Seoul Administrative Court-2015-Gu 5914 ( October 03, 2017)

Whether the Plaintiff constitutes a resident

The Plaintiff paid almost every month’s health insurance premium, electricity tax, etc. between 2007 and 2012, and settled a considerable amount of credit card usage. The Plaintiff, who obtained a loan from a financial institution on July 2007 and around November 2010, offered the Plaintiff’s apartment as security twice, constitutes a variety of legal relations for domestic life in the taxable period of each of the dispositions of this case.

Article 2 of the Enforcement Decree of the Income Tax Act (Determination of Domicile and Domicile)

2017Nu39244 global income and revocation of disposition

○ ○

○ Head of tax office

Seoul Administrative Court Decision 2015Guhap59914 decided February 3, 2017

October 27, 2017

December 2, 2018

1. All appeals filed by the plaintiff and the defendant are dismissed.

2. The costs of appeal shall be borne by each party.

1. Purport of claim

The imposition of each global income tax on the plaintiff as stated in the separate disposition list by the defendant against the plaintiff shall be revoked.

2. Purport of appeal

[Plaintiff]

The part against the plaintiff in the judgment of the court of first instance shall be revoked. The defendant's imposition of KRW 140,570 (including additional taxes), global income tax of KRW 140,570 (including additional taxes), global income tax of KRW 62,51,570 (including additional taxes), imposition of global income tax of KRW 62,570 (including additional taxes), imposition of global income tax of KRW 118,584,739 (including additional taxes), imposition of global income tax of KRW 118,584,739 (including additional taxes), imposition of global income tax of KRW 223,71,890 (including additional taxes) of global income tax of KRW 223,71,890 (including additional taxes), imposition of imposition of KRW 19,051,817 (including additional taxes), and imposition of additional taxes of KRW 69,79,797,790 (including additional taxes) of global income tax of KRW 2012.

[Defendant]

The part against the defendant in the judgment of the court of first instance shall be revoked. The plaintiff's claim corresponding to the revocation shall be dismissed.

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

The reasons for this decision are as follows. The fact-finding and decision of the first instance court is justifiable even if the plaintiff and the defendant added the additional evidences in this court, and the fact-finding and decision of the first instance court are added, and the reasons for the first instance judgment are as follows. Therefore, they are cited in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act, except for addition

2. Judgment on the Plaintiff’s additional assertion

A. Whether the plaintiff's "resident" is "resident"

1) The plaintiff's assertion

In light of the Plaintiff’s domestic residence period, close relatives, and vocational living relationship, it is difficult to view that the Plaintiff’s domestic residence during the instant taxable period is recognized. Even if the Plaintiff is a domestic resident, the Plaintiff is also a Chinese resident and China’s taxation authority has priority over China, which is the center of the Plaintiff’s significant interest pursuant to the Korea-China Tax Treaty. Therefore, the instant disposition based on the premise that

2) Determination

A) Whether the Plaintiff constitutes a “resident” under the Income Tax Act

(1) Relevant legal principles

According to Article 1-2 (1) 1 of the former Income Tax Act (amended by Act No. 12852, Dec. 23, 2014; hereinafter "former Income Tax Act"), "resident" means an individual who has a domicile in the Republic of Korea or has a domicile in the Republic of Korea for at least one year. According to Article 2 of the former Enforcement Decree of the Income Tax Act (amended by Presidential Decree No. 26067, Feb. 3, 2015), the address under Article 1-2 of the former Income Tax Act shall be determined based on objective facts of living relationship, such as existence of a family member living together in the Republic of Korea and assets located in the Republic of Korea (paragraph (1)), and whether an individual living in the Republic of Korea needs a continuous residing in the Republic of Korea, or has a family living in the Republic of Korea in the Republic of Korea in view of his/her occupation and property status, if the person living in Korea or working in a foreign country requires continuous residing in the Republic of Korea, and whether he/she has a permanent domicile in the Republic of Korea or foreign nationality.

