National Tax Service Review Income 2011-0163 (25 April 2012)

The bonus disposal is legitimate for the provisional payment, deeming that the special relationship between the plaintiff and the corporation was extinguished at the time of closure.

Even if dissolution and liquidation procedures were not followed, it is reasonable to view that the special relationship with the plaintiff was extinguished at the time of closure, and since the provisional payment was not recovered until the notice of taxation was given to the non-party company as well as at the time of closure, it can be deemed that the provisional payment was renounced or the collection was impossible, the bonus disposition for the provisional payment is legitimate.

2011Guhap3929 global income and revocation of disposition

ThisAAA

Head of Changwon Tax Office

May 21, 2013

July 9, 2013

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of global income tax of KRW 000 on December 1, 201, and the imposition of global income tax of KRW 000 on December 1, 201, belonging to the year 2008, and the imposition of KRW 000 on global income tax of KRW 200 on December 1, 201, shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a person who was a director of OO Co., Ltd. (hereinafter “OO”) from October 4, 2007 to October 3, 2010.

B. On July 30, 2008, the non-party company reported the closure of business to the Defendant on June 30, 2008.

C. On December 1, 2011, the Defendant concluded that the non-party company did not recover KRW 0000 from the provisional payment to the Plaintiff while closing its business, and disposed of the said provisional payment and the amount of KRW 000,000 as a bonus to the Plaintiff, and decided and notified the Plaintiff of KRW 000 (additional Tax) global income tax for the year 2008, but revoked ex officio the additional tax amount of KRW 000, and again, determined and notified the additional tax amount of KRW 000 on December 1, 2012.

D. On December 20, 2011, the Plaintiff requested an examination to the Commissioner of the National Tax Service, but was dismissed on April 25, 2012.

E. On May 2013, the Defendant, while proceeding in the instant lawsuit, corrected the amount of the unclaimed amount to the Plaintiff of the non-party company as KRW 000 (hereinafter “the instant provisional payment”), and corrected the amount of the accrued interest at KRW 000,000, and adjusted the amount of the global income tax for the Plaintiff in 2008, and the additional tax for the Plaintiff at KRW 000,000 (hereinafter “the instant disposition”).

[Grounds for recognition] The whole purport of the arguments, and the non-sovered facts, Gap evidence 1, 2, 13, and 14, Eul evidence 1, 2, 10, 11, and 16

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Although the non-party company made a report on discontinuance of construction business due to the depression of construction business, it was not only a temporary suspension of business, and the special relationship between the Plaintiff and the non-party company was maintained on May 2, 201 until the completion of the Cheongsan procedure of the non-party company.

2) The instant provisional payments are not entirely reverted to the Plaintiff. Of them, KRW 000 was reverted to the Plaintiff, and the Nonparty Company, on January 18, 201, demanded the Plaintiff to refund KRW 0000,000 from the provisional payments, the Plaintiff returned KRW 000 on the same day, and on April 25, 2011, paid the remainder after the Plaintiff deducted the estimated dividend amount from the provisional payments from the said provisional payments to the Nonparty Company and repaid the provisional payments in full.

3) Therefore, the instant disposition imposing a comprehensive income tax on the Plaintiff is unlawful on the grounds that the non-party company did not recover the instant provisional payment at the time of closure of June 30, 2008. The instant disposition is unlawful. Even if it is alleged by the Defendant, the amount of the instant provisional payment should be excluded from KRW 00,000, the Plaintiff’s investment, and KRW 00,000, which were returned by the Plaintiff under the name of the expenses for the registration of dissolution of the company.

4) Since the Plaintiff did not have been exempted from the provisional payment obligation, and since it was impossible to expect the Plaintiff to return and pay the income tax as it paid all the provisional payment prior to the instant disposition, it is unlawful to impose the additional tax.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) The balance of the provisional payment against the plaintiff in the business year 2007 of the non-party company is stated as the short-term loan in the balance sheet as 000 won.

2) The non-party company did not report value-added tax and corporate tax after its closure on June 30, 2008 and did not report the source of income tax or the year-end tax settlement.

3) Although the place of business of the non-party company was located at the window 0000 of Changwon-si, the lease agreement on the above place of business was terminated on February 29, 2008.

4) On December 2010, the issue of provisional payment was pointed out in the audit by the National Tax Service on the Defendant, and on December 13, 2010, the Defendant sent a explanatory guide to request the Nonparty Company to furnish the explanatory materials of provisional payment, and on December 21, 2010, the Defendant issued a notice of prior notice of corporate tax imposition to the Nonparty Company, and on January 18, 2011, passed a resolution to dissolve the Nonparty Company.

[Grounds for Recognition] The non-speed facts, Gap evidence 2, Eul evidence 2, Eul evidence 4, Eul evidence 6 1, 2, Eul evidence 8, and Eul evidence 8, and the purport of the whole pleadings.

D. Determination

1) In the case of a corporation, the special relationship is in principle maintained until the corporation is dissolved and its liquidation affairs are completed. However, even if the corporation was not dissolved and liquidation procedures have not commenced exceptionally, if it is unable to impose long-term taxes on the specially related person for the reason that there is no substance of the corporation, such as its place of business or employees, nor any other business for profit because it was dissolved or liquidated because it was not actually dissolved or liquidated, it would result in unfair treatment compared with the corporation upon which the liquidation procedures were completed, and if special circumstances exist, such as the case that goes against the principle of tax equality, it would be deemed that the special relationship was extinguished at the time of its closure. Since the dissolution and liquidation procedures for the non-party corporation commenced on January 18, 201, there is no dispute between the parties, but at the same time, it is reasonable to view the non-party corporation as being dissolved and liquidation procedures at the time of the closure of the business, and the non-party corporation did not complete the liquidation procedures at the time of the closure of the business and the evidence collection procedure at the time of the non-party corporation was not equipped with evidence or evidence.

2) The Plaintiff asserted that 000 won paid by the non-party company to KimO on April 5, 2007 and 000 won paid to Ma○○ on April 27, 2007 should be excluded from the bonus disposal amount for the Plaintiff, but according to the statements in the Eul evidence 6-1 and 2, it can be recognized that 000 won, which is the provisional payment amount, was paid by the non-party company to the Plaintiff from May 9, 2007 to October 10, 2007, is the balance of the amount not recovered, so the above amount paid by the non-party company to the above person cannot be excluded from the provisional payment amount. In addition, even if the Plaintiff claimed that the amount should be deducted from the provisional payment amount, it cannot be viewed that the Plaintiff’s contribution or registration expenses should not affect the income disposal in light of the Plaintiff’s settlement procedures or the expenses incurred in the process, and that part of this amount should not be deducted.

3) As to the imposition of additional tax, in cases where a taxpayer violates various obligations, such as a tax return and tax payment, as prescribed by the Act without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, the additional tax under tax law is an administrative sanction imposed by the taxpayer as prescribed by the Act (see, e.g., Supreme Court Decision 2007Du3107, Apr. 23, 2009). In addition, it cannot be deemed that there exists any justifiable reason which makes it impossible to deny the Plaintiff’s violation of the tax liability, considering the fact that the Plaintiff did not pay the provisional payment until the prior notice of taxation was given by the Defendant as well as the Plaintiff’s failure to pay the provisional payment by the prior notice of taxation.

4) Therefore, the instant disposition is lawful.

3. Conclusion

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