relevant company. Furthermore, from 190 to 29, AAA served as the representative director from 2010 to 31 March 2014, the CCC served as the representative director. However, for any objective reason, it is difficult to view that the president and the representative director, who are the controlling shareholder and the representative director, should have different special bonus payments within 10 times the annual average wage, and the executive director should have different special bonus payments within 3 times the annual average wage amount. In light of the provisions of Article 4(3) of the former Corporate Tax Act and Article 4(3) of the former Enforcement Decree of the Corporate Tax Act, it is difficult to view that the controlling shareholder is a controlling shareholder.

In this regard, the plaintiff asserts that Article 43 (2) of the former Enforcement Decree of the Corporate Tax Act does not violate the above provision under the principle of strict interpretation by setting the maximum payment limit, since it is merely demanding the payment criteria and does not require the establishment of specific criteria. However, since the plaintiff's executive bonus regulations and the resolution of the board of directors do not exist in the standard itself as to whether the specific amount should be paid as the base of base of base, it cannot be viewed as

3) Sub-decisions

For more than anything above, the plaintiff's provision on the payment of executive bonus and the resolution of the board of directors cannot be seen as the "standard for payment of benefits" under Article 43 (2) of the former Enforcement Decree of the Corporate Tax Act.

B. There is no illegality that the Plaintiff excluded the special bonus paid by the Plaintiff to AA from the deductible expenses, unless there is a reasonable ground for the special bonus for AA under Article 43(2) of the former Enforcement Decree of the Corporate Tax Act. However, if the special bonus paid by the Plaintiff to A was viewed as legitimate payment criteria on a family basis, it is examined whether the special bonus paid to AA is excessive or unreasonable under Article 26(1) of the former Corporate Tax Act.

1) According to each of the statements in Gap evidence Nos. 6, 7, 8, 9, and 11 (including each number), AA is acknowledged that the plaintiff received a relatively small amount of wages compared to other officers, such as the statement in the annual salary statement in attached Form No. 2 until 2007 in the composition procedure. This seems to be a reasonable ground for payment of a more general or special bonus, unlike other officers.

2) According to the evidence No. 16-1, 2, and 3, the fact that real estate at the market price of an individual owned by AA is offered as security for the Plaintiff’s obligation and used for debt settlement can be acknowledged. However, the Plaintiff’s act of making a shareholder’s personal contribution as a controlling shareholder is deemed to have a aspect of preserving the value of his/her own stocks, and there is a right to receive dividends as a shareholder and claim reimbursement from the Plaintiff for his/her own contribution, and there is doubt as to whether such contributions should be recovered through bonuses, which are the compensation for labor. Therefore, it is difficult to view that the individual contribution is a reasonable ground for paying a large amount of special bonus.

3) In addition, the Plaintiff’s assertion that he kneee and reduced the HDR cost by adding knife to the factory with the employees’ opposition due to the AA’s business judgment, is that according to the evidence No. 12-1, the above HDR system was operated from January 1, 2007, and at that time, the Plaintiff was operated under the court’s supervision in accordance with the composition procedure, but it is doubtful whether it can be a public figure due to the individual business judgment of AA. Furthermore, the cost effectiveness analysis of evidence No. 13 and No. 14 was not a evidence to acknowledge the Plaintiff’s assertion. Furthermore, according to the Plaintiff’s statement No. 1’s argument, the Plaintiff’s corporate tax base for the year 2008, the tax base for the year 2009, the tax base for the year 58.5 billion won, and the tax base for the year 2010,000 won, compared to the net profit of the Plaintiff’s introduction of the H system.

4) Ultimately, among the grounds alleged by the Plaintiff, the grounds for rationalizing the payment of special contributions of AA from among the grounds for the Plaintiff’s assertion can be deemed to be the amount of benefits paid by the Plaintiff during the period of the composition procedure. Even so, the Plaintiff, as seen earlier, is a company that had gone through the composition procedure from 1998 to 2007 and has basically been liable for a lot of debts due to bad management. Although the management performance has been improved in the composition procedure in 2008, this is basically attributable to the Plaintiff’s management’s outstanding performance, rather than due to the Plaintiff’s outstanding management’s outstanding performance, in light of the fact that the management performance has been improved in the year 2008, it is not reasonable that AA’s total amount of benefits and bonuses received in the year 200,000,000,0000,000,000 won or more, which corresponds to the amount of contribution to AA’s management ability or contribution to A0,000 won.

5. Conclusion

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