Money received under a contract at the time of retirement constitutes earned income.

Since legal retirement allowances cannot be deemed to have been included in the amount received under the contract at the time of retirement, the instant disposition as earned income is legitimate.

Article 20 of the Income Tax Act and Article 22 of the Income Tax Act

2015Guhap2711 global income and revocation of disposition

KimA

BB Director of the Tax Office

October 6, 2016

November 10, 2016

1. The plaintiff's claim is dismissed.

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

Defendant’s imposition of global income tax of KRW 31,585,800,000 on the Plaintiff on October 7, 2014

The disposition shall be revoked.

1. Details of the disposition;

A. From January 1, 2008 to October 31, 2009, the Plaintiff used the position of “director in charge of finance” in CCC (hereinafter “CCC”) to serve as “director in charge of finance.”

B. On September 17, 2012, through December 7, 2012, the commissioner of the DD Regional Tax Office conducted a tax investigation on the non-party company from September 17, 2012 to December 7, 2012, and as a result, the non-party company paid KRW 97,50,000 to the Plaintiff on November 10, 209 (hereinafter “the instant money”) and confirmed that the non-party company did not perform its withholding duty, and notified the Defendant of the taxation data.

C. On August 1, 2013, the Defendant considered the instant money as the Plaintiff’s other income, and issued a correction and notification of global income tax to the Plaintiff on August 1, 2013, but determined that the instant money constitutes the Plaintiff’s earned income and revoked the said disposition, and on October 7, 2014, issued a correction and notification of the Plaintiff’s total global income tax amounting to KRW 31,585,800 (including general under-reported penalty tax and penalty tax for unfaithful payment) (hereinafter “instant disposition”).

D. The Plaintiff, who is dissatisfied with the instant disposition, filed a request for review on May 11, 2015, but received a decision to dismiss the request for review on July 21, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 3, 8, 12, 13, 19, Eul evidence Nos. 1, 2, 4, 5, 8, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Although the Defendant alleged that the instant money is retirement allowance as retirement allowance, it constitutes retirement income, such as that the Plaintiff’s retirement allowance for having served for about two years in the non-party company, and thus, the instant disposition based on the premise that the instant money constitutes wage and salary income is unlawful.

2) It is unreasonable for the non-party company to claim a withholding tax against the non-party company despite the non-party company’s duty to withhold the unpaid amount. The Defendant did not notify the non-party company of the instant amount prior to the closure of its business, but investigated the closure of its business and deprived of the Plaintiff’s opportunity to vindicate. Therefore, the instant disposition is unlawful.

3) The Plaintiff, who only earned income and retirement income, did not have a duty to make a final return on tax base, is unlawful.

B. Relevant statutes

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

C. Facts of recognition

Each of the above evidence, Gap evidence, Eul evidence Nos. 1, 2, 14 through 16, Eul evidence Nos. 3, 6, and 7, and the whole purport of the pleading is acknowledged as follows.

1) The plaintiff was employed in office as a "director in charge of finance" in the non-party company and retired from office on November 1, 2009, and the plaintiff was not registered as a director in the corporate register of the non-party company.

2) On November 2, 2009, the main contents of the contract entered into between the Plaintiff and the Nonparty Company in relation to the Plaintiff’s retirement (hereinafter “instant contract”) are as follows (A refers to Nonparty Company, and B refers to the Plaintiff respectively).

3) The main contents of the “Rules on Officers’ Remuneration and Retirement Allowance” of the non-party company (hereinafter “instant retirement allowance rules”) are as follows.

4) On November 10, 2009, Nonparty Company paid the Plaintiff KRW 97,50,000 as stipulated in the instant contract, namely, the instant money. Nonparty Company did not withhold the instant money, and Plaintiff did not make a final return on the tax base for the instant money.

5) On March 31, 2012, Nonparty Company closed its business.

D. Determination

1) As to the Plaintiff’s first argument

A) Article 20 (1) 1 (d) of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009; hereinafter referred to as the "former Income Tax Act") provides that "income received from retirement" among income generated in the pertinent year includes "income not falling under retirement income", and Article 38 (1) 13 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 22034 of Feb. 18, 2010; hereinafter referred to as the "former Enforcement Decree of the Income Tax Act") provides that "retirement allowance, retirement bonus, and other similar benefits that are paid from retirement income not falling under retirement income" as earned income. In addition, Article 22 (6) of the former Enforcement Decree of the Income Tax Act delegates the scope of retirement income to the Presidential Decree, and Article 42-2 of the former Enforcement Decree of the Income Tax Act provides for the scope of retirement income and includes "retirement allowance payment or other similar benefits under a labor-management agreement that applies to a large number of retirement workers."