The Income Tax Act stipulates that the objective living relationship in the Republic of Korea shall be comprehensively considered when determining individual residence, and the living relationship in the other country shall not be considered as a comparative determination factor, and when considering the fact that both countries are seeking resolution through a tax treaty, etc. in preparation for cases where both countries are recognized, a domestic resident shall be determined on the basis of their living relationship in the Republic of Korea, and it shall not be determined by taking into account overseas activities and asset holding (see, e.g., Supreme Court Decision 92Nu1695, May 27, 1993).

(2) Facts of recognition

In full view of Gap evidence 7, Gap evidence 20-1, Gap evidence 21 through 23, 25 through 28, 34 through 39, 45, 46, Eul evidence 1, 2, 10 through 16, 18, and 19 (including each number), the following facts may be acknowledged.

(A) Place of residence of the Plaintiff and the Plaintiff’s family

① The Plaintiff’s child has AA (Ma, 1988’s birth), and BB (L, 1990 birth). On November 23, 2004, the Plaintiff divorced from the former spouse RedCC (name before the opening of the name: RedD) on November 23, 2004, and maintained a matrimonial relationship by November 27, 2014.

② The Plaintiff’s domicile on the resident registration is ○○○-gu, Seoul from June 12, 2004 to August 15, 2007, 368-35, and from August 16, 2007 to December 29, 2014, ○○○-dong, Seoul 690-58***** 600, while NewE, which was the Plaintiff’s wife, resided in the Plaintiff’s domicile from May 28, 2009 to April 2014.

③ Meanwhile, during the period from June 12, 2004 to November 11, 2008, EA, his wife, resided in the Plaintiff’s domicile registered as the householder, and thereafter, EA had the mother of EA and the Plaintiff’s former wife resided together with RedCC.

(B) Domestic residence period of the Plaintiff and the Plaintiff’s family members

The domestic residence status of the plaintiff and the plaintiff's family members are as follows:

(C) Property status and economic activities of the Plaintiff and the Plaintiff’s family members

① The current status of domestic real estate acquired during or held in the taxable period (2007-2012) of the instant disposition (2007-2012) by the Plaintiff or his/her family members is as listed below:

② From 2007 to 2012, the Plaintiff paid monthly national health insurance premium, national pension premium, communication fee, cable broadcasting fee, and electricity tax, and paid the amount of domestic credit card use.

③ With respect to ○○○○-gu Seoul ○○○○-dong 690-58***** on July 31, 2007, the Plaintiff became the debtor, and **** on November 17, 2010, respectively, set up the right to collateral with the maximum debt amount of KRW 325,00,000 with respect to 600,000, the Plaintiff set up the right to collateral with the savings bank as the maximum debt amount of KRW 60,000.

④ From January 1, 2002 to May 31, 2013, the Plaintiff engaged in the manufacturing business (type processing) under the trade name, “AAA trade,” from 7-15, ○○-gu, Seoul, ○○○-ro, 100-ro, to 7-15, and from June 1, 1998 to July 15, 2016, the Plaintiff engaged in the manufacturing business (amount accounting) with the trade name, “B trade,” ○○-dong, Seoul ○○-dong 690-58*** 600 (B).

⑤ On December 15, 2010, the Plaintiff completed the registration of a construction business (new construction sale of a house) with the trade name, 'Yong-gun, Dong-gun, Dong-dong, Dong-dong, Dong-gun, the Plaintiff owned as the Plaintiff on December 15, 2010, 'Yong-gun, Dong-gun, Dong-gun, Dong-gun, the location of the business place', and operated the above business until July 18, 2016. With respect to the new construction of a house and the studio rental business in the Dong-gun, Dong-gun, Dong-gun, Dong-gun, and the above business until July 18, 2016, the Plaintiff delegated the management right to new construction of a house and the number of new persons, the Plaintiff's wife, who is the Plaintiff's wife, to whom the Plaintiff's wife belongs, for the purpose of the new construction cost of a house, housing defect repair cost, etc.

