National Tax Service Review Income 2010-0030 (28. 2010.28)

It is legitimate that the person to whom the outflow money belongs has been disposed of as bonus to the representative director.

It is difficult to recognize the fact that a corporation has repaid the amount borrowed from a bond company as part of the real estate transfer proceeds of a corporation, and it is legitimate to dispose of the amount as a bonus to the representative director on the corporate register because there is no objective evidence about the business relations of the amount borrowed in cash from the corporate account, since the person to whom the amount discharged

2010Guhap18025 Global Income and Revocation of Disposition

Jeonn

The director of the tax office

August 24, 2011

September 21, 2011

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The Defendant’s disposition of imposition of KRW 1,020,274,580 on May 1, 2009 against the Plaintiff was revoked.

1. Details of the disposition;

A. (1) A. (1) A corporation established on February 25, 2003 for the main purpose of housing construction business, etc. (i.e., a trade name before revision: O Construction Co., Ltd.; hereinafter referred to as the “instant corporation”).

(2) At the time of the establishment of the instant corporation, the Plaintiff was appointed as the representative director and was registered on the corporate register until October 8, 2003. From October 8, 2003 to September 21, 2004, the Plaintiff was registered as the joint representative director with KimA as well as the joint representative director. After that, ACC and KimA were appointed as the joint representative director on September 21, 2004 and were registered on the corporate register until January 25, 2005.

B. (1) From March 7, 2003 to May 2003, the instant corporation entered into a contract with the maximum of KRW 28,450,912,00 with the land of KRW 75,210 square meters (hereinafter referred to as “instant land”) out of 00,00,000, from the largest of 28,450,912,000, and transferred the right to acquire the instant land to △△△ Construction Co.,, Ltd. (hereinafter referred to as “△△△△”) on the condition of granting the down payment of KRW 2,943,831,000, while paying the total amount of KRW 2,943,831,000 as the down payment, around October 7, 2003.

(2) The instant corporation received KRW 6,874,00,000 among the transfer cost of KRW 15,219,819,000 from △ Construction in 2003. On December 22, 2004, it received KRW 8,345,819,000 from △△ Construction at the time of filing a corporate tax return for the business year 2003.

C. (1) From February 26, 2007 to May 7, 2007, the Director of the Central Regional Tax Office (hereinafter referred to as the “Investigation Office”) conducted an investigation of corporate tax integration with respect to the pertinent corporation, and disposed of the amount of KRW 15,219,819,00 as bonus for the year 2004, by adding the amount of income estimated as standard expense rate to the gross income for the reason that the account books and evidential documents were not submitted, the amount of KRW 10,274,903,614, which was estimated as standard expense rate was estimated as standard expense rate, to the gross income for the year 2004, and the amount of KRW 9,145,56, which was calculated by subtracting the net income before deducting the initial amount of corporate tax deduction from the above amount of income.

(2) The Commissioner of the National Tax Service confirmed funds leaked from the corporation of this case at the time of regular inspection by the investigating agency, and ordered the actual person to dispose of the funds as bonus in accordance with the representative director’s service period in the corporate register if the actual person is not clear. Accordingly, the investigating agency conducted a financial survey on the corporation of this case from September 17, 2008 to October 15, 2008, and determined that the initial decision on the estimation of the amount of income was justifiable. The transfer price was KRW 15,219,819,000 as the representative director of the corporation of this case, and the transfer price was KRW 15,219,819,00 as a bonus in proportion to the Plaintiff’s service period to manage the investment fund, and the Plaintiff, the representative director of △△△△△ Construction and KimA, other than the Plaintiff, was reverted to the Plaintiff as a bonus income disposition amounting to KRW 4,130,575,000 and CC as a bonus in 0.90.0

(3) The Chairman of the Board of Audit and Inspection directed the Plaintiff to dispose of the total amount of KRW 6,874,00,000 as bonus for the year 203 when the Plaintiff was employed as the representative director and the place of use is unclear. Accordingly, the Chairman of the Board of Audit and Inspection ordered the Plaintiff to dispose of the total amount of KRW 3,524,00,000 as bonus for the year 203 as bonus for the year 2003, since it does not fall under the case where the amount of income cannot be calculated by books or other documentary evidence because it is possible to know the acquisition price of the instant land and the transfer price of the right thereto. The amount obviously reverted to each representative in relation to bonus income disposition should be disposed of to each representative. As such, the Board of Audit and Inspection ordered the Plaintiff to dispose of the total amount of KRW 6,874,00,000 as bonus for the year 205,300,000 won excluding the amount paid as bonus for the Plaintiff.

