Cho High Court Decision 2010Du1884 (Ob. 08, 2011)

With respect to the imposition of income tax on embezzlement, five years of exclusion period of imposition shall apply.

It is expected that the representative's embezzlement in the future should be clarified the fact of future embezzlement or the fact of false inclusion in corporate tax, etc., and the disposition of income by the tax authorities should also be made, so it is difficult to see that the exclusion period for imposition of five years is applied to the bonus to be reverted to him/her.

2011Guhap5538 Revocation, etc. of Disposition of Corporate Tax Imposition

AA Construction’s administrator ○○○○, a sacrifice corporation,

Jungyang Tax Office et al.

January 19, 2012

February 21, 2012

1. On February 8, 2010, the commissioner of the regional regional tax office of the defendant Jung-gu shall revoke the disposition on the change in the amount of income in the year 2002, the amount of 00 won in 2003, and the amount of 00 won in 203

2. The plaintiff's claim against the director of the Jungyang Tax Office and the remainder against the director of the regional tax office of Jungyang Tax Office.

All claims are dismissed.

3. Of the costs of lawsuit, the part arising between the plaintiff and the defendant shall be borne by the plaintiff, and the 9/10 of the part arising between the plaintiff and the defendant, and the remaining part shall be remanded to the plaintiff, respectively.

1. The disposition taken by the Director of the Regional Tax Office of Korea on February 8, 2010 against the plaintiff of 2002 pro rata 00 won for the year 2002, 000 won for the year 2003, 000 won for the year 2004, 000 won for the year 2005, 000 won for the year 2006, 000 won for the year 2007, 000 won for the year 2007, and 000 won for the year 2008 shall be revoked.

2. On February 8, 2010, the head of the Jungyang Tax Office’s disposition of imposing corporate tax amounting to KRW 000 for the year 2002 against the Plaintiff and KRW 000 for the year 2003.

1. Details of the disposition;

A. The Plaintiff is a corporation established on April 4, 1991 and engaged in a housing construction project, housing site preparation project, housing construction sale project, etc., and operated by a custodian upon receipt of a decision to commence rehabilitation procedures from the Suwon District Court on April 16, 2009. The said rehabilitation procedures were terminated on November 16, 201.

나. 2002년부터 2008년까지 원고의 대표이사로 재직하던 김CC는 2009. 7. 17. 수 원지방법원 안산지원(2009고합4호)에서 2002. 9. 중순경부터 2008. 12. 중순경까지 사 이에 주식회사 QQQQ디자인 등 하도급업체와 공사금액을 부풀려 계약을 체결하고 그 차액을 돌려받아 임의로 승용차나 주택 등을 구입하는 등 사적용도로 소비하여 합계 00，000，000，000원을 횡령하였다"는 내용이 포함된 범죄사실로 징역 3년 6월을 선고 받고, 이에 불복하여 항소하였으나 항소심 법원인 서울고등법원(2009노2057호)은 2010. 1. 29. 김CC의 사실오인 주장은 배척하고 양형부당 주장만올 받아들여 징역 2 년 6월의 형을 선고하였다. 김CC가 이에 상고하였으나 대법원(2010도2180호)은 2010. 6. 10. 이를 기각하여 위 판결은 확정되었다.

C. On July 15, 2009, from around January 15, 2009 to January 201, 2010, the director of the regional tax office of the defendant Jungbu Regional Tax Office: (a) conducted a corporate tax integration investigation from around July 15, 2009 to the head of the regional tax office, and (b) notified the head of the regional tax office having jurisdiction over the disposition agency of the fact that KimCC received a false tax invoice containing the above embezzled amount in the supply value from 2002 to 2008 by entering into a contract with the subcontractor, and (c) notified the subcontractor of the fact that

D. Accordingly, according to the purport of the above notification on February 8, 2010, the head of the Jungyang Tax Office imposed and notified the Plaintiff the total amount of KRW 000 won for the year 2002, KRW 000 for the year 2003, KRW 000 for the year 2004, KRW 000 for the year 2005, KRW 000 for the year 2006, and KRW 000 for the year 2008 (the Plaintiff is dissatisfied only with the disposition of imposing corporate tax for the year 2002 and 2003, and only this part is referred to as the “instant disposition of imposing corporate tax”).

E. At the same time, the director of the regional regional tax office of the defendant Jungbu Regional Tax Office notified the plaintiff of the change of the acquisition amount of KRW 000,000, as stated in the purport of the claim, by aggregating the interest on the recognition of the amount of embezzlement of this case (the amount equivalent to the value-added tax) (hereinafter referred to as "the notice of change of income amount of this case") on the same day.

F. On May 7, 2010, the Plaintiff appealed to each of the above dispositions (hereinafter referred to as “each of the dispositions in this case”) and filed an appeal with the Tax Tribunal on May 7, 2010, but the said claim was dismissed on February 8, 2011.

