Suwon District Court-2018-Gu 62059 (Law No. 19, 2018)

Examination-corporation-2017-0025 ( December 21, 2017)

Whether an executive bonus constitutes a loss;

Among performance bonuses paid to executives (as with the judgment of the court of first instance), the performance bonuses paid in excess of the payment rate prescribed by the rules on the payment of executive remuneration of the plaintiff shall not be included in the calculation of losses.

Article 43 (Non-Inclusion of Bonuses in Expenses)

2018Nu67420 Revocation of Disposition of Corporate Tax Imposition

주식회사 ○○○○ 네트웍스

○ Head of tax office

Suwon District Court Decision 2018Guhap62059 Decided September 19, 2018

.06.21

oly 16, 2019

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant shall revoke all of the disposition imposing corporate tax of KRW 250,177,803 as of March 13, 2017, corporate tax of KRW 393,825,540 as of May 2, 2017, corporate tax of KRW 393,825,540 as of May 2, 2017, corporate tax of KRW 366,020,966 as of March 2013, corporate tax of KRW 325,056,469 as of March 15, 2015.

1. Quotation of the reasons for the judgment of the first instance;

The reasons to be stated in this judgment are as follows, and the reasons to be stated in this judgment are the same as the reasons to be stated in the judgment of the court of first instance other than those to be added or determined additionally in paragraph (2). Thus, this Court shall accept it in accordance with Article 8(2) of the

○ Additional Acts and subordinate statutes concerning the judgment of the first instance court shall be added in the attached Form of this Court.

2. Additional determination

A. Whether the procedure of the instant disposition is lawful

1) The plaintiff's assertion

The Defendant, even though there was no ground to select the subject of tax investigation under Article 81-6(3) of the Framework Act on National Taxes, did not select the Plaintiff as the subject of tax investigation and collected taxation data, and accordingly, imposed a tax accordingly.

2) Determination

A) In light of the provisions and purport of Article 81-3(1) and (2) of the former Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006; hereinafter “former Framework Act on National Taxes”) to collect taxation data selected as a subject of tax investigation without any grounds for selection of the subject of tax investigation under Article 81-5 of the former Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006; hereinafter the “former Framework Act on National Taxes”) and to impose tax accordingly, such taxation disposition is unlawful, unless there are special circumstances, since it violates Articles 81-5 and 81-3(1) of the former Framework Act on National Taxes (amended by Act No. 8139, Jun. 26, 2014; hereinafter “where there is clear evidence to acknowledge suspicion of tax evasion” in Article 81-3(2) of the former Framework Act on National Taxes (see, e.g., Supreme Court Decision 2012Du1948).

B) According to the purport of the Plaintiff’s evidence No. 14 and the entire argument, the Plaintiff’s corporate tax declaration data provides that ① KRW 71.9% and KRW 73.3% of operating income shall be paid to the instant executives who are controlling shareholders in 2012 and 2013; ② the instant executives who are controlling shareholders in 2014 and 2015 paid dividends in excess of operating income and KRW 62.1 million each year as dividends in excess of operating income; ② the Plaintiff’s bonus in 2009 for the management of the receipt of earned income and the payment record of earned income in 2008 shall be 80 times of the paid bonus in 2008; ③ The Defendant’s assertion that the Plaintiff’s corporate tax investigation report on the selection of the Plaintiff’s corporate tax investigation data was unlawful since it was verified that the Plaintiff’s most shareholder ○○○ was merely in the customer support room, and the Defendant’s allegation that the Plaintiff’s bonus in this case’s tax investigation conducted the tax investigation without reasonable grounds for the Plaintiff’s selection of the Plaintiff’s bonus.

B. Whether the instant disposition is substantive and lawful

1) Determination on the assertion of exclusion from application of Article 43(2) of the Enforcement Decree of the Corporate Tax Act

A) The plaintiff's assertion

The plaintiff asserts that Article 43 (2) of the Enforcement Decree of the Corporate Tax Act is not applicable since the performance bonus paid to the executive officers of this case from 2011 to 2015 is a fixed bonus paid periodically, fixed, and uniformly.

B) Determination

Where a director actually performs duties as a director prescribed in the Commercial Act while concurrently performs duties as a director, if the substance of all the affairs in charge is limited to providing certain labor under the direction and supervision of the employer, he/she may be deemed to handle the delegated affairs. In addition, in cases where a director of a stock company receives certain remuneration as prescribed by the articles of incorporation or the resolution of the general meeting of shareholders, in principle, it is based on the provisions of Article 388 of the Commercial Act and remuneration is not the wage prescribed in the Labor Standards Act (see Supreme Court Decision 2012Da28813, Sept. 26, 2013).

