Seocho 2016west 113 ( May 9, 2016)

Since remuneration for the trustee in bankruptcy is recognized that he/she performs his/her business for profit-making purposes under his/her responsibility and responsibility, and has continuity and repetition.

Since the trustee in bankruptcy continues to perform his/her duties, repeated, there is no profit-making purpose, or is not a reimbursement for actual expenses, and business income is paid because he/she performs his/her duties under his/her own account and responsibility: Provided, That there is a justifiable reason that the plaintiff cannot expect that he/she will report

Article 19 of the Income Tax Act

2017Guhap71263 global income and revocation of such disposition

Park AA

BB Director of the Tax Office

June 8, 2017

June 29, 2017

1. Of the disposition imposing global income tax on the Plaintiff on October 0000, the total amount of KRW 000,000 (general underreported penalty tax amounting to 00,000,000, and penalty tax amounting to 00,000), the total amount of penalty tax in the disposition imposing global income tax on the Plaintiff for the imposition of global income tax for the year 000,000 (additional tax amounting to 00,000,000, and 00,000,000), and the total amount of penalty tax in the disposition imposing global income tax for the imposition of global income tax for the year 00,000 (additional tax amounting to 00,000,000, and 00,000,000,000)

Each part shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. 7/10 of the costs of lawsuit shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

Cheong-gu Office

The Defendant’s global income tax of KRW 000,000 (including additional taxes), global income tax of KRW 000,000 (including additional taxes), global income tax of KRW 000,000 (including additional taxes) for the year 000,000, and global income tax of 000 for the Plaintiff on October 000.

Each disposition of 00,000 won (including additional taxes) shall be revoked.

1. Details of the disposition;

A. The plaintiff is a member lawyer of the Il Digital Law Firm until October 00, 000, and thereafter, as an attorney at the private law office from 000 to 000, the plaintiff is a majority of individual bankruptcy cases.

The trustee was appointed as a trustee in bankruptcy and performed the work.

B. From 000 to 000, the Plaintiff performed the bankruptcy-related reorganization business in relation to the bankruptcy case, and received a total of KRW 000,000,000 (hereinafter “the instant remuneration”). The Plaintiff considered it as other income pursuant to Article 21(1)19 of the Income Tax Act, and included it in the amount of income for each year of year, and filed a comprehensive income tax return and payment by applying the necessary expenses of 80% pursuant to Article 87 subparag. 1(b) of the Enforcement Decree of the Income Tax Act.

C. However, on the ground that the instant remuneration constitutes business income, the Defendant within the year of 000 by the Plaintiff

The plaintiff calculated the global income for the year 000 and notified each of the total income tax for the year 000 to 000 as follows (hereinafter collectively referred to as the "disposition of this case") to the plaintiff.

Year

Remuneration for Trustee in Bankruptcy

Principal Tax

Additional Tax

Notice Tax Amount

000

00

00 won

00 won

00%,

000

00

00 won

00 won

00%

000

00

00 won

00 won

00%

Total

00

00 won

00 won

00%

D. The plaintiff appealed and filed an appeal with the Tax Tribunal on October 0, 000, but was dismissed on October 0, 000.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Gap evidence 3-1, Gap evidence 4-1, Gap evidence 5-1, Gap evidence 6-1, Eul evidence 1-3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the instant remuneration is deemed as other income under the Income Tax Act, the instant disposition made by deeming it as business income is unlawful. Even if the instant claim is not accepted, since the bankruptcy trustee did not belong to a specific full bench that existed before the enforcement of a new individual bankruptcy system at the central district court around 000 and received a distribution of bankruptcy cases from several full benchs, the portion of the instant remuneration in 000 among the instant remuneration ought to be deemed as other income.

2) Since the trustee in bankruptcy does not fall under any of the incomes listed in the Income Tax Act, the instant disposition imposed on him is in violation of the principle of no taxation without the law. While the Plaintiff reported global income tax by deeming the trustee in bankruptcy as other income for several years in accordance with the National Tax Service’s established rules, the Defendant modified the past interpretation contrary to such trust, and thus, the instant disposition violates the principle of no taxation without the law.

3) In cases where an attorney-at-law, who works for a law firm, is appointed as a trustee in bankruptcy, registration of business cannot be separately made in accordance with the restrictions of relevant laws, such as the Attorney-at-law Act, and there is no input code, and thus, no relevant expenses cannot be recognized as necessary expenses because it is difficult to report the amount of remuneration to a trustee in bankruptcy. On the other hand, in cases where an attorney-at-law, who works for a private law office, is appointed as a trustee in bankruptcy, all of the relevant expenses can be recognized as necessary expenses. Although an attorney-at-law, who works for the same bankruptcy

4) Even if the Plaintiff considered the instant remuneration as business income, given that there exist justifiable grounds for the Plaintiff to classify the instant remuneration from 000 to 000 as other income and to make a return and payment of comprehensive income tax, the part regarding general under-reported and unpaid penalty taxes in the instant disposition is unlawful. Furthermore, the trustee in bankruptcy is not an independent business entity designated as a public special institution, not an attorney-at-law, and thus, is not an independent business entity for profit-making purposes, and thus, the Plaintiff’s obligation to keep and record books is also unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the instant remuneration is business income

- 5-

Whether a certain income constitutes business income or constitutes other income, which is a temporary income, shall not be based on the form, name, and appearance of the transaction entered into between the parties, but on its substance.

Following the evaluation, in light of the substance of the relevant taxpayer’s vocational activities as a party to the transaction, the period, frequency, mode, and counterpart of the activities, and whether such activities are for profit-making purposes, and whether such activities are continuous and repeated to the extent that they can be seen as business activities, etc., shall be determined according to social norms by taking into account not only the relevant activities that include income but also all the circumstances before and after such activities.

See Supreme Court Decision 2000Du5203 delivered on April 24, 2001, etc.

In light of the above facts, although the plaintiff's business income for 00 years and 00 years and 00 years and 00 years and 00 years and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 00 won and 0 won and 00 won and 00 won and 00 won and 1) and 1) and 1) and 1) and 1) and 3) of the 0-year bankruptcy trustee's interest in the above 00-year bankruptcy.

Therefore, the instant disposition that calculated the Plaintiff’s comprehensive income tax by deeming the instant remuneration business income as lawful, and the Plaintiff’s above assertion is without merit.

2) Whether the principle of no taxation without law is violated

Article 19 (1) of the Income Tax Act provides that "business income shall be the following income generated in the relevant taxable period: "Income generated in the specialized, scientific and technical service business (excluding research and development business prescribed by Presidential Decree; hereinafter the same shall apply)" in subparagraph 13, and income similar to income in subparagraphs 1 through 19 of Article 20, which is calculated for profit-making purposes:

Under the Act, ‘income earned through continuous and repeated activities' is defined as ‘income'.

On the other hand, as seen earlier, the instant remuneration is the business income, which is the income generated from the specialty, science, and technology service business under Article 19 (1) 13 of the Income Tax Act, or the income that is similar to the income under subparagraphs 1 through 19 of Article 19 (1) of the Income Tax Act, and is the income that is obtained from the continuous and repeated activity under his own calculation and responsibility for profit-making purposes. Therefore, it is difficult to view the instant disposition as a violation of the principle of no taxation without any justifiable reason because it expands or analogicals the tax laws and regulations without reasonable grounds. Accordingly, the Plaintiