Whether the bonus paid in excess of the standard for payment of benefits is included in deductible expenses.

Among bonuses paid to executives by a corporation, the amount paid in excess of the amount paid according to the standards for payment of benefits determined by the articles of incorporation, the general meeting of shareholders, the general meeting of members or the resolution of the board of directors

Article 26 (Non-Inclusion of Excessive Expenses in Loss)

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing corporate tax for the Plaintiff on January 3, 2005 exceeds KRW 105,343,980 in excess of KRW 34,771,791 in the disposition of imposing corporate tax for the year 1999, KRW 94,440 in the disposition of imposing corporate tax for the year 200 in excess of KRW 59,34,60 in the disposition of imposing corporate tax for the year 94,440, and KRW 126,985,940 in the disposition of imposing corporate tax for the year 2001, exceeding KRW 90,873,073,070 in the disposition of imposing corporate tax for the year 202, KRW 71,714,510 in the disposition of imposing corporate tax for the year 202, exceeding KRW 39,687,360 in the disposition of imposing corporate tax for the year 203,020, KRW 26,842,160.

1. Details of the disposition;

The following facts are recognized by taking account of each entry in the evidence of Nos. 1 through 5, 1 through 6, 3 through 5, 1 through 7, 6-1 through 8, and 6-1 through 8, respectively, of the evidence of No. 6:

가. 원고는 해륙운수업 등을 영위하는 법인으로서, 1999년부터 2003년까지 그 공동대표이사이던 허○○(2002. 12. 20.까지 재임)에게 아래 〔표〕 순번 1 ＂상여금지급액＂란 기재와 같이, 역시 그 공동대표이사 전○○에게 같은 표 순번 2 ＂상여금지급액＂란 기재와 같이, 그 이사 전ΔΔ에게 같은 표 순번 3 ＂상여금지급액＂란 기재와 같이, 각 상여금을 지급하였고, 공○○에게는 2003년 합계 20,694,000원의 임원 상여금을 지급하였다.

(Unit) (Unit: Won)

No.

Executive Officers

Calculation Details

199

200

201

202

203

1

Hu○ ○

Amount of bonus payment

41,412,240

35,617,600

39,577,000

4,817,200

6,381,800

(-)Criteria for payments

10,000,000

10,000,000

10,000,000

10,000,000

6,381,800

(-)School Expenses;

1,092,240

1,877,600

2,477,600

5,141,200

0

Sub-committees

30,320,000

23,740,000

27,099,400

29,676,000

0

2

○○

Amount of bonus payment

42,504,480

34,340,000

37,100,000

39,676,000

39,676,000

(-)Criteria for payments

10,000,000

10,000,000

10,000,000

10,000,000

39,676,000

(-)School Expenses;

2,184,480

600,000

Sub-committees

30,320,000

23,740,000

27,100,000

29,676,000

3

전ΔΔ

Amount of bonus payment

27,446,00

23,980,000

27,377,600

29,289,200

30,716,00

(-)Criteria for payments

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

(-)School Expenses;

0

0

677,600

741,200

752,000

Sub-committees

2,446,00

18,980,000

21,700,000

23,548,000

24,964,00

4

Gong ○

Amount of bonus payment

0

0

0

0

20,694,000

Sub-committees

20,694,000

Total

83,086,00

66,460,000

75,899,400

82,900,000

45,658,000

나. 피고는 2005. 1. 3. 원고가 위와 같이 지급한 상여금 중 위 〔표〕각＂소계＂란 기재 금액(이하 ´이 사건 상여금´이라 한다)이 급여지급기준 없이 지급된 상여금에 해당 한다고 보아 이를 손금불산입한 다음, 원고에 대해 1999년 귀속 법인세(가산세 포함, 이하 같다) 105,343,980원, 2000년 귀속 법인세 94,440,510원, 2001년 귀속 법인세126,985,940원, 2002년 귀속 법인세 71,714,510원, 2003년 귀속 법인세 43,020,470원을 각 부과(이하 ´이 사건 처분´이라 한다)하였다.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The instant disposition should be revoked because it is unlawful for the following reasons.

(1) From the beginning to the Plaintiff, there was a principle or standard that the Plaintiff would pay bonuses at the same ratio as the general employees to the full-time officers. Accordingly, the Plaintiff paid bonuses to the Plaintiff’s officers following the resolution of the Plaintiff’s board of directors. Since the instant bonus was approved by the shareholders’ general meeting on the accounting documents and financial statements that contain the details of the instant bonus, the instant bonus should be included in the deductible expenses.

