Plaintiff (Law Firm Hong, Attorneys Im Jae-hoon et al., Counsel for the plaintiff-appellant)

Daejeon Head of the District Tax Office

October 13, 2016

1. The plaintiff's claim is dismissed.

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

The defendant's rejection disposition against the plaintiff on November 3, 2014 is revoked in the amount of KRW 286,767,086 as global income tax of KRW 1,573,862 as global income tax of the year 2012.

1. Details of the disposition;

A. On June 4, 2005, the Plaintiff entered △△△△△ (a construction business, housing construction business, golf course construction business, hotel construction business, and container construction business; hereinafter “△△△△”) and was appointed as a director on April 13, 2007, and resigned from the director on May 13, 2010, and was dismissed on July 31, 2010, and was dismissed on July 31, 2010. At the time of the work of △△△△△, the Plaintiff was in office as the head of the headquarters for the construction of ○○○○ golf course after the approval of the project. After the completion of the said golf course, the Plaintiff was in charge of general affairs to promote the tourism development business in △△△△△△.

B. On October 8, 2007, the Plaintiff entered into an agreement with △△△△△△ (hereinafter “instant agreement”).

Article 1, “A” and “B” (referring to the Plaintiff; hereinafter the same shall apply) agree to the following terms and conditions. In implementing the △△△ Tourist Zone Project, Article 1, “B” and “B,” and “B, at the time of departure from office,” “B,” and “B, at the time of departure from office, shall be paid within three (3) years after retirement from office as provided for in the following: (a) “I, at the time of departure from office, by recognizing the general terms and conditions of the oral promise; and (b) “I, at the time of departure from office, by one billion (1 billion) each as the prescribed successful compensation; and (c) in addition, “I, at the time of the necessity of the payment, by two hundred and twenty (200 million) million (20 million) months thereafter to Nonparty 1 and Nonparty 2”; and (a) if so, the period of payment under Article 2, “A” and “B, at the time of delay, shall be paid within three (3) years after retirement from the date of retirement from office.

C. On July 31, 2010, 2010, △△△△△ rendered a notice of dismissal to the Plaintiff on the ground that “the Plaintiff was suffering from enormous operational damage to the company in which △△△△ was in office upon filing a lawsuit or an application for provisional attachment.” On June 11, 2010, the Plaintiff filed a lawsuit seeking the payment of the agreed amount against △△△△△△△△△△ ( Jeju District Court 2010Ga1537, hereinafter “prior civil lawsuit”).

D. In the preceding civil litigation, the judgment ordering the Plaintiff to pay KRW 1.2 billion to the △△△△△△△△ to the Plaintiff. On April 20, 2012, the appellate court appealed against the above judgment, and the lower court paid KRW 3.4 billion to Nonparty 1 and Nonparty 2, including the Plaintiff, and paid KRW 3.4 billion to Nonparty 2. Of the above amount, the Plaintiff, out of the amount, was voluntarily adjusted to have a total of KRW 8.4 billion (hereinafter “instant dispute amount”) in proportion to the share of KRW 8.4 billion (Article 2011Na3155 of the Residents of the Gwangju High Court of Gwangju, Gwangju High Court; hereinafter “instant conciliation”). The Plaintiff received the key amount from the △△△△△△△△△△ on May 4, 2012.

E. In the process of filing global income tax returns for the year 2012 on May 31, 2013, the Plaintiff reported and paid a total of KRW 286,767,086, including wage and salary income accrued in the year 2012, based on the instant agreement, and filed a request for correction requesting the refund of KRW 285,193,224 (=286,767,086 – 1,573,862) by asserting that the time when income tax accrued on August 4, 2014 was not 2007 but 2007 (hereinafter “instant request for correction”). The Defendant rejected the Plaintiff’s request for correction on November 3, 2014 (hereinafter “instant disposition of refusal”).

