Daegu District Court-2016-Gu Partnership-20182 ( June 3, 2016)

Whether it can be deemed that the organization's profits have been distributed to a clan member to the organization's members.

The Plaintiff’s distribution of part of the real estate transfer proceeds to clan members cannot be deemed to constitute “a case where organization’s profits are distributed to its members” under Article 13(2)3 of the Framework Act on National Taxes.

Article 13 (2) of the Framework Act on National Taxes

Daegu High Court 2016Nu5489 ( December 23, 2016)

O's Dus

Head of the Tax Office

Daegu District Court Decision 2016Guhap20182

November 25, 2016

December 23, 2016

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s disposition of refusal to revise corporate tax imposed on the Plaintiff on May 20, 2015 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation is as follows, and the reasoning for this Court’s decision is the same as the reasoning for the judgment of the first instance, except for adding the judgment as described in Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act as follows.

The "46,440 square meters" in the second third place of the judgment of the court of first instance shall be deemed "46,449 square meters".

○ The fourth 20th son of the judgment of the first instance shall be added by means of a resolution of the extraordinary general meeting between the “Plaintiff” and the “second string”.

○ The fifth and fourth written judgments of the first instance court are “influent” and “influent”.

○ In Part 5 of the 5th judgment of the first instance court, “this point does not conflict with the defendant.”

○ The fifth 16th 16th am the court's fifth am on the other hand "the other hand".

The issue of this case is whether the real estate price belongs to the plaintiff who is a juristic person" in the 5th judgment of the court of first instance, 19 to 21. The issue is whether the real estate price belongs to the plaintiff who is a juristic person". It is considered as the "whether the real estate price belongs actually to the plaintiff who is a juristic person".

○ The 6th of the 6th judgment of the first instance court is "transfered and then disbursed according to the resolution of the special general meeting of the clan following the transfer".

○ It shall add "related Acts and subordinate statutes" to the attached Form of the judgment of the first instance court to "related Acts and subordinate statutes."

2. Additional determination

A. As to whether the Plaintiff satisfies the requirements under Article 13(2)3 of the Framework Act on National Taxes

1) The defendant's assertion

To constitute a "organization deemed a corporation" under Article 13 (2) of the Framework Act on National Taxes, it is required to require "not to distribute the profits of the organization to its members pursuant to subparagraph 3 of the same paragraph." Since the Plaintiff distributed the real estate transfer proceeds of this case to clan members, it does not constitute "organization deemed a corporation" and is not subject to the Corporate Tax Act.

2) Determination

A) Relevant legal principles

(1) Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted as the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, where it is necessary to clarify the meaning through mutual interpretation between the laws and regulations, it is inevitable to make a combined interpretation in light of the legislative purport, etc. to the extent that it does not undermine the legal stability and predictability pursued by the principle of no taxation without law (see, e.g., Supreme Court Decisions 2007Du4438, Feb. 15, 2008; 201Du17295, Jan. 29, 2014).

(2) Article 3-2 of the Enforcement Decree of the Income Tax Act provides that an organization deemed a resident or a non-resident shall be deemed to be jointly engaged in a business where the method of distributing profits or the ratio of distributing profits between its members is determined or it is confirmed that actual profits are distributed among its members, and such organization shall be deemed to be a resident or a non-resident if the method of distributing profits or the ratio of distributing profits between its members is not determined or confirmed (Article 1(1)1). In such cases, if a non-profit organization that does not distribute profits to its members is "non-profit organization that does not distribute profits to its members," the organization shall be deemed to be a resident who is liable to pay income tax, and if a "profit-making organization that distributes profits to its members," the organization shall be deemed to be one resident who is a taxpayer and the income tax shall be imposed on each member as a taxpayer (see, e.g., Supreme Court Decision 2010Du19393, Jan. 27, 2012).