④ On May 31, 2009 and May 31, 2010, the Plaintiff filed a final return on the tax base of global income tax for the income received from BB trade in 2008 and 2009. On May 31, 201, and May 30, 2012, the Plaintiff filed a final return on the tax base of global income tax for the income received on the first hand, on May 31, 201, and on the income received on the first hand, 2010, 2011, and 2012.

(D) Details of remittance to the Plaintiff’s family members

① From June 12, 2004 to November 11, 2008, EA, his wife, resided in the domicile of the Plaintiff registered as the head of the household. The Plaintiff transferred money to EA several times as indicated below.

② From around 2009 to 2014, the new EE resided in the Plaintiff’s domicile registered as the householder, and the Plaintiff transferred money to the new E several times as indicated below.

(E) Economic activities, etc. of the Plaintiff and the Plaintiff’s family in China

① On May 28, 2002, the Plaintiff established a craft production business in China Cheongdo ******* Chinese craft (hereinafter referred to as a “China local subsidiary”) and has been engaged in business through the above local subsidiary from around that time, and has 51% of the shares of the Chinese local subsidiary.

② From July 2004, the Plaintiff purchased 19* 19, 19, 1, 2401 and 2, 2, and 1602, and held until now. On September 6, 2006, the Plaintiff purchased 2, 308, 189, 2, 189, 189, 189, B-70.

③ The Plaintiff, ASEAN from September 2005 to July 2008, ****** a specialized school, who was enrolled in the North Korean border from September 2009 to July 2013 * a college.

(3) The plaintiff's domestic resident status

In light of the following circumstances, the evidence and the purport of the entire argument revealed as seen above, even if the Plaintiff’s period of stay in China is longer than the period of stay in Korea and the Plaintiff has a place of business in China, the Plaintiff is deemed to have a basis for living in Korea, such as his family and property. Thus, the Plaintiff is a resident under Article 1-2(1) of the former Income Tax Act. Therefore, this part of the Plaintiff’s assertion is groundless.

① In the case of 2007 and 2008, the Plaintiff and ASEAN, who were their children, were staying in Korea on 56th, 2007, 54th, 2008, and the period of stay is much more than the period of stay in China since 2007 and 7th, 2008. However, in light of the Plaintiff’s her son and wife around 2007, 2007 and 2008, RedCC, the mother of this time, had already resided in Korea and had no choice but to depend on the Plaintiff’s livelihood. In addition, in light of the circumstances that the Plaintiff transferred several times of payment to this, the Plaintiff’s son’s son’s son’s son’s son’s her son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son’s son her son, the Plaintiff’s son son’s son her her her her son.

② In the case of 2009, 2010, 2012, the period of stay in the Republic of Korea by the Plaintiff and ASEAN is August 80, 2009, 65, 2010, and 102. The period of stay in the Republic of Korea by the Plaintiff and ASEAN is B, and the period of stay in the Republic of Korea was 87, 2009, 42, 2009, and 63, 2012, and the period of stay in the Republic of Korea is still more than the period of stay in the Republic of Korea. However, the Plaintiff married with the New E on January 8, 2009. The period of stay in the Republic of Korea was 235, 2010, 303, 2012, and 360, 2012, which is more than the period of stay in the Republic of China. Moreover, the Plaintiff transferred the amount of stay in China to New E, a member of the Plaintiff’s family.

③ Moreover, the Plaintiff acquired three real estate, including land and apartment, at a considerable price from 2006 to 2010. In addition, in 2011, 222 households were newly constructed on the land in the dong-gun, Busan Metropolitan City, and thereafter, acquired assets, such as new construction, sale, and studio rental business at the same place, such as receiving deposit money and monthly rent, from the time around that time.