[Ground of recognition] Facts without diverse items, Gap evidence l through 6, 8, 9 (including paper numbers), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

(1) On the notice of the change in the income amount of the instant case

(A) The embezzlement of this case cannot be deemed to have been out of the company. The plaintiff, who revealed the embezzlement of KimCC, took measures such as securing the damage claim against KimCC and recovering part of the embezzlement. Considering all the circumstances such as the process of embezzlement, the embezzlement of this case should be deemed to exist under special circumstances that cannot be deemed as not premised on recovery at the time of its utilization. Even if the plaintiff's assertion on the embezzlement of this case is not acknowledged, when borrowing KRW 0 billion from the PPBB bank around June 2008, the plaintiff established a collateral security right on the commercial building owned by KimCC in Seoul, ○○-dong OO-dong 00,000, and was settled to have repaid the above loan with the sale price of the above building on December 21, 2009, the amount of the embezzlement of this case was presumed to have been recovered at least as at least as at the time of its diversion in 208, and thus the disposition of income of KRW 00,000 shall be excluded.

(B) If the income is disposed of as a bonus under the Corporate Tax Act, the corporation’s obligation to pay withholding income tax is established at the time of receipt of the notice of income amount, and simultaneously becomes final and conclusive. Since the Plaintiff already recovered KRW 000,000, which was prior to the establishment of the obligation to pay income tax-friendly return on the embezzlement of this case, around December 2009, at least the disposition to notify the change in income amount

(C) In the instant case, it cannot be deemed that the case constitutes a case where a national tax has been evaded due to fraud or other unlawful act, and thus, the exclusion period for imposition of five years, not exceeding 10 years prescribed in Article 26-2(1)1 of the Framework Act on National Taxes, shall be applied. Thus, the disposition of notice of change in the amount of income accrued prior

(2) As to the disposition of imposition of corporate tax in this case

The imposition disposition of the corporate tax in this case cannot be deemed to fall under the case where the plaintiff evaded the national tax due to fraud or other unlawful act, and thus, the exclusion period of imposition of the corporate tax in commerce should be applied. Accordingly, the imposition disposition of the corporate tax in 2002 and 2003 should be revoked.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) As to the notice of the change in the income amount of this case

(A) As to the assertion of internal reservation of the instant embezzlement

Unless there exist special circumstances, the act of the representative director, etc., who is the actual manager of a corporation, uses the corporation’s funds from the beginning, and thus, constitutes an outflow from the company as an expenditure itself. As to special circumstances, which cannot be deemed as not premised on recovery from the useful point of view, it shall be determined individually and specifically by taking into account all the circumstances such as the actual status within the corporation, such as the representative director, etc., the subject of embezzlement, the degree of control over the corporation, the circumstances leading to embezzlement, and the measures taken by the corporation after embezzlement, etc., where the intent of the representative director is deemed as identical to the corporation’s intent or where it is difficult to deem that the corporate economic interest with the representative director, etc. is in fact consistent. Such special circumstances must be proved by the corporation asserting it (see Supreme Court Decision 2007Du20959, Jan. 28, 2010). In light of the above legal principle, the Plaintiff’s assertion that the aforementioned funds are insufficient to be collected based on the evidence presented as a whole, including the following arguments.

1) The Plaintiff’s representative director, KimCC, the Plaintiff’s representative director, was one shareholder since the establishment of the Plaintiff.

However, in order to meet the requirements for share distribution at the time of incorporation, the punishment was imposed on the name trust with KimD, KimE, and LeeF, who is a form of punishment, and thereafter transferred each of the above shares in its own name on May 3, 2008 and July 20, 2008. In other words, since the Plaintiff appears to have been operated as a single company of KimCC, it is difficult to view that the intention of KimCC, a representative director, is identical to the intention of the Plaintiff who is a juristic person or that the economic interest between them is in fact consistent.

2) The money embezzled by KimCC has been consumed by KimCC for both private purposes. The measures to recover embezzlement against KimCC were taken after the Plaintiff entered rehabilitation procedures or when the KimCC was investigated and tried due to embezzlement, etc. It is difficult to deem that the said measures were based on the recovery at the time of embezzlement when embezzlement was embezzled due to considerable progress from the time of embezzlement.

3) The Plaintiff’s assertion that the Plaintiff would have exercised the right to claim a return if other directors were aware of, as a result of embezzlement due to disputes arising with the siblings of KimCC, who was a shareholder and director at the time of 2002 regarding the enormous dividend, but there is no evidence that there was a dispute between KimCC and the siblings. In addition, according to the above argument, considering that KimCC was the actual representative of the Plaintiff, it would rather be the embezzlement of money without the intention to return.

4) We examine the preliminary argument on the portion of 2008 as to complete 2008, and on the ground that KimCC offered its own building as collateral for the Plaintiff’s loan, etc., it is difficult to see that KimCC was completely separate from the subcontractor in 2008, and at the time of embezzlement, it cannot be said that the Plaintiff’s loan was repaid to the said building, and that it was the intention to recover the subsequent embezzlement money to the Plaintiff. Thus, there is no reason to believe in itself.