B) Specific determination

Article 13 of the Framework Act on National Taxes: (1) According to the review report on the amendment bill of the Framework Act on National Taxes, Article 13 of the Framework Act on National Taxes provides the following circumstances that can be known by the relevant Acts and subordinate statutes and the statement

In light of the fact that religious organizations or clans are not only recognized as corporations, but also have been newly established to allow them to be viewed as corporations in consideration of the need to trade their assets separately from the financial assets of their representatives, and the fact that Article 1 subparagraph 2 (c) of the Corporate Tax Act provides "organizations deemed as corporations" as above, "organizations not distribute profits to members of non-profit organizations" under Article 13 (2) 3 of the Framework Act on National Taxes refers to "non-profit organizations". In light of the nature and characteristics of the non-profit organizations and the legal principles of taxation according to the classification of profit organizations and non-profit organizations under the Enforcement Decree of the Income Tax Act as seen earlier, it is reasonable to view that the articles of incorporation or regulations stipulate specific provisions on the method of distributing profits or the ratio of distributing profits to members of an organization and, in cases where only the method of distributing profits in non-regular and specific cases is prescribed, it shall not distribute profits to members of an organization.

The reasoning of the judgment of the court of first instance cited by the plaintiff, which has distributed part of the real estate transfer proceeds of this case to clan members, is as follows. However, the following circumstances acknowledged by Gap's statement Nos. 6, 14, and 15 and the purport of the whole pleadings are as follows: ① the plaintiff's purpose is not to distribute profits to the members of a clan established for the purpose of the protection of graves, religious rites, promotion of friendship among the members, mutual aid among the members, etc. ② the plaintiff's articles of association or regulations, and ③ the distribution of real estate transfer proceeds of this case was made once according to the resolution of the special meeting of the plaintiff's clan. In light of the above, the plaintiff's distribution of part of the real estate transfer proceeds of this case to clan members cannot be deemed to constitute "the case where the plaintiff distributed profits to the members of an organization" under Article 13 (2) 3 of the Framework Act on National Taxes (the defendant's assertion that the real estate transfer proceeds of this case does not constitute the requirement of Article 13 (2) 3) 1) 3 of the Framework Act.

B. As to whether the instant real estate transfer proceeds actually accrue to the Plaintiff after the approval of the “organization deemed a corporation”

The Defendant asserts to the effect that the real estate transfer price of this case was only attributed to an organization that is deemed a corporation, and thus, it did not belong to an organization after approval. However, in light of the fact that Article 13(2) of the Framework Act on National Taxes provides that where the real estate transfer price of this case was approved as an "organization deemed a corporation" under Article 13(2) of the Framework Act on National Taxes, it shall be deemed that the continuity and homogeneity of the relevant organization are maintained. Thus, the effect of profit and loss is maintained as it actually reverted to the organization after approval. Thus, the Defendant’s assertion on this part

C. As to whether the possibility of tax evasion exists

In the event that the plaintiff entered the real estate in the property status at the time of applying for approval of the "organization deemed a corporation" and then sold the real estate and distributed the price to clan members, approval is revoked pursuant to Article 8 (4) of the Enforcement Decree of the Framework Act on National Taxes because it does not meet the requirement that "the profit of the organization should not be distributed to the members of the association" under Article 13 (2) 3 of the Framework Act on National Taxes, and thereby, it cannot be subject to the Corporate Tax Act. Since the plaintiff sold the real estate in advance before obtaining approval to avoid this, it is argued that the inclusion of profits and losses from the transfer of the real estate in the profit and loss of the plaintiff's first business year constitutes a case where tax evasion is likely to occur, but the part of the transfer price of the real estate in this case distributed to clan members of the plaintiff does not constitute "the case where the profit of the organization was distributed to the members of the association" under Article 13 (2) 3 of the Framework Act on National Taxes, this part

3. Conclusion

If so, the plaintiff's claim is reasonable, and the judgment of the court of first instance is justified.

Since the defendant's appeal is justifiable, it is dismissed as it is so decided as per Disposition.