B) In the instant case, comprehensively taking into account the following circumstances recognized by the overall purport of evidence and arguments as above, the instant money cannot be deemed as “retirement allowance, retirement allowance, and other benefits of a similar nature that apply to a large number of non-specified retirement workers” under Article 42-2(1)4 of the former Enforcement Decree of the Income Tax Act, and it constitutes “retirement allowance, retirement bonus, and other benefits of a similar nature” under Article 38(1)13 of the former Enforcement Decree of the Income Tax Act, which are received due to retirement, and which are not included in retirement income, constitutes “retirement allowance, retirement bonus, and other benefits of a similar nature.” Accordingly, the Plaintiff’s partial statement of evidence No. 11 and testimony of witness E is not believed. Accordingly, this part of the Plaintiff’s assertion is without merit.

① The instant money is not uniformly paid to all officers and employees retired from the non-party company, but is the money paid under the instant contract concluded between the Plaintiff and the non-party company. There is no evidence to support that other officers and employees retired from the non-party company entered into a contract similar to the instant contract and received the money similar to the instant money, or there was a ground provision for the non-party company.

② Article 3 of the instant retirement allowance provision provides that the term “executive officers” refers to the directors and auditors registered in the corporate register. The Plaintiff does not constitute an executive officer as prescribed in the above provision because it was not registered as a director in the corporate register of the non-party company, and there is no other evidence to support that the instant retirement allowance provision applies to the Plaintiff. In addition, there is no evidence to support that at the time of the Plaintiff’s retirement, there was a provision regarding the payment of retirement allowances related to

③ Around December 2012, EE drafted a written confirmation that the non-party company paid retirement consolation money of KRW 97,500,000 to the Plaintiff during the business year 2009 and did not withhold the income tax.

④ The Plaintiff appears to have received the instant money under the instant contract and does not seem to have received some of the instant money or a part thereof as a statutory retirement allowance stipulated in the Guarantee of Workers’ Retirement Benefits Act, etc. In addition, insofar as there is no evidence from Nonparty Company regarding the payment of remunerations, allowances, bonuses, retirement allowances, etc., the Plaintiff cannot be considered as “average wage, which serves as the basis for the calculation of retirement allowances,” and it is unclear whether the Plaintiff included the retirement allowances in the amount received each year.

2) As to the second argument of the Plaintiff

In light of the following circumstances, even if only earned income and retirement income are residents exempted from the obligation to make a final return on the global income tax base due to only the above evidence and the purport of the entire pleadings, the global income tax may be imposed upon them as global income tax (see, e.g., Supreme Court Decision 2004Du4604, Jul. 13, 2006). As seen earlier, withholding tax on the instant amount is omitted, and there is any other income to be added to the global income other than the income that has been withheld from withholding and year-end tax settlement pursuant to Article 73(1) and (4) of the former Income Tax Act, if there is any other income to be added to the global income, the obligation to make the final return on the tax base is not exempted. The Plaintiff did not make a final return on the tax base of the instant amount, and the instant disposition was made within the exclusion period pursuant to the tax investigation and notification of taxation data by the commissioner of the DD Regional Tax Office and it is difficult to view that the Defendant deprived the Plaintiff’s opportunity to vindicate.

3) As to the third argument by the Plaintiff

Under the tax law, where a taxpayer violates various obligations, such as a return and tax payment, as prescribed by the Act without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, a taxpayer’s intentional or negligent act or negligence is not considered, and the site, error, etc. of statutes does not constitute justifiable grounds for not breach of duty (see, e.g., Supreme Court Decision 2012Du7370, Mar. 13, 2014). As seen earlier, withholding tax on the instant money that the Plaintiff received on November 10, 209 was omitted, and the year-end settlement was not made, and the Plaintiff did not have a duty to make a final return on the tax base of the instant money between May 1, 2010 and May 31, 2010, and the Plaintiff did not accept the instant money by deeming it as other income and did not have any justifiable grounds for the Plaintiff’s breach of duty even after the Plaintiff’s correction and notification of global income tax after August 1, 2013.

3. Conclusion

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

(c)