Seocho 209west 2286 (Law No. 29, 2009)

Cases of determining the exclusive contract amount as other income;

It is reasonable to view that the exclusive contract amount is not paid continuously and repeatedly in return for the provision of services, but it is temporary and preferential income paid in return for the preferential advantage in competition with other companies with exclusive and excellent advertising video editing capabilities of the plaintiff separately from the above.

The contents of the decision shall be the same as attached.

1. The Defendant’s imposition of global income tax of KRW 43,941,30 on February 2, 2009 against the Plaintiff and KRW 17,853,50 on global income tax of KRW 17,853,50 on May 1, 2009 shall be revoked.

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

The same shall apply to the order.

1. Circumstances concerning the imposition and disposition of the instant case;

A. As an advertising editing technician, the Plaintiff agreed to receive KRW 160,00,000 as an exclusive contract amount (hereinafter “the instant exclusive contract amount”) on December 31, 2003 between the AAAA (hereinafter “AAA”) for the purpose of editing advertising images, and received 50,000,000,000 as an exclusive contract amount (hereinafter “the instant contract deposit”), and received damages for delay from around January 31, 2004, around 65,479,452 (the amount including damages for delay of 10% per annum for 60,000,000,000 on November 31, 2004).

B. The Plaintiff deemed the instant down payment as other income and received the said payment in 2003, 75% of the necessary expenses, and 80% of the necessary expenses as to the portion paid in 2004, respectively, and filed a final tax assessment report for each global income tax for 2003 and 2004, respectively, and paid the pertinent tax amount.

C. As to this, the Defendant: (a) considered the instant down payment as business income and denied necessary expenses; (b) corrected the comprehensive income tax; and (c) rendered the Plaintiff a disposition of imposition of KRW 43,941,300, global income tax for 2004, and KRW 17,853,500, global income tax for 2003, as indicated in the order, around February 2, 2009, around May 1, 2009 (hereinafter “instant disposition of imposition”).

D. The Plaintiff filed a tax appeal against the instant disposition, but around June 29, 2009, the instant down payment was dismissed on the ground that it is reasonable to view it as business income generated continuously and repeatedly as consideration for the overall business activities of the Plaintiff as an advertising video editing technician.

[Ground of recognition] Facts without dispute, Gap evidence 1, 3, Eul evidence 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The down payment of this case is an exclusive contract income under Article 21 (1) 18 of the Income Tax Act and Article 87 subparagraph 2 of the Enforcement Decree of the Income Tax Act, because it is a temporary and preferred income paid as an opportunity cost for future revenues in compensation instead of providing the Plaintiff’s advertising video editing technology to persons other than AAAA for four years from January 1, 204 by recognizing the Plaintiff’s superior advertising video editing technology. Accordingly, the instant disposition denying the deduction of necessary expenses under the premise that the down payment of this case is a business income is unlawful.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

1) On December 31, 2003, the Plaintiff entered into the instant exclusive agreement with the AAAAA on the following matters, while performing advertising video editing service in Seoul, Seoul, a corporation, and entering into an employment contract with the AAAAA on around 1999, while serving as an employee. From around 202, the Plaintiff received income from each service provided to the AAAA without an employment contract (so-called "so-called "so-called franchise"). On December 31, 2003, the Plaintiff entered into the instant exclusive agreement with the main content of the following:

Article 2 (Term of Contract)

This Agreement shall be for the two-year period from January 1, 2004 to December 31, 2005, and if AAA wishes, the plaintiff shall enter into a renewal contract with a two-year period of contract or more.

Article 3 (Advance Contract and Payment of Contract Deposit)

1. The Plaintiff is prohibited from providing another person with advertising image synthetic technology owned by the Plaintiff for a period of two times the contract period under Article 2.

2. AAA shall pay 160,000,000 won of the exclusive contract amount, separate from the charges for editing services on advertising salt paid by the Plaintiff pursuant to the provisions of Article 14, as compensation for losses incurred by the Plaintiff due to the Plaintiff’s failure to provide another person with advertising video synthetic technology. If the full amount of the exclusive contract amount is not paid on the contract date, the amount of delayed payment shall be paid in addition to the interest of 10

Article 14 (Payment of Price for Advertisement Video editing Services)

AAAA shall pay the Plaintiff 5% of its advertising sales monthly to the Plaintiff for advertising video editing services.

Provided, That if the amount is less than 16 million won, 16 million won shall be paid.

2) On February 21, 2006, after the expiration of the exclusive contract period, the Plaintiff was appointed as a co-representative of the AA around February 21, 2006.

3) The amount of income which the Plaintiff reported from around 1999 to around 2008 is as follows.

[Ground of recognition] Facts without dispute, Gap 3, 10 evidence, Eul 2 through 5, the purport of the whole pleadings

D. Determination

The term "exclusive contract amount" under Article 21 (1) 18 of the Income Tax Act refers to the amount received in return for entering into an exclusive contract, and under the premise that only one contracting party enters into a service contract for the sole purpose of a single contracting party, the business income under Article 19 of the Income Tax Act refers to the income earned by a continuous and repeated social activity in an independent position for the purpose of profit-making. Thus, it is specified that it is continuous and repeated.

Furthermore, even if the name of the acquired income is "exclusive contract deposit", it shall be deemed as business income insofar as the business feasibility is recognized. Whether the Plaintiff's income received from the service constitutes other income, which is a lump-sum income, shall not be attributable to the form, name, and appearance of the transaction entered into between the parties, but shall be evaluated according to the substance of the transaction, and then the relevant taxpayer who is a party to the transaction shall be determined according to social norms in light of the substance of the transaction, duration of the activity, frequency, mode, other party, etc. (see, e.g., Supreme Court Decision 200Du5203, Apr. 24, 2001).

In light of the following circumstances acknowledged as above, i.e., the exclusive contract of this case: ① its name is exclusive contract; ② the nature of the contract deposit of this case is an opportunity cost; ③ the period of providing the advertisement editing services to AAA is about 10 years after the termination of the contract period; ④ the contract contract of this case is concluded only once; ④ the contract of this case is separated from the contract price of this case; the contract of this case is 180,950,000 won for the exclusive contract of this case; and the contract amount of this case is 20 years for the exclusive contract of this case; and the contract amount of this case is 10 years for the exclusive contract of this case and 20 years for the exclusive contract of this case. Since the contract amount of this case was 10 years for the exclusive contract of this case and 20 years for the exclusive contract of this case, it is difficult to recognize the Plaintiff’s exclusive contract amount of 20 years for the exclusive contract of this case and 30 years for the exclusive contract of this case.

E. Intermediates theory

Therefore, the instant disposition denying the deduction of necessary expenses by deeming the down payment of this case as the business income shall be revoked as it is unlawful.

3. Conclusion

If so, the plaintiff's claim shall be accepted for the reasons of the judgment as per Disposition.