(B) As to the assertion of partial recovery of embezzlement

The act of the representative director, etc. of a corporation who uses funds of the corporation constitutes an outflow from the company, as it is not based on the premise of early recovery. A group of income tax liability for the portion belonging to the representative director, etc. out of the outflow from the company belongs to the corporation, and even if such person has returned the amount to the corporation later, it may not affect the tax liability (see, e.g., Supreme Court Decision 98Du7350, Dec. 24, 199). Meanwhile, in cases where the tax authority deemed that the amount of earnings out of the company belongs to the officers or employees and disposed of the income as bonus, it is deemed that the amount of income was reverted to the corporation, the withholding agent, as of the date on which the notice of change in the income amount was served to the corporation, and thus, the amount of income tax should be collected from 200 years to 40 years from the end of the taxable period (see, e.g., Supreme Court Decision 200Da14897, Dec. 31, 2009).

(C) As to the assertion regarding the exclusion period of imposition

1) Relevant legal principles

The amount of income disposal by recognizing the representative of a corporation pursuant to the provisions of the Corporate Tax Act is deemed to have been calculated on the date of receipt of the notice of change in the amount of income; however, it is merely deemed to have been paid to the representative in reality, not on the date of receipt of the above notice of change in the amount of income. In order to establish the obligation to pay income tax of a corporation, the source taxpayer who received the above notice of change in the amount of income must be deemed to have received the income tax at the time of receipt of the above notice of change in the amount of income. If the source taxpayer’s liability to pay income tax already extinguished due to the lapse of the exclusion period of imposition of the income tax, it cannot be established, and thus, the subsequent notice of change in amount of income is unlawful. In addition, in a case where the representative of a corporation received false tax invoices and concealed the amount of income by 10 years excessively counted in the book, it is difficult to view that the representative was subject to disposal by 20 years prior to such act to have been disposed of as the representative of the corporation’s income tax, and thus it cannot be deemed to have been disposed of 10.

2) The history of amendment of the relevant laws and regulations

Meanwhile, with regard to the amendment of the Framework Act on National Taxes by Act No. 11124 on December 31, 201, Article 26-2 (1) 1, which provides that "if a taxpayer evades a national tax or receives a refund or deduction due to a fraudulent or other unlawful act prescribed by Presidential Decree (hereinafter "unlawful act"), it shall be ten years from the date on which the national tax can be imposed, if the national tax is evaded or refunded or deducted due to such unlawful act, it shall be ten years from the date on which the income tax or corporate tax can be imposed on the amount disposed of pursuant to Article 67 of the Corporate Tax Act." In addition, the National Assembly, in the event that a corporate tax evaded by unlawful act is paid as a bonus or dividend, etc., the period for exclusion of the imposition of national tax on such amount, is also to supplement some deficiencies in operation of the current system, such as adjustment of corporate tax for ten years as well as the income tax that was evaded, it seems that it is generally difficult to recognize such additional legislation in light of the above legal principles.

3) Determination

In light of the above legal principles and the amendment history of Article 26-2 (1) 1 of the Framework Act on National Taxes, the above provision of the Act should be interpreted in accordance with the above legal principles. Unlike the Plaintiff’s intention to evade corporate tax, it is reasonable to view that it is difficult to avoid the income tax on bonus belonging to the tax authority for 0 years since it is anticipated that the change in the income tax for 20 years prior to the expiration of the period of 0 years prior to the expiration of the 20-year period of 0-year period of 10-year period of 20-year of 20-year of 20-year of 20-year of 20-year of 10-year of 20-year of 20-year of 20-year of 20-year of 20-year of 20-year of 10-year of 20-year of 20-year of 20-year of 10-year of 30-year of 20-year of 20-year of 3.

(2) The disposition of imposition of the corporate tax of this case is sold (the exclusion period for imposition)

According to the circumstances of the above disposition, it is reasonable to view that the Plaintiff, the representative director of the Plaintiff, embezzled the Plaintiff’s money for a long time by including false external processing expenses and receiving the return, thereby underreporting corporate tax by reducing the taxable income other than the Plaintiff (other than the exclusion period of imposition of income tax on the KimCC). This constitutes a case where the Plaintiff’s corporate tax, which is a national tax, is evaded by a company or other unlawful act (Article 12 of this Act). Accordingly, according to the record of evidence No. 12 of this case, the KimCC was sentenced to two years and a fine of 2 billion won from the Suwon District Court on April 7, 201 (Article 2010Da492) due to the above act (Article 26-2(1)1 of the Framework Act on National Taxes, and the imposition period of corporate tax of this case can not be accepted as the Plaintiff’s assertion that the disposition of this case was imposed within the exclusion period of imposition of total 10 years and 2010 days.

3. Conclusion

Therefore, the plaintiff's claim against the director of the Central Tax Office of Jung-gu is justified within the scope of the above recognition, and the plaintiff's remaining claim against the defendant and the claim against the director of the Nanyang Tax Office of Korea are dismissed as it is without merit. It is so decided as per Disposition.