Meanwhile, in cases where a person appointed as a director or auditor at a general meeting of shareholders of a stock company enters into a contract with the stock company and takes office as a director or auditor, he/she may receive remuneration by the amount, time and method of payment determined by the articles of incorporation or the resolution of the general meeting of shareholders pursuant to Articles 388 and 415 of the Commercial Act (see Supreme Court Decision 2015Da21308, Sept. 10, 201

However, according to the facts acknowledged earlier and the evidence evidence No. 10, the plaintiff's provision on the payment of executive officers' remuneration as of August 4, 2009 classified the basic salary, the basic bonus, and the performance bonus as of August 4, 2009. Article 45 of the plaintiff's articles of incorporation provides that the plaintiff shall dispose of a little amount of executive bonus with the plaintiff's profit. Thus, the performance bonus paid by the plaintiff to the executive officers of this case is paid by the payment method according to the payment method according to the provision on the payment of executive officers' remuneration as of August 4, 2009, unlike the wages stipulated in the Labor Standards Act. Thus, the plaintiff's assertion that Article 43 (2) of the Enforcement Decree of the Corporate Tax Act is not applicable is without merit, since the executive's remuneration

2) Determination on the assertion that performance bonus is subsequent to the argument

A) The plaintiff's assertion

The Plaintiff’s shareholder consists of only the executives of the instant case, and it is apparent that the instant executive will be a resolution by the general meeting of all the executives, and the instant executive will be made according to the intent of the instant executive officers. Thus, unlike the provision on the payment of executive remuneration as of August 4, 2009, unlike the provision on the payment of executive remuneration, the general meeting of shareholders adopted a resolution on the payment of performance bonus in advance or did not prepare the minutes, but the approval procedure of the financial statements was conducted at the general meeting of shareholders every year. Thus, since the instant executive officers confirmed the provision on the payment of executive remuneration after the date of August 4, 2009, it shall be deemed that the general meeting of shareholders

B) Determination

If a director’s remuneration is not determined by the articles of incorporation, it shall be determined by the resolution of the general meeting of shareholders. However, in the case of so-called “one-person company,” if the minutes of the general meeting of shareholders were prepared by one shareholder even if there was no actual fact of holding the general meeting of shareholders, such resolution may be deemed to have been made, barring special circumstances. Even if the minutes of the general meeting of shareholders were not prepared, the resolution of the general meeting of shareholders may be deemed to have been made by evidence. Such legal doctrine may also apply likewise to the case of the general meeting of shareholders of a company which is a one-person company (see Supreme Court Decision 2004Da

However, as seen earlier, the Plaintiff intended to make a resolution on the payment of executive remuneration of August 4, 2009 and to make a payment of executive remuneration based on such resolution, and should have revised the provision on the payment of executive remuneration of August 4, 2009, which existed in the existing company, in order to pay the executive remuneration. However, if the executive remuneration was paid differently from the provision on the payment of executive remuneration of August 4, 2009 without such procedure, unlike the provision on the payment of executive remuneration of August 4, 2009, the provision on the payment of executive remuneration of August 4, 2009 shall be deemed to have been paid the executive remuneration in violation of the provision on the payment of executive remuneration of all shareholders since there was no provision on the payment of executive remuneration of the officer, and the provision on the payment of executive remuneration of August 4, 2009 shall be divided into the basic salary, basic bonus, performance bonus, and the amount specifically defined at the general meeting of shareholders without a resolution on the payment conditions and amount, it cannot be viewed as a new ground for ratification.

3) Determination on the assertion of substantial double taxation

A) The plaintiff's assertion

Although the Defendant imposed income tax on the performance bonus paid by the Plaintiff to the executives of the instant case, it is unlawful as it constitutes a substantial double taxation and it is unlawful to additionally collect corporate tax from the Plaintiff, instead of including the amount equivalent to the performance bonus as deductible expenses even though the Defendant imposed income tax on the executives

B) Determination

Even in cases of double taxation on the source of the same taxable capacity, it is endeavoring not to apply double taxation by determining the requirements for each period differently, and even in cases of double application, as to how to regulate different tax which constitutes different tax items of taxation, a broad legislative discretion is granted to the legislators, it cannot be deemed a violation of the principle of double taxation (see Constitutional Court Order 2004HunBa76, Jun. 29, 2006). As to this case, Article 43(2) of the Enforcement Decree of the Corporate Tax Act does not include bonuses exceeding the standard of payment in deductible expenses to prevent unfair reduction of corporate income (see Constitutional Court Order 2004HunBa76, Jun. 29, 2006). Article 43(2) of the Enforcement Decree of the Corporate Tax Act does not include bonuses exceeding the standard of payment in deductible expenses, as income tax differs from a juristic person,

3. Conclusion

The plaintiff's claim of this case is dismissed as it is without merit. The judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit.