It is reasonable to view that the instant provisional payment, etc. was leaked out of the company and reverted to the Plaintiff as final and conclusive.

If a stock company waives the collection of provisional payment or places it in a situation where it is impossible to recover the provisional payment from a person with a special relationship, it is reasonable to deem that the provisional payment ultimately belongs to a person with a special relationship who has leaked outside of the company, so in such a case, the disposal of income can be disposed of pursuant to Article 67 of the former Corporate Tax Act.

Article 67 of the Corporate Tax Act

2018Guhap1788 Global Income and Revocation of Disposition

Gangwon A

BB Director of the Tax Office

July 4, 2019

August 22, 2019

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of global income tax of KRW 361,642,830 on January 3, 2018 against the Plaintiff on January 3, 2018 is revoked.

1. Details of the disposition;

A.CC Co., Ltd. (hereinafter “CC”) was a corporation established on June 19, 195 with the purpose of construction business, etc. on the basis of its business, and was closed on March 31, 2015 on the ground of a business depression after business registration was completed on June 20, 1995.

B. At the time of the closure of the business, the Plaintiff was holding 3,210 weeks (27%) out of 123,000 shares issued by theCC.

C. On December 30, 2016,CC reported to the Defendant after the due date of corporate tax for the business year 2015, and 837,846,82 won was included in the “CC’s balance sheet” with a shareholder, executive, and employee short-term loan.

D. The Defendant determined that the special relationship between the Plaintiff andCC was extinguished at the time of the closure of the business, and determined that the said short-term loan was reverted to the Plaintiff as the Plaintiff did not recover the said short-term loan from the Plaintiff, and accordingly, disposed of the said short-term loan amount of KRW 837,846,82, and the said short-term loan amount of KRW 11,023,175, as bonus for the Plaintiff, and notified the Plaintiff of the change in the amount of income for which the said amount was reverted to the Plaintiff on August 4, 2017.

E. The Defendant did not report the global income tax on the amount of the foregoing change in the income amount, and on January 3, 2018, determined and notified the Plaintiff of KRW 361,642,830 as global income tax for the year 2015 (hereinafter “instant disposition”).

F. On January 30, 2018, the Plaintiff dissatisfied with the instant disposition, filed a request for examination with the National Tax Service on June 19, 2018, but was dismissed on September 6, 2018.

[Ground of recognition] Facts without dispute, Gap 1, 2, Eul 1 through 6 (including those with serial numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The disposition of this case shall be revoked on the grounds of illegality as follows.

1) The Plaintiff only handled as ifCC had a short-term loan to an executive officer and did not have a personnel on the books ofCC. As such, the instant provisional payment, etc. cannot be deemed to have been leaked out of the company.

2)CC merely changed its trade name into “DDD” and did not have been liquidated. Therefore, it cannot be deemed that the special relationship betweenCC and the Plaintiff was extinguished.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the first argument

A) According to Article 67 of the former Corporate Tax Act (amended by Act No. 16008, Dec. 24, 2018; hereinafter “former Corporate Tax Act”), when reporting, determining, etc. the corporate tax base on income for each business year, the amount included in the calculation of earnings shall be disposed of as bonus, dividend, etc. according to the person to whom the income belongs. According to Article 106(1)1(b) of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 28640, Feb. 13, 2018), where it is obvious that the amount included in the calculation of earnings has leaked out of the company, the person to whom the income belongs shall be treated as a bonus for the person to whom the income belongs. According to the provisions of Article 4-06 of the former Corporate Tax Act (amended by Act No. 1608, Dec. 24, 2018).

However, it is the premise that a stock company should collect the provisional payment from a person in a special relationship. Thus, if a stock company waives its actual collection or is placed in a situation where it is impossible to collect the provisional payment from a person in a special relationship, such as not collecting the provisional payment from a person in a special relationship, it is reasonable to deem that the provisional payment ultimately belongs to a person in a special relationship who flows out of the company, and thus, it is reasonable to deem that the provisional payment ultimately belongs to a person in a special relationship. In such a case, the disposal of the income can

B) In addition, according to the evidence No. 2 and No. 4, the Plaintiff’s representative director holding 27% of the total issued and outstanding shares at the time of the closure of theCC, and the Plaintiff was in a special relationship withCC as prescribed by the Corporate Tax Act. The facts thatCC closed its business on March 31, 2015 and did not recover the instant provisional payment, etc. from the Plaintiff by the date of the closure of the business are as seen earlier. Furthermore, according to the evidence No. 2 and No. 4, the Plaintiff repeated the Plaintiff’s divulgence and repayment of the funds ofCC from 2007 to 2015, and it is recognized that the funds not leaked and repaid until March 31, 2015 were generated by the final report No. 837,846,822, and since there is no evidence to acknowledge that the instant provisional payment, etc. was processed on the balance sheet ofCC, it shall be deemed that the instant provisional payment, etc. was reverted to the Plaintiff.

C) As to this, the Plaintiff asserted thatCC did not receive KRW 719,353,00 from GGGG in 2007 and 2008, but did not receive KRW 719,353,00 as the provisional payment. However, the disposal of income under Article 67 of the former Corporate Tax Act is disposing of the amount that is not included in gross income or deductible expenses in filing a return, determination, or correction of the tax base on income for each business year to the person to whom it belongs, and by reflecting the previous sales that are not for the pertinent business year, the Defendant shall dispose of the amount that is not included in gross income or deductible expenses.

There is no such basis.

D) Therefore, the Plaintiff’s assertion on this cannot be accepted.

2) Determination on the second argument

A) According to the evidence Nos. 5 and 1 evidence Nos. 5 and 1,CC completed the registration of a legal entity whose trade name is changed to “DDDD” on October 24, 2017, which was after its closure, and it held a temporary general meeting on the same day and adopted a resolution to approve the change of trade name.

B) However, in full view of the following circumstances revealed by the overall purport of evidence Nos. 2, 3, 8, and 2, 7, and 16 as well as the overall purport of the pleadings, even ifCC did not follow dissolution and liquidation procedures under the Commercial Act at the time of closure of its business, it is deemed that it was actually liquidated and extinguished at that time, and that the special relationship betweenCC and the Plaintiff was also extinguished.

① On April 3, 2015, the date of voluntary closure from March 31, 2015, 2015, CC sold and disposed of physical assets ***-*-Land and its ground buildings, which is the location of its principal office *, and thereafter, CC has not operated its business with the trade name 'CC'.

② On April 15, 2016, the Plaintiff engaged in a construction business by filing a personal business registration with the name of “DDDD”. On August 9, 2017, the Plaintiff opened a business of “DDDD” with the same corporate registration number and business registration number asCC on October 28, 2017, and closed the business of “DDDD” with the personal business operator on November 17, 2017. In light of such a series of processes, DDD appears to have been de facto converted into a personal business chain.

③ According to the CDR’s VAT and corporate tax return details, DDR did not generate sales from October 1, 2017 to March 31, 2019, and there was no revenue (the Plaintiff’s construction contract, etc. submitted to the National Tax Service, on the business line of DDR). Furthermore, in light of the fact that DDR’s payment of wage and salary payment to its employees was not confirmed, DDR appears to be a company that exists only formally by using the CCC’s corporate register without cancellation.

C) Therefore, the Plaintiff’s assertion on this cannot be accepted.

3. Conclusion

Therefore, the instant disposition is lawful, and thus, the Plaintiff’s claim is dismissed as it is without merit. It is so decided as per Disposition.