Early High Court Decision 201J 0928 ( October 14, 2011)

In the year-end settlement process, the exclusion period of five years is not applied since it cannot be viewed as a non-declaration if the root income is omitted.

Even if the income return on the profits from exercising the stock option was omitted in the year-end adjustment process, it cannot be deemed as a non-reported report, and it is merely a under-reported return on earned income, and the exclusion

2011Guhap3635 global income and revocation of disposition

KoreaA

Head of the Office of Government

January 31, 2012

February 14, 2012

1. The Defendant’s disposition imposing global income tax of KRW 254,367,210 on the Plaintiff on August 1, 2010 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff worked for BBB Limited Company (BBB Co., Ltd. to BBBB Limited Company on November 20, 2007; hereinafter “BBBB”), and paid a comprehensive income tax for Class B and Class B earned income generated in 2004 through year-end tax settlement for the year 2004.

B. Meanwhile, during the above period, the Plaintiff exercised the stock option received from the YB, the parent company of the BBB Limited (U.S. head office of the BBB). With respect to the income of KRW 434,436,954 as a result of the said exercise of the stock option, the Plaintiff did not include the income from the exercise of the stock option in the year-end settlement of the Class B earned income, and did not separately report the tax base determination.

C. On August 1, 2010, the Defendant issued the instant disposition that determined and notified KRW 254,367,210 as global income tax for the year 2004 on the ground that the Plaintiff did not report the exercise of the instant stock option interest, which is Class B employment income 2) to the Plaintiff.

D. On March 7, 2011, the Plaintiff filed an appeal with the Tax Tribunal on March 7, 201, and received a decision of dismissal on June 14, 2011, and filed the instant lawsuit.

[Ground of recognition] A without dispute, Gap evidence 1, 2, 4-1, 2, Eul evidence Nos. 1 through 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Since the Plaintiff reported and paid income tax on Class A and Class B earned income in 2004 through the year-end tax settlement, the Plaintiff is not obligated to make a final return on the tax base. Therefore, even if the Plaintiff omitted the return of income on the profit from exercising the stock option in this case during the year-end tax settlement, it does not constitute a case of underreporting wage and salary income and not a case of failing to submit a tax base return (unreported return), so the exclusion period of five years should be applied to the above benefit from exercising the stock option. Thus, the instant disposition was imposed after the exclusion period

(b) relevant statutes;

It is as shown in the attached Form.

C. Determination

1) Comprehensively taking account of the overall purport of the arguments in the evidence Nos. 2, 4-1, 2, and 1 through 3, the fact that the Plaintiff earned the same earned income as the following table in 2004 can be acknowledged (the Plaintiff did not have any income other than the earned income in 2004).

2) Articles 70(1) and 73(1) and (2) of the former Income Tax Act (amended by Act No. 8825, Dec. 31, 2007; hereinafter the same shall apply) impose an obligation on a resident having global income in the current year to report the tax base of global income to the head of the district tax office having jurisdiction over the place of tax payment: Provided, That where a person having only employment income or having any employment income received from more than two persons has paid the income tax through his year-end adjustment, he shall be exempted from the obligation to make a final tax return. Meanwhile, Articles 149(1) and 150(1) and (3) of the former Income Tax Act and Article 204(1) of the Enforcement Decree of the said Act (amended by Presidential Decree No. 20618, Feb. 22, 2008; hereinafter referred to as the “former Enforcement Decree of the Income Tax Act”) stipulate that a tax association shall impose a tax association of Class A’s total of employment income and income belonging to Class 3(1).

3) In full view of the above relevant Acts and subordinate statutes, the Plaintiff’s payment of the income tax on Class B earned income received from the Defendant’s parent company after the day on which the Plaintiff was placed through the tax association, and the Plaintiff’s payment of the income tax for the year 2004 by making a year-end tax settlement along with Class A earned income, etc., the Plaintiff constitutes a person who has paid the income tax by year-end tax settlement as a person with labor income received from more than two persons under Article 73(2) of the Income Tax Act (the Plaintiff’s payment of income tax on Class B earned income through year-end tax settlement

However, such circumstance alone cannot be deemed as having a duty to make a final return on the tax base of the Plaintiff. Therefore, even if the Plaintiff omitted the gains from exercising the stock option of this case, which is a part of the acquisition of Class B employment establishments in the year 2004, during the year-end settlement of global income tax for global income tax for 204, it is merely underreporting earned income, and it cannot be deemed as a case where the taxpayer fails to file a tax base return by the statutory due date for return under Article 26-2(1)2 of the former Framework Act on National Taxes, i.e., a case where the taxpayer fails to file a tax base return by the due date for return. Thus, the exclusion period of imposing income tax on the gains from exercising the stock option of this case shall be deemed to have been five years pursuant to Article 26-2(1)3 of the former Framework Act on National Taxes (amended by Act No. 10219, Mar. 31, 201) and Article 70(1) of the former Income Tax Act was unlawful for the exclusion period of Plaintiff 20 years and 10.

4) Meanwhile, if a part of the wage and salary income was omitted from the year-end tax settlement as in this case, if the relevant worker is separately liable to make a tax return, the period for exclusion of seven years shall apply to the omitted income, at any time, if the income tax was paid through the year-end tax settlement but part of the income was omitted. This result goes against the purport of Article 73 of the Income Tax Act, which discharges the duty of final tax return for simplified payment of income tax, convenience of taxation, and reduction of administrative power, on behalf of the payer

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.