early 2012 Middle 1779 ( October 22, 2013)

The payment fee paid to the actual chairperson of the plaintiff constitutes a bonus paid and disposed of the company's profit as a bonus.

Since it is deemed that the actual chairperson of the plaintiff's actual chairperson does not pay business entrustment expenses, but actually pays and disposes of the company's profit as bonus, it should be excluded from deductible expenses in calculating corporate tax.

Article 20 (Non-Inclusion of Losses from Capital Transactions in Corporate Tax Act

2014Guhap128 Disposition of revocation of the imposition of corporate tax

OMWC Co., Ltd.

○ Head of tax office

2015.06.12

2015.06.26

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

Each disposition of imposition of value-added tax imposed by the Defendant on January 3, 2012 on the Plaintiff on January 3, 2008, KRW 43,62,681, KRW 61, KRW 672,47 for February 2008, KRW 118,634,064 for year 207, KRW 646,01,037 for year 2008, and KRW 74,436,187 for year 209 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a corporation that manufactures and sells electric wires and telecommunication cable products using the same as its raw materials, and the actual operator of the Plaintiff is a new operator, and the shareholders are composed of KimB (20%) who is the spouse of the new AA, and newCC (60%) and newD (20%) of the new AA. The representative director is a newCC, and the in-house director is KimB and the high EA is registered.

B. In 2008, the Plaintiff received a total of KRW 2.65 billion in cash or check from Nonparty FF Industry Co., Ltd. (hereinafter “FF industry”) and deposited it into the Plaintiff’s account in the name of the Plaintiff.

C. On February 10, 2007, the Plaintiff entered into an agreement on the payment of contingent remuneration for business activities (hereinafter referred to as the “instant agreement”) with the newA. From 2007 to 2009, the Plaintiff paid to the newA totaling KRW 1.439 billion ( KRW 484 billion in 2007, KRW 530 million in 2008, KRW 425 million in 2009) as the piece rate under the said agreement.

The plaintiff appropriated the amount paid as deductible expenses at the time of filing corporate tax for each business year from 2007 to 2009.

D. From June 14, 201 to December 14, 2011, the director of the regional tax office of ○○○ has conducted a tax investigation with the Plaintiff, and the Defendant: ① KRW 1,545,794,200,000, which the Plaintiff received from the F Industry, shall be deemed as deposit amount due to the omission in sales, and KRW 1,405,267,455, the supply value of KRW 1,405,00 shall be deemed as the amount of deposit money due to omission in sales; ② from 2007 to 209, the amount of corporate tax shall be added to the base of value added tax for the first and second years of 2008; ② from 2007 to 2009, the Plaintiff shall be deemed as a bonus from the calculation of the corporate tax for each business year; ③ from 2007 to 207, the Plaintiff shall be notified of the non-deductible tax invoice and the non-deductible tax invoice for each business year of 200G from 207.

E. On January 3, 2012, the Defendant notified the Plaintiff of KRW 1, 78,70,635, KRW 208, KRW 195, KRW 195, KRW 901, KRW 195, KRW 43,263,504, KRW 138,09, and KRW 128,354, KRW 280, KRW 280, KRW 734,976, KRW 531, KRW 2008, KRW 86, KRW 360, KRW 959, KRW 44,49, and KRW 153, in 2010 (hereinafter “instant disposition”).

F. On March 30, 2012, the Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on March 30, 2012. On October 22, 2013, the Tax Tribunal rendered a decision to the effect that the Plaintiff dismissed the Plaintiff’s claim on the following grounds: (a) re-assessment of whether the said amount was omitted in sales with respect to the amount received from the F industry; and (b) rectification of the tax base and the tax amount by re-assessment of whether the said amount was omitted in sales; and (c) the amount paid by the Plaintiff to the newA should be excluded from corporate tax calculation in calculating corporate tax; (c) bonus paid

G. According to the decision of the Tax Tribunal, the director of the ○○○ Regional Tax Office re-audits the Plaintiff from November 11, 2013 to November 30, 2013. The Plaintiff notified the Defendant of the result of re-auditing the amount of KRW 1,545,794,200 as of June 26, 2008 (the amount assessed as the omission amount at the time of initial tax investigation) out of the amount of KRW 1,545,794,200 (the amount assessed as the omission amount at the time of initial tax investigation), which was paid by the Plaintiff from the F industry, as of June 26, 2008, the amount of KRW 195,272,7277) was deemed as the deposit related to money transaction, not the omission of sales, and the remaining amount was determined as only the amount of KRW 1,350,794,20 (the supply amount 1,277,94,727).

