Cho Jae-2017-Gu-4239 ( December 22, 2017)

Global Income Detailed and Revocation of Disposition

If it is unclear whether the substance of income, etc. belongs to the nominal owner, and thus the judge is unable to be convicted, the disadvantage resulting therefrom is the tax authority that bears ultimate burden of proof as to the existence of the tax requirement and the tax base.

Article 84-2 of the Framework Act on National Taxes

Daegu District Court 2018Guhap2095 global income and revocation of disposition

OO

OO Head of the tax office

May 30, 2019

July 11, 2019

1. The Defendant’s imposition of KRW 00,000,000 on the Plaintiff on October 0, 2017 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order of the Gu office.

1. Details of the disposition;

A. On August 00, 2014, an agricultural corporation established for the purpose of agricultural product processing business, agricultural product distribution business, etc. (hereinafter referred to as “OOO”) closed around December 0, 2015.

B. On September 0, 2014, the Plaintiff was appointed as the representative director of the OO and resigned on June 00, 2015, and was registered in the corporate register of the OO.

C. The director of the OO head of the tax office confirmed that the short-term rental amount of KRW 295,00,000 remaining on the balance sheet for the business year 2014 was leaked out of the company while conducting an OO’s estimation of corporate tax base for the business year 2015, and recognized that the Plaintiff was paid as the bonus as the representative (the calculated method according to the period during which the Plaintiff served as the representative director during each business year). The director of the OO head of the tax office notified the Plaintiff of the change in the amount of income to the above purport on September 00, 2016, and then notified the head of the competent tax office of this fact.

D. On June 1, 2017, the Defendant issued a disposition imposing global income tax of KRW 00,000,000 (hereinafter “instant tax”) on the ground that “OOOO’s failure to report income tax on the amount of the recognized bonus reverted to year 2015” on the Plaintiff (hereinafter “instant disposition”).

E. On September 7, 2017, the Plaintiff filed an appeal with the Tax Tribunal on September 7, 2017, but the said appeal was dismissed on December 22, 2017. The fact that there is no dispute with recognition, and the purport of the entire pleadings and arguments stated in Gap’s subparagraphs 1, 2, 4, 5, and Eul’s subparagraphs 1 through 3.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the actual operator of the OOO is not the plaintiff but the non-party OO, the instant disposition taken on the premise that the plaintiff is the actual operator of the OOO is unlawful as it violates the principle of substantial taxation.

B. Relevant statutes

The statutes related to the disposition of this case shall be as specified in the attached Form.

C. Relevant legal principles

Article 106(1)1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 26981, Feb. 12, 2016) where it is clear that the amount included in the calculation of earnings has been leaked to the company other than the company when the tax authority determines or revises the corporate tax base, the amount included in the calculation of earnings shall be the dividends, bonuses from the disposition of profits, other income, and other outflow from the company according to the person to whom the income belongs: Provided, That where the attribution is unclear, it shall be deemed that it has been reverted to the representative. Here, the representative shall be a de facto representative operating the company. Although the company was registered as the representative director of the company, if the company had not been actually operated, such recognized income shall not be deemed to have been reverted to the representative (see, e.g., Supreme Court Decision 2014Du4764, Nov.

Meanwhile, 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 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 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 owner, the nominal owner of such income, profit, act, or transaction, the nominal owner shall not be the person to whom such income, etc. belongs, but the person who substantially controls and manages the relevant taxable subject shall be the taxpayer pursuant to the principle of substantial taxation. Determination as to such a case should be made by comprehensively taking into account the circumstances leading to the use of the nominal owner’s agreement, 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 subject

Although it is necessary to assert and prove to the extent that he/she has a reasonable doubt, if it is unclear whether the substance of income, etc. belongs to the nominal person, thereby making it impossible for the judge to conviction, any disadvantage resulting therefrom shall return to the tax authority that bears the ultimate burden of proof as to the existence of the tax requirement and the tax base (see Supreme Court Decision 2011Du9935, May 16, 2014).

The facts that the Plaintiff had been registered as the representative director of OO on the corporate register for about nine months from September 0, 2014 to June 00, 2015 are as seen earlier. According to the overall purport of the entries and arguments in Articles 4 and 5, it is recognized that the Plaintiff engaged in the wholesale and retail business, etc. with the trade name from around 1999 to around 2009, such as OOsan, OO comprehensive food, OOO distribution, OOO food, OOO food distribution, and OOO food system, etc., and that OOOO paid 2,90,000 won to the Plaintiff around December 2014. Furthermore, it is doubtful that the Plaintiff had involved in the operation of OOO, including the Plaintiff’s statement that he/she had taken office in the representative director for the agricultural products distribution business that he/she intends to use OO introduced by oO.

However, comprehensively taking account of the following circumstances, each of the above evidence, Gap evidence Nos. 6 through 11 (including branch numbers, if any; hereinafter the same shall apply), witness OO's testimony, and witness OO's testimony, it is insufficient to recognize that the plaintiff actually controlled and managed OOO's testimony, or that the income, profits, and assets of OOO were actually attributed to the plaintiff. There is no other evidence to acknowledge otherwise. Accordingly, the instant disposition taken on the premise that the plaintiff is the actual operator of OOO's report should be revoked as it is unlawful.