(4) Accordingly, on May 1, 2009, the Defendant issued a disposition imposing global income tax of KRW 1,020,274,580 on the Plaintiff for the year 2003 (hereinafter “instant disposition”).

(5) The Plaintiff dissatisfied with the instant disposition and filed an objection with the Investigative Agency on August 3, 2009, the Investigative Agency rendered a re-audit decision to the effect that “the instant disposition was re-audited on December 28, 2009, which reverted to the Plaintiff and corrected the tax base and tax amount according to the result,” and the Plaintiff filed a request for review with the Commissioner of the National Tax Service on March 25, 2010, but the Commissioner of the National Tax Service dismissed the Plaintiff’s request for review on September 28, 2010.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 6 in Gap evidence 1 (including branch numbers, if any) and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition shall be revoked ex officio in accordance with the purport of the Re-investigation Decision of December 28, 2009 by the Investigative Agency.

The amount equivalent to the down payment (amounting to KRW 2,943,831,00) that the instant corporation borrowed from the bonds company, etc. through Ansan at the time of the purchase of the instant land, among the money (amounting to KRW 3,007,674,980) determined by the Investigative Agency to be irrelevant to the corporation’s business and operating expenses due to the outflow of the land outside of the country, is immediately repaid to the bonds company, etc. after receiving the payment for the transfer from the △△ Construction. Thus, the said down payment is not the income leaked at least, and it is not clear that the said amount belongs to the money

In addition, since early October 2003, the Plaintiff did not participate in the operation of the instant legal entity, and the ACC actually operated the said legal entity, so it is not the representative of the legal entity subject to the recognition of the action.

(b) Related statutes;

Attached Form is as shown in the attached Form.

C. Determination

(1) The re-assessment decision which is conducted in practice as a type of the decision on the objection filing, etc. shall take effect as a decision on the objection filing, etc., by supplementing the contents thereof by the follow-up disposition of the disposition agency (see Supreme Court en banc Decision 2007Du12514, Jun. 25, 2010). Thus, unless the defendant's follow-up disposition based on the re-audit decision of December 28, 2009 by the investigating agency did not take effect, the above decision shall not take effect, and the situation that there was no disposition following the above decision shall not be considered as a ground for illegality of the disposition of this case. Accordingly,

(2) In light of the following circumstances: (a) it is difficult to acknowledge that the Plaintiff paid the down payment amount borrowed from the bond business operator, etc. at the time of the purchase of the instant land as part of the total amount received around 2003 as the transfer price of the instant land; (b) there is no other evidence to acknowledge the aforementioned facts and the entire arguments; (c) the Plaintiff’s representative director’s transfer of the right to acquire the instant land to △ Construction; (d) there is no 15,219,819,000 won, which is 6,874,000 won, which is 00 won and 00 won, which is 10,000 won or more; and (e) the Plaintiff’s transfer price was 00 won or more; and (e) the Plaintiff’s transfer price was 00,000 won or more; and (e) the Plaintiff’s transfer price was 00,000 won or more; and (e) the Plaintiff’s transfer price was 000,0000.3 won or more.

(3) The recognition contribution system for a representative under the Corporate Tax Act is not based on the fact that such a representative has generated income, but rather on a certain fact that can be recognized as such act in order to prevent an unfair act under tax laws by a corporation, regardless of its substance. In such a case, the representative of the corporation subject to the disposition of bonus shall be strictly interpreted (see, e.g., Supreme Court Decision 93Nu1176, Mar. 8, 1994). Since the representative is a de facto operating representative of the company, even if the company was registered as the representative in the corporate register, if the representative is not actually operating the company, it shall not be subject to the comprehensive income tax by devolving such income on the representative. However, since a person registered as the representative in the corporate register can be presumed to have actually operated the company, the representative in the corporate register must prove that the representative did not actually operate the company.

On May 3, 2007, ACC stated that it held 51% of the shares of the instant corporation as a major shareholder holding 51% of the shares of the instant corporation around December 2003 as at the time of the investigation by the Investigative Agency on May 3, 2007 and performed the representative director on behalf of the Plaintiff, it is difficult to recognize that the Plaintiff, not the Plaintiff, actually operated the instant corporation on or around 2003, and there is no other evidence to acknowledge this otherwise, the Plaintiff’s assertion on this part is without merit.

(4) Therefore, the instant disposition that was rendered by the Plaintiff, a representative of the instant legal entity, was lawful on the ground that the ownership of KRW 3,007,674,980, which was included in the corporate tax base’s gross income and leaked out of the private capital, is unclear.

3. Conclusion

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