H. On December 17, 2013, upon notification of the results of re-audit by the commissioner of the regional tax office of ○○○○, the Defendant reduced or corrected the value-added tax for the second period of 2008 and the corporate tax for the business year of 2008 on the amount received from the F industry (the first correction), and on January 3, 2014, with respect to bonuses paid to the Plaintiff’s officers upon the decision of the Tax Tribunal, corporate tax for the business year of 2007, corporate tax for the business year of 2008, corporate tax for the business year of 2009, corporate tax for the business year of 209, corporate tax for the business year of 2010, corporate tax for the business year of 2010, and adjusted the reduction of the value-added tax for the first period of 2008 on the amount received from the F industry (the third correction) ex officio on April 1, 2014 (the changes in the amount of each tax imposed

(be omitted)

[Ground of recognition] Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 4 (including additional number), dispute-free facts, the purport of the whole pleadings

2. The plaintiff's assertion

A. The Plaintiff received 2.65 billion won from the F industry in 2008 from the F industry was originally appropriated in advance for the F industry the omitted amount of the Plaintiff’s return on the HM metal in 2006 as an advance payment for the F industry. However, in 2008, the advance payment was collected from the F industry, not the sales amount.

Even if the above 2.65 billion won is not recognized as the amount of advance payment collected, the above amount shall not be the sales amount [the advance payment of KRW 139 million, out of the 1,350,794,200 assessed by the Defendant as the amount of omission in sales, shall be recovered from the Co., Ltd. II Cable (hereinafter referred to as "II Cable"), and KRW 545 million shall be paid as compensation for damage from HM Co., Ltd. (hereinafter referred to as "HM"), and KRW 434,00 won shall be paid as compensation for damage, and the remaining amount of KRW 232,794,200,00 shall be the money loaned by NewA Co., Ltd. (hereinafter referred to as "J Cable").

Furthermore, the Plaintiff’s appropriation of the above KRW 2.65 billion as advance payment to the F industry was pointed out by the tax office as an excessive appropriation of processed assets from the F industry, and then disposed of the above amount in the calculation of earnings and earnings, and paid the income tax to the person to whom it belongs, and thus, it is unlawful to impose tax on the above KRW 2.65 billion again.

B. 1.439 billion won paid by the Plaintiff to the newA is the fact that the newA has paid performance rates or operating income fees to contribute to the Plaintiff’s profit generation, and thus, it shall be included in the calculation of corporate tax.

3. Related statutes;

It is as shown in the attached Form.

4. Determination

A. Whether the amount received from the F industry is a sales amount;

1) Facts of recognition

A) The Plaintiff omitted a report on the sales amounting to KRW 5.741 billion for H metal in 2006, but thereafter, the sales amounting to KRW 3,215,00,000 for the above sales amount to gross income and reserve as well as KRW 2.65 billion for the F industry where the deposit to the Plaintiff is not verified among the sales amount, while making additional payment of corporate tax by adjusting the sales amount to deductible expenses and reserve.

B) The Plaintiff received KRW 2.65 billion from the F industry in 2008. Of them, most of the payment of KRW 1,545,794,200 among them was made by the Plaintiff’s trading companies, such as HH metal, JJ cable, and II cable, deposited into the FF industry’s account, such as HH metal, JJ cable, and II cable, and received from the FF industry. The FF industry was the Plaintiff’s employee, Kim K (30%) as of August 1, 2005 to January 7, 2008, the FF industry was the Plaintiff’s employee, and the FF industry was the Plaintiff’s business location from August 1, 2005 to 14, 208, the Plaintiff’s income amount of KRW 14,000,000,000 for KRW 20,000,000,0000,000, KRW 2931,2984,2985,2984.