① OO is an agricultural company owned by Nonparty OO and registered as a representative director at the time of its incorporation of 20,000 shares of 20,000 shares (one share price of 5,000 won per share) by Nonparty O, the remainder of 10%, and OO was registered as a representative director. O is a relationship with OO on June 11, 204, which is established and operated together with OOO. OO is an employee of O, and OO is a farmer who lent its name to establish an agricultural company as an OO's relative, and both are related to OO that is not the Plaintiff.

② In order to attend this court as a witness, and to deal with the OO distribution company (hereinafter “OOO distribution company”) which is an agricultural products distributor, the OO established the OOO as necessary by the OOO company, and it was stated that it was not a shareholder or a representative director directly because 'the bad credit holder'. According to these statements, the OO was deemed to have an economic need for the OO to establish the OO company on the ground of its partner, etc. and to actually operate the company and to make profits.

③ In addition, in this court, the Plaintiff stated that Nonparty O transferred the status of the representative director of OO to the Plaintiff in return for arranging the transaction between OO and OO distribution, and that 200 million won of the funds held by OO prior to the Plaintiff becoming the representative director was recovered by OO. In other words, according to the recommendation of OOO et al., the funds of OO that existed before the Plaintiff becomes the representative director of OO was entirely reverted to OO and its partners.

④ From October 2014 to November 2014, the OOO appears to have been operating in part of the factory of the OOO-type agricultural company located in the OO-type; from December 2014 to March 2015, the OO-type agricultural company located in the OO-type; and from February 12, 2016 to March 2015, the OO-type was found to have been operating in the factory of the O-type agricultural company located in the O-type. On December 24, 2015, the Daegu District Court 2015Kadan000 for employees of the OO-type from November 24, 2014 to March 2015, the O-type was sentenced to a suspended sentence of two years for imprisonment with labor for a violation of the Labor Standards Act following the delayed payment of wages, and the O-type was also recognized as the operator of the O-type.

⑤ Although the OO appears in this court as a witness and stated that it was false confession at the time when the employee was punished for violating the Labor Standards Act, it is difficult to deem that the employee of the OOO was guilty of the actual operator responsible for the overdue payment, and it is difficult for the OOO to find reasonable grounds for punishment instead of protecting the Plaintiff. In light of the above, it is difficult for the OOO to believe that the above statement is made.

④ While the Plaintiff appears to have transferred OO and the Plaintiff under this law, it did not specifically state the role of the Plaintiff that the Plaintiff took charge of the OO and the Plaintiff. In addition, the Plaintiff appears to have requested OO to replace the representative director of the OO from the beginning of 2015. However, if the Plaintiff was the actual operator of the OO, it would not be necessary to make such a request to the OO.

7) Nonparty OO also appeared as a witness in this court, and he is aware of all of OO, OOO, and OO. Around early November 201, 2014, OOO knew that OO was in the workplace of OOO and was in a position of third party without any special interest with the Plaintiff and OOOO, and that OO was aware of the fact that OOO was in a workplace of OOOO. Moreover, OOO was aware of the Plaintiff’s knowledge of 's 'YO'. A witness who was in a position of third party without any special interest with the Plaintiff and OOO, and that there was no reasonable reason for OOO to make a false statement favorable to the Plaintiff. As such, OO’s credibility can be acknowledged.

(8) Even based on the statement of earned income payment (Evidence B), the Plaintiff merely stated that he/she received the monthly wage of KRW 2,900,000,000 on December 18, 2014, and there is no other evidence to deem that the income of OOO was substantially reverted to the Plaintiff. On the other hand, OO was punished for committing an offense, such as deceiving OO distribution in collusion with OOO on the ground of false purchase place, such as OOO, etc. after concluding an agricultural product transaction agreement with OOO distribution, and using it in installments after receiving transfer of credit purchase amount [ Changwon District Court Decision 2017DaMa000, Jan. 18, 2019; Supreme Court 2019No900, May 22, 2019], such an offense appears to have the authority to manage and dispose of the property of OOO, etc.

① Around May 00, 2017, the Plaintiff urged that OO be an actual operator of OOO to resolve the instant tax issue imposed on the Plaintiff. Accordingly, OO was under investigation by another case, and thus it is difficult to do so. If the Plaintiff was an actual operator of OOO, it appears that the OO was unable to make such demand, and that it did not respond as above.

In addition, the non-party 1, who is the business partner of the OO, prepared and submitted a confirmation (Evidence No. 10) that "OO is an operator of the OO and the plaintiff has not been involved in the transaction," and the non-party 1, who worked for the OO, directly handled the employment and work instructions of the employee, and the plaintiff did not participate in the duties of the OO." (Evidence No. 11).

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is decided as per Disposition by admitting it.