Whether a business entity is a real business entity shall be determined by comprehensively taking into account various circumstances, such as the details of the use of name, the content of the agreement, the degree of involvement of the nominal owner

In the application of the principle of substantial taxation, it shall be determined by comprehensively taking into account various circumstances, such as the details of the use of the name, the content of the agreement by the parties, the degree and scope of involvement by the nominal owner, the relationship of internal responsibilities and calculations, the location of independent management

Article 14 (Real Taxation)

2018-Gu Partnership-51744 Revocation of imposition of global income tax, etc.

AA

O Head of tax office

6.06.07

2019.07.05

1. The plaintiff's claims against the defendants are all dismissed.

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

Cheong-gu Office

Each disposition taken by the Defendants against the Plaintiff shall be revoked.

A. In ○○ City, ○○○○-dong, registered in the Plaintiff’s name, “△△△△△ (Operation at the place of residence from August 25, 2003, and from March 10, 2004 to April 15, 2017)” was operated on the side of the road, on the side of the road, “○○○○-form Total Product Board (hereinafter referred to as “○○○”) registered in the name of HH.

B. As a result of the personal integration investigation on HH from March 27, 2017 to April 15, 2017, Defendant* the head of a tax office determined that KRW 580,96,40,06,960, out of KRW 580,96,80,000, which was deposited in the Nong Bank account in the name of the Plaintiff (hereinafter “instant account”) from January 1, 2011 to December 31, 2015, KRW 197,80,806,960, among KRW 583,159,445, which was deposited in the Plaintiff’s account (hereinafter “instant account”), was omitted sales amount of △△ trade, and notified Defendant** the head of a tax office of this determination.

C. The Defendants deemed the key amount of the Plaintiff’s omitting sales as the Plaintiff’s income amount, and notified the Plaintiff that the value-added tax and the comprehensive income tax were corrected and notified (hereinafter “each disposition of this case”).

D. As to this, the Plaintiff filed a tax appeal on July 26, 2017, but was dismissed on October 20, 2017.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 and 2 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

HH actually operated both trade in △△ and ○○ization from 2011 to 2015, and the Plaintiff is merely an employee of HH. Accordingly, global income tax and value-added tax on the issue amount pursuant to the principle of substantial taxation ought to be imposed on HH rather than the Plaintiff.

B. Determination

1) Relevant legal principles

Article 14(1) of the Framework Act on National Taxes declares the principle of substantial taxation by stipulating that if the ownership of income, profit, property, act, or transaction subject to taxation is merely nominal and there is another person to whom such income, profit, property, act, or transaction belongs, the person to whom such income, profit, or transaction actually belongs shall be liable to pay taxes. Therefore, if there is another person who substantially controls and manages such income, profit, property, act, transaction, etc. different from the nominal ownership, the nominal owner shall not be the person to whom such income, profit, or appearance belongs, but the person who substantially controls and manages the relevant taxable object shall be the taxpayer pursuant to the principle of substantial taxation. Furthermore, whether such a case falls under the foregoing ought to be determined by comprehensively taking into account various circumstances such as the circumstance leading up to the use of the nominal title, the degree and scope of the nominal owner’s involvement, internal responsibility and calculation relationship, and the location of independent management and disposal authority over the taxable object. Meanwhile, in principle, the tax authority bears the burden of proof as to the existence and tax basis of taxation, even if the title and the actual owner bears the burden.

2) Specific determination

In light of the following circumstances, the evidence submitted by the Plaintiff and the Plaintiff filed a complaint with HH as a violation of the Labor Standards Act, solely on the ground that: (a) evidence submitted by the Plaintiff and the Plaintiff filed a complaint against the Plaintiff for a business or tax investigation related to the Plaintiff; (b) lack of considerable doubt as to the fact that the actual operator of △△ Trade is a HH, not the Plaintiff; and (c) there is no other evidence to doubt whether the pertinent issue amount belongs to the Plaintiff, the nominal owner.

A) At the time of the tax investigation, the Plaintiff and HH respectively prepared a written confirmation on the omission of sales as an employer of △△ Trade and ○○ization. There is no evidence to deem that the said written confirmation was drafted compulsorily against the intent of the Plaintiff or HH.

B) In order to be deemed that HH actually operated not only the portion of ○○ization but also the portion of △△ trade, it should be substantiated that the revenue of △△ trade belongs to HH, and there is no evidence to acknowledge it, and there is no evidence to acknowledge that the amount of the instant account was remitted or cash withdrawn and ultimately reverted to HH.

C) Although part of the account of this case was deposited in revenue and expenses, HH agreed in this court to entrust the Plaintiff with the operation of the ○○○ization and received revenue, HH testified testified that it returned part of the credit card payment deposited into the account of HH or settled it by the method of receiving money from the Plaintiff. The Plaintiff’s statement “Settlement of the Ha President” in the account book (Evidence No. 3) prepared by the Plaintiff also accords with this.

D) The account books prepared by the Plaintiff (No. 3) are prepared by HH under the condition that HH entrusted the Plaintiff with the operation of the ○○○ization and received certain profits. As such, the details of sales of △△ and ○○ization in the said account books appear to be written without distinction.

E) The Plaintiff asserts that HH controlled all revenues of ○○ization and △△ Trade while managing the instant account, but rather, the Plaintiff made monetary transactions with the Plaintiff using the instant account, paid the Plaintiff’s transfer income tax, and transferred the money of the instant account to another account under the Plaintiff’s name. In so doing, it is difficult to view that HH exclusively managed the said account.

E) The credit card sales of ○○○○○ was deposited into the account in the name of HH, and only a part of the credit card sales of △△ was deposited into the instant account. The remaining sales appear to have been deposited into the other account in the Plaintiff’s name. There is no evidence to prove that the said amount was ultimately reverted to HH.

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.