④ From 2007 to 2012, the Plaintiff paid almost every month’s national health insurance premium, national pension premium, communication fee, and electricity tax, and paid a considerable amount of credit card usage on several occasions. In addition, the Plaintiff received a loan from a financial institution around July 2007 and around November 2010, offered the Plaintiff’s apartment as security twice. As such, the Plaintiff has formed various legal relations for domestic life between 2007 and 2012, which are the taxable periods of each of the instant dispositions.

⑤ During each taxable period of the instant dispositions, the Plaintiff filed a final tax base return on global income tax on the BB trade and the current LAS income, which is the domestic company operated by the Plaintiff. In particular, the Plaintiff voluntarily stated that the Plaintiff received the export payment of a Chinese local company’s local company using a part of the BB trade account in order to obtain favorable conditions for loans from the Korea Credit Guarantee Fund when it had managed the performance such as the support plan for the internship company, etc., without any actual business details since September 17, 2013, BB was organized as the support plan for the internship company in the future, and failed to report the business closure to run its business in the Republic of Korea.

B) Whether the Plaintiff constitutes a Chinese resident in accordance with the Korea-China Tax Convention

(1) An individual is both a domestic resident and a foreign resident under the Income Tax Act.

If a taxpayer falls under a taxpayer of income tax, etc. under foreign law, a separate provision is established through the conclusion of a tax treaty among countries to prevent such double resident. If a taxpayer is recognized as a dual resident, the determination of which country’s resident should be deemed as a resident under the conditions as prescribed by the tax treaty concluded with the country concerned shall be made, and the resident country and the determination of the said tax rate shall meet the taxation requirements: Provided, That with respect to the fact that the taxpayer, who is a domestic resident, is also a resident of a foreign country, the taxpayer bears the burden of proving that the tax treaty should apply (see, e.g., Supreme Court Decision 2006Du3964, Dec. 11, 2008).

Furthermore, Article 4(2) of the Korea-China Tax Convention signed on March 28, 1994 between the Republic of Korea and China and entered into force on September 28, 1994 provides that, in cases where an individual becomes a resident of both countries, ① a country having a permanent residence, ② a country having a human and economic relationship most closely (centered in heavy interest), ③ a country having a temporary domicile, ④ a country having a permanent domicile, ④ a country having a citizen’s residence, and ④ a country having a citizen’s residence. However, if it is impossible to determine a residential country in accordance with any of the criteria, the country liable for tax payment shall be determined

Meanwhile, according to Article 1 (1) of the Chinese Private Income Tax Act, a resident in the Central Tax Act refers to an individual who has his/her domicile in the border of China or has no domicile in the border of China. According to Article 2 of the Chinese Private Income Tax Ordinance, a "individual who has his/her domicile in the border of China" refers to an individual who has a damply residing in the border of China due to family register, home, and economic benefits. According to Article 3 of the same Ordinance, a "one year of residing in the border of China" refers to a period of 365 days in which he/she has resided in the border of China during one tax year. In cases of a temporary departure for which the period of one departure does not exceed 30 days during one tax year, or whose annual departure does not exceed 90 days, the period of departure shall not be deducted from the period of residence.

(2) According to the above facts, in the case of the year 2007 through 2010, the Plaintiff appears to be a Chinese resident under the Income Tax Act and the Enforcement Ordinance of the same Enforcement Ordinance. However, in the case of the year 2012, the Plaintiff is deemed to be a Chinese resident since the annual aggregate of the dates of departure exceeds 90 days when the Plaintiff was staying in Korea for 102 days and was based on the Chinese tax law. Thus, it cannot be deemed to be a Chinese resident since the period of stay in China within the Chinese border under Article 1(1) of the Income Tax Act and Article 3 of the Enforcement Ordinance of the same Ordinance

In addition, even if the plaintiff is a Chinese resident under the Chinese tax law, as seen earlier, if it proves that the permanent domicile is China from 2007 to 2012, or if the plaintiff's permanent domicile is unclear, it should prove that the human and economic relations are China, but the defendant's each disposition against the plaintiff is unlawful.