F. The Plaintiff, who is dissatisfied with the foregoing rejection disposition, filed an appeal on December 31, 2014, but the appeal was dismissed on October 13, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4 (including branch numbers in case of additional number; hereinafter the same shall apply), Eul evidence No. 1, the purport of the whole pleadings

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

The key amount received by the Plaintiff from △△△△△△ on April 8, 2012 falls under the earned income reverting to 2007 as consideration for work arising from the instant agreement concluded on October 8, 2007. Since the instant agreement was concluded and confirmed to a considerably mature level of income feasibility at the time of the instant agreement, the Plaintiff’s rejection of the Plaintiff’s request for correction of the global income tax return for the year 2012, which was reported including income in 2012, is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

Comprehensively taking account of the following circumstances acknowledged by comprehensively taking account of the respective descriptions of evidence Nos. 2 through 5 and the purport of the entire pleadings as seen earlier, the key amount is not an earned income, but not an earned income, and the possibility of income realization is mature and finalized by the conciliation procedure, and the time of income attribution is 2012. Thus, the instant disposition is lawful and the Plaintiff’s assertion is without merit.

1) The right confirmation principle, which is the principle of determining the time when income is attributed under the Income Tax Act, is not the time when income is realized, but the income for the pertinent year is deemed to have been accrued at the time of the occurrence of the right, and the income for the pertinent year is to be assessed in advance on the premise that it will be realized in the future. However, in such a right confirmation principle, the concept of "determined" cannot be defined as a general principle that is not an exception to the time when income is attributed, and it shall be determined on the basis of whether the period of attribution has considerably mature and finalized to the extent that it is highly likely to realize the income, considering the specific issues, including the management and control of income, the degree of the income generated, and the timing when the taxpayer is secured, together with other factors (see, e.g., Supreme Court Decisions 96Nu19154, Jun. 13, 1997; 201Du809, Jul. 9, 2002; 2010Du9617, Sept. 30, 2).

2) The Plaintiff asserts that the nature of the instant agreement is a kind of director’s remuneration to be paid in return for the performance of duties while in office, on the premise that the Plaintiff, etc. provided labor during the agreement and provided it to △△△△△, and that the time of attribution is 2007 when the instant agreement was prepared and the labor was provided. In determining the time of attribution of the key amount, the nature of the key amount (whether it is labor income or other income) should be first examined, and this is related to the nature of the instant agreement, and this is examined.

Article 1 of the instant agreement provides that “A (Plaintiff) recognizes the general terms and conditions agreed upon by △△△△△△ upon the transfer of the company “A” and that “B shall pay A additional amount of KRW 200 million to Nonparty 1 and Nonparty 2, if it is deemed necessary to pay B, the terms and conditions that △△△△△△△△△ shall pay to B,” under the instant agreement, it is difficult to view that the Plaintiff’s right to pay KRW 200 million to the Plaintiff by December 31, 207, on the sole basis of the following terms and conditions: (a) it is difficult to view that the Plaintiff’s right to pay △△△△△△△△△△△△△△△△△△△△△△△△△△△ was not a valid one billion wage and salary agreement; (b) it is reasonable to deem that the Plaintiff’s business, which was the time of the formation of the instant agreement, was a final and conclusive one year or half year, based on the financial situation of the Plaintiff’s development project in the instant case.

3) In other words, the instant agreement is not an ordinary payment agreement for the company to pay for the performance of its duties while in office to the director, but has the nature of compensation for success based on the outcome of the tourism development project in △△△△ and the Plaintiff’s performance. As long as the Plaintiff received the key amount according to the instant conciliation procedure established in the course of a civil lawsuit between △△△ and the Plaintiff, the said key amount is the agreed amount received through court conciliation and has the character of “other income” under Article 21 of the former Income Tax Act (amended by Act No. 11611, Jan. 1, 2013; hereinafter “ Income Tax Act”). In particular, during the instant conciliation procedure, Nonparty 1 and Nonparty 2, who are the party to the instant agreement including the Plaintiff, renounced all other claims instead of distributing the total amount of KRW 3,40 million from △△△△△△△△△, and thus, the key amount at issue constitutes “other income under Article 15(1)16(1)5 of the former Enforcement Decree of the Income Tax Act, which was amended by the Plaintiff’s 101.