(2) Around 1999, the Defendant recognized that the Plaintiff’s bonus to the executives constituted a deductible expense until the time of the tax investigation, and the Plaintiff also paid bonus to the executives by reliance on the Defendant’s taxation practice. Therefore, the instant disposition is contrary to the principle of trust protection or established tax practice.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(1) Whether the bonus of this case is included in deductible expenses

(A) Facts of recognition

The following facts are acknowledged when adding up the above evidence 7 to 15, A4-1, 2, 6 through 8, A5-13 to 27, A7-2 through 9, B7, and 8-8, and some testimonys of the witness resistance:

1) 원고는 1998. 12. 21.자 이사회에서, 공동대표이사 허○○ 전○○에게 각 1,000만 원, 상무이사 전ΔΔ에게 500만 원의 상여금을 지급하기로 의결하고, 2003. 1. 20.자 임시주주총회에서 대주주 겸 공동대표이사에 대해 연봉제를 실시하기로 의결한 이외에는, 1999년부터 2002년까지 사이에 임원들에게 지급할 상여금의 지급기준에 대해 정관에 정하거나 주주총회 또는 이사회에서 결의한 바 없다.

2) The Plaintiff’s officers’ salaries are paid without distinction between the basic salary and the allowances, and the employees’ salaries are composed of the basic salary and the allowances. The Plaintiff paid 100% bonus for the officers’ salaries in April 199, June 200, February 2001, June 2002, and the basic salary in 2002, and 50% bonus for the officers’ salaries in January 2003, respectively.

3) The Plaintiff’s calculation documents and financial statements including bonuses paid to executives each year from 1999 to 2003 were approved by the board of directors and the general meeting of shareholders.

4) On August 26, 2004, on the part of the Defendant’s public official, the ○○○ Joint Executive Director, claiming by the Defendant, submitted a written confirmation of the fact that ○○○ Joint Executive Director, who was appointed by the Company, is not a director registered on the register but an employee employed on a regular basis.

(b)judgments

1) Article 26 of the Corporate Tax Act (hereinafter “E”) provides that the amount deemed excessive or unreasonable among the amounts of losses, such as corporate personnel, as prescribed by the Presidential Decree, shall not be included in the calculation of losses in calculating the income amount for each business year. Article 43 of the Enforcement Decree of the Act provides that not only the bonus paid by a corporation to its officers or employees based on the disposition of profits (paragraph (1) but also the bonus paid by a corporation to its officers or employees in excess of the amount paid according to the standards for payment of benefits determined by the articles of incorporation, the general meeting of shareholders, the general meeting of partners or the resolution of the abnormal meeting (Paragraph (2) shall not be included

2) Comprehensively taking account of the contents of the relevant laws and regulations and the aforementioned paragraphs (a) and (1), the Plaintiff paid bonuses at the same ratio as the employees to the officers at the time at issue in the instant case. However, there is no evidence to determine which basis the bonus paid to the officers even though the organization of the bonus was different (in 2003, it is difficult to see that there was established established payment criteria even in light of the fact that the Plaintiff paid bonus to ○○○, who is not an officer, in the year 2003), and even if the Plaintiff passed a resolution required by the relevant laws and regulations on the payment criteria of the officers’ salary, the instant bonus did not undergo a resolution on the part of the period including the resolution of the board of directors on December 21, 198. Even if the Plaintiff obtained the approval of the board of directors or the general meeting of shareholders with respect to the calculation documents that contain the details of the instant bonus, it cannot be deemed that the instant bonus was merely an ex post facto approval on the payment after the end of the fiscal year, and cannot be included in deductible expenses.

3) Therefore, the above argument is without merit.

(2) Whether the principle of protection of trust is violated

(A) Article 15 of the Framework Act on National Taxes provides for the principle of good faith and the principle of protection of trust and trust that a tax official shall observe in performing his/her duties. To apply such principle in a taxation disposition, the tax authority should name the public opinion that is the object of trust to the taxpayer. With respect to the trust of the tax authority’s statement of opinion that is justifiable, the taxpayer should not be responsible to the taxpayer; the taxpayer should trust the statement of opinion and act in accordance with it; and the taxpayer’s interest should be infringed by making a disposition contrary to the opinion expressed by the tax authority (see, e.g., Supreme Court Decision 84Nu593, Apr. 23, 1985).

(B) Even though Defendant did not point out the inclusion of bonuses paid to executives by 1997 in the course of the tax investigation in deductible expenses, considering the fact that the failure to impose such bonuses alone cannot be deemed to have made a public opinion statement that can be trusted on the taxpayer, and that the failure to impose such tax should be deemed to have been an error in statutory interpretation or an error in the course of mistake of facts, etc., the disposition of this case cannot be deemed to have been contrary to the principle of trust protection or taxation practice.

(C) Therefore, the argument on this issue is without merit, and the instant disposition is lawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.