However, the above facts and the overall purport of arguments are as follows. ① 'portal residence' under the Korea-China Tax Convention is not for short-term stay in terms of the language and text, but for the purpose of permanent use, and where there are family members living together with the intent of being able to continue to be used at any time, it refers to the formation of a family's livelihood. Mari-A, a family living together with the plaintiff as of 2007-2008, and Mari-A, a family living together with the plaintiff as of 2009-2012, most of the family members living together with the plaintiff were residing in Korea for a period of one year, ② 'the nationality of both the plaintiff and their family members is the Republic of Korea, 'the most economic relation between the plaintiff and the plaintiff's residential property and 'the most economic relation before and after 2006-2010, 'the economic relation between the plaintiff and 's family members living together with the plaintiff's domestic financial resources for their own economic activities.

Therefore, even in accordance with the Korea-China Tax Convention, the residing country where the plaintiff is liable to pay taxes is the Republic of Korea and the plaintiff is the subject of domestic global income tax. Therefore, this part of the plaintiff's assertion is without merit.

B. Whether disposal of income under the Corporate Tax Act is necessary

The plaintiff asserted that it is improper to dispose of the issue amount as earned income under Article 20 (1) 1 of the Income Tax Act immediately without disposing of the income in accordance with the Corporate Tax Act.

However, the disposal of income pursuant to the Corporate Tax Act refers to disposal of bonus, dividend, other outflow of income, internal reservation, etc. to the person to whom the amount included in the calculation of the income belongs where the corporate tax base on the income for each business year is reported (see Articles 67, 60, 97(1), and 91 of the Corporate Tax Act, Article 106 of the Enforcement Decree of the Corporate Tax Act, etc.).

However, in addition to the purport of the entire arguments cited earlier, the key amount is the plaintiff's bonus or temporary salary which the plaintiff transferred to the plaintiff's company's profits outside of the company, which is the plaintiff's earned income, and the Chinese subsidiary did not have domestic business place or domestic real estate, etc., and accordingly, the plaintiff was transferred the key amount through the bank account in the name of "BB trade" and "AA trade". Accordingly, the key amount is not subject to disposition of income under the Corporate Tax Act. Accordingly, the plaintiff's assertion on this part is rejected.

(c) Whether there exists a ground for requesting a correction following the return and loss of the amount of outflow from the company;

1) The plaintiff's assertion

The Plaintiff paid the transaction price of a local subsidiary in China to a transaction partner in accordance with the civil mediation protocol established in China. This can be deemed that the Plaintiff returned the outflow income to the local subsidiary in China by paying the transaction price obligation of the local subsidiary in reality. However, in the case of a foreign corporation, such as a foreign subsidiary in China, it is impossible to file a revised return to the domestic tax authority, and thus, it is necessary to deal with it in principle in accordance with the precedent on the effects of return of illegal income in the tax law. Therefore, it falls under the case where the tax liability initially established loses the premise for the return of illegal income. Therefore, the Defendant’s taxation should be revoked by recognizing the existence of the

2) Determination

The plaintiff claims as above on the premise that the issue amount is illegal income that should be returned to the Chinese subsidiary.

However, according to the above quoted evidence, it is recognized that Korean workers working for a Chinese local company were paid through a domestic account. The plaintiff, when preparing a written answer in Sungdong Tax Office, stated that he did not receive the benefits separately from the Chinese local company, is the representative of the Chinese local company. According to the facts acknowledged above, the plaintiff paid some of the key amount to the family and living expenses.

In light of the above facts, it is difficult to conclude that the evidence alone submitted by the plaintiff as "illegal income" is not limited to the plaintiff's bonus or temporary payment of the plaintiff's bonus or temporary payment, and there is no other evidence to acknowledge it. Therefore, the plaintiff's above assertion is rejected without need to further examine it.

3. Conclusion

Thus, the plaintiff's claim shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as it is without merit. The judgment of the court of first instance is just in conclusion, and the plaintiff and the defendant's appeal are dismissed as they are without merit.