4) The right is not finalized solely because it satisfies the requirements or validity of the legal right in relation to the principle of confirmation of right. Thus, determination of whether to determine the right related to the timing of attribution under the tax law does not necessarily coincide with the standards under the private law. In other words, the term “determination” of the right under the Income Tax Act refers to the situation in which the substance of the right which is the cause of profit is objectively recognized as a result of guarantee by the law, and thus, the right holder can exercise the right, and there is no obstacle in exercising the right. In addition, in a case where a dispute between the payer and the beneficiary of the income dispute over the existence and scope of the claim, and if it is not clearly unreasonable in light of the circumstance and the nature of the case, the right cannot be deemed to have become final and conclusive at the stage of the transfer of the lawsuit, and the right is established only when the judgment becomes final and conclusive (Supreme Court Decision 96Nu19154 delivered on June 13, 197).

5) The Plaintiff asserts that the period of attribution of the key amount of income is 2007 on the grounds that the claim for the amount of issue was already made from October 2007 upon the conclusion of the instant agreement. However, as seen earlier, there was a dispute over the existence and scope of the claim for successful compensation pursuant to the instant agreement through prior civil litigation, and in light of the developments and contents of the agreement, it is not clearly unreasonable to the extent that △△△△ should return the liability. The Plaintiff’s actual key amount received from △△△△△△ in accordance with the instant agreement is KRW 8.4 million and it is difficult to view that the instant agreement has become final and conclusive only on the basis of the instant agreement, because the difference between the 1.2 billion won and the amount, which are stated to be paid by △△△△△△△△△△ in accordance with the instant agreement, the key amount is “other income” and the period of attribution was at least 200 million won, which was paid by the Plaintiff from △△△△△△ in the accounting process.

6) The Plaintiff alleged that the nature of the key amount of the instant agreement in the preceding civil procedure constitutes “labor income” on the grounds that the instant agreement was interpreted as “one-class remuneration for directors. However, as the instant agreement had the nature of a director’s remuneration, it would be subject to procedural restrictions that should have been approved by the general meeting of shareholders or the board of directors at the time of conclusion of the agreement in accordance with the Commercial Act, if the instant agreement had the nature of a director’s remuneration, and thus, was for examination. Rather, in the preceding civil procedure, the Plaintiff asserted that the instant agreement was a contingent compensation agreement having the nature of the cost for completion of the golf course, instead of the director’s remuneration agreement, to avoid such procedural restrictions. Accordingly, the discussion as to whether the instant agreement in the preceding civil procedure has the nature of “the director’s remuneration” has the nature of “the key amount of wage” as the issue point of the instant case cannot be employed as it is, unlike

7) Meanwhile, the Plaintiff asserts that the key issue amount should be classified as earned income by the tax authority’s established rules which classify shower who received shower in the course of entering into an employment contract with an enterprise. However, the shower is a kind of dual pay that is paid for the employment of excellent human resources. In most cases, there is an agreement to refund a certain amount when most of the compulsory work period is given and the period of the contract retires within the contract period. The instant agreement is not the amount that the Plaintiff received from the entire workplace as the condition that the Plaintiff moved to △△△△△△△△△, but rather, it is not the amount that the Plaintiff received from the former workplace as the condition that he was transferred to △△△△△△△△, and thus, it is irrelevant to the instant agreement. (The time when the instant agreement was concluded is more than two years after the Plaintiff was employed at △△△△△), and the rules on shower

3. Conclusion

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

[Attachment]

Judges in the first instance court (Presiding Judge)