C) In 2009, the head of ○○ Regional Tax Office pointed out that the Plaintiff’s accounting of KRW 2.65 billion out of the sales in 2006 as an advance payment constitutes an excessive appropriation of processed assets. Accordingly, the Defendant designated the person to whom the Plaintiff accrued as a newAA while disposing of income in the course of making a disposition of KRW 2.65 billion out of the sales in the year 2006 as an excessive appropriation of processed assets. The Defendant paid the income tax for the year 2006 in accordance with the above disposition.

D) On December 9, 201, 201, when the Plaintiff’s representative director was under tax investigation by the ○○ Regional Tax Office, the document confirming that the Plaintiff was omitted from filing a return of corporate tax and value-added tax on the amount of KRW 1,545,794,200 in the year 2008 was prepared in the name of the Plaintiff and his own name. On December 2, 2011, the newCC and new AA submitted to the ○○ Regional Tax Office a document stating the transaction date, sales amount, sales amount, and funds flow, etc., accompanied by the document stating that the said KRW 1,545,794,200 was omitted from filing a return of corporate tax and value-added tax. The omitted sales statement by each of the above attached Form stated that “The FF industry was recovered from advance payment of the FF industry after deposit into the FF industry.”

E) The director of the regional tax office of ○○○○” assessed the amount stated in the details of omission of sales by each sales office as the omitted amount of purchase declaration, and notified each head of the competent tax office of the omission of purchase due to the transaction between JJ Cable, HH metal and the Plaintiff. Each head of the competent tax office imposed corporate tax (corporate tax for 2008 business year) which reflects the omission of purchase declaration on JJ Cable and HH metal. JJ Cable and HH metal did not object to the imposition disposition of each corporate tax.

[Ground of recognition] Facts without dispute, entry of evidence of Nos. 9 through 16, 23, and 24 (including additional numbers), the purport of the whole pleadings

2) Determination

In light of the following circumstances, it is reasonable to view that the Plaintiff’s KRW 1,350,794,200, excluding KRW 195,000,000,000, which was paid as of June 26, 2008, as stated in the details of omission of sales by the FF industry, etc. from the FF industry, etc. in 2008, is the Plaintiff’s sales amount, and in light of the following circumstances, it is reasonable to view the Plaintiff’s sales amount in 2008.

① In light of the fact that the FF industry’s income and revenue of the FF industry as of 2007 and 2008 were not reflected in the FF industry’s income and revenue as of 2.65 billion won in advance, the Plaintiff did not account the FF industry as an advance payment for the settlement of accounts of 2.65 billion won out of the sales in 2006, and it did not pay the said amount to the Plaintiff from the FF industry’s assets in advance. In light of the fact that the FF industry did not account the above 2.65 billion won in advance, and even in 2008, the FF industry received the money from the Plaintiff’s customers and paid it to the Plaintiff, it is difficult for the Plaintiff to believe that the FF industry received advance payment from the FF industry’s assets in 2006 and paid it to the Plaintiff.

② Furthermore, in order for the Plaintiff to impose corporate tax on part of the KRW 2.65 billion, which the Plaintiff received from the F industry in 2008 on the grounds that the Plaintiff and the New AA paid corporate tax and income tax on the sales amount of KRW 2.65 million in 2006,00,000, as alleged by the Plaintiff, it is unlawful to impose corporate tax on the part of the KRW 2.65 billion, which the Plaintiff received from the F industry in 2008, as alleged by the Plaintiff, it shall be recognized that the sales amount of the year 2006,000,000,000 won received from the F industry in 2008 and KRW 2.65,00,000,000,000, which was actually the same amount

③ Even if newCC, the representative director of the Plaintiff and new AA, prepared by the actual operator of the Plaintiff, stated that the sales omitted in the above-mentioned report was received from most of the FF industry and collected advance payment for the FF industry after deposit into the FF industry, it was re-deposited to the pertinent corporation. Therefore, it is supported by the fact that the FF industry would be the most advanced payment collection amounting to KRW 2.65 billion in the sales amount in the year 2008, for the purpose of accounting settlement of advance payment of KRW 2.65 billion in the FF industry, which was falsely stated by the Plaintiff.

④ As to the Defendant’s determination of the amount deposited to the Plaintiff via the F industry from HM and J Cable as the amount of omission in the purchase declaration of HH metal and JJ Cable, the HH metal and J Cable did not object to the imposition of the said tax on HH metal and JJ Cable. In light of the above, it is reasonable to view the said KRW 1,350,794,200 as the Plaintiff’s sales on each of the sales offices indicated in the details of omission in sales by each of the annexed sales offices, and it is insufficient to reverse the said amount solely on the basis of the written evidence Nos. 14 through 16.

B. Determination as to the nature of the money paid by the Plaintiff to NewA

1) Facts of recognition

A) The instant agreement entered into between the Plaintiff and the newA is to: (a) delegate all the powers of the Plaintiff with respect to the business to the newA; (b) provide all support necessary for the business activities; and (c) provide the Plaintiff’s sales performance to the newA by adding the sales performance to KRW 5 billion per KRW 10 billion, which increased above KRW 39 billion in excess of KRW 29 billion in sales performance in 2004.3) If the Plaintiff’s sales performance exceeds KRW 10 billion in sales performance in 2004,000,000 in excess of KRW 10 billion in sales performance.

B) The Plaintiff’s sales amount was KRW 16 billion in 2003, KRW 29.4 billion in 2004, and KRW 66.4 billion in 2005, and KRW 9.7 billion in 2006, and continued to exceed KRW 100 billion in 2007 to 2010. The Plaintiff’s revenues and business income from 2006 to 2009 are as follows.

(The following omission):

C) The amount of the Plaintiff’s dividend income to shareholders from 2007 to 2009 and the fees paid to the newA is as follows.

(The following omission):

[Grounds for recognition] Gap evidence Nos. 1, Eul evidence Nos. 6 and 8 (including paper numbers), the purport of the whole pleadings

2) Determination

In light of the following circumstances revealed by the fact that the Plaintiff’s KRW 1.439 billion paid to new ones from 2007 to 2009 falls under operating expenses, the above KRW 1.439 billion is deemed not to have been paid by the Plaintiff to new ones but to have been paid and disposed of as a bonus to new ones, and thus, it should be included in the calculation of corporate tax.

① According to the instant agreement between the Plaintiff and the newA, the standard for calculating piece rates that the Plaintiff pays to the newA is not the Plaintiff’s sales in 2007, which was 2007, at the time of the agreement, but the difference between the Plaintiff’s sales in 2004 and the Plaintiff’s sales in 2007, and thus, it is difficult to view the piece rates under the agreement as remuneration for the Plaintiff’s sales in charge of the Plaintiff’s business activities after 2007. Rather, the agreement was concluded with the intent of enabling the newA to stably distribute a certain amount of profit in the future, based on the sales in 2004, which would have a considerable difference between the Plaintiff’

② From 2006 to 2009, the Plaintiff’s income or income for each business year has not been specially increased since the conclusion of the instant agreement, and even in this regard, it is difficult to view that the amount that the Plaintiff paid to the newA from 2007 to 2009 is a consideration for the entrusted business activities of the newA.

③ The above arrangement does not provide for a certain upper limit of performance rates, and it is difficult to view the performance rates as remuneration for efforts made by new AA to contribute to the Plaintiff from 2004 to 2007, since it continues to pay performance rates to new A in certain proportion depending on the difference where the Plaintiff’s sales in 2004 exceed 10 billion won are continuously higher than the Plaintiff’s sales in 2004.

④ The Plaintiff’s shareholders consisting of the Plaintiff’s spouse and the children of the NewCC. Although the Plaintiff is not a shareholder, the Plaintiff is a person who actually exercises the Plaintiff’s management. The amount of performance rate paid from 2007 to 2009 by the Plaintiff is similar to the amount of dividend income received by the NewCC, which actually holds 60% shares from the Plaintiff.

C. Sub-committee

Of the money received by the Plaintiff from the F industry in 2008, KRW 1,350,794,200, which constitutes sales revenue for which a report on sales was omitted, and the said tax disposition does not overlap with a tax disposition for KRW 2,650,000,000 in 2006. Moreover, it is reasonable to deem that the Plaintiff paid KRW 1,439,000,000,000 paid to NewA from 2007 to 2009, not business expenses, but the Plaintiff’s interest was paid as a bonus to NewA. Therefore, the instant disposition is lawful.

5. Conclusion

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