Where a corporation has included processing expenses in deductible expenses while filing a report on the tax base and amount of corporate tax, but includes the corresponding nominal debts in its balance sheet, whether the amount equivalent to such expenses can be deemed to have been out of deductible expenses (negative in principle)

Even though a taxpayer corporation has included the processing costs in the calculation of losses in the calculation of losses when filing a report on the tax base and amount of corporate tax, if there is no change in the net assets of the relevant corporation in the net assets of the relevant corporation, it shall not be deemed that the amount equivalent to the cost has been leaked out of the company, unless there are other circumstances that recognize the outflow

Article 67 of the former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007); Article 106(1)1 of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 19328 of Feb. 9, 2006)

Plaintiff

The head of Yangcheon Tax Office

Seoul High Court Decision 2009Nu12671 Decided December 8, 2009

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

Even if a taxpayer corporation has included the processing costs in the calculation of losses in the calculation of losses when filing a report on the tax base and amount of corporate tax, if there is no change in the net assets of the relevant corporation in the net assets of the relevant corporation, it shall not be deemed that the amount equivalent to the cost has been leaked out of the company, unless there is any other reason to recognize the outflow

According to the reasoning of the judgment below and the evidence duly admitted, for a business year 2004, an employer-employee shop (hereinafter referred to as the "o-employee shop") included the purchase amount of KRW 424,60,00 in deductible expenses using 8 false purchase tax invoices received by the Guideate Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical Ethical E.

Nevertheless, the court below deemed that the amount of the instant expenses was leaked out of the company solely on the ground that the expenses were disposed of as processing expenses and included in the calculation of losses, and on the premise of this, determined that the instant disposition was lawful by disposing of the amount of KRW 255,750,000 among them as an recognition prize for the plaintiff who was the representative director of the union-based at the time, and imposing the comprehensive income tax on the plaintiff. In so doing, the court below erred by misapprehending the legal principles on the outflow from the company

Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Chang-soo (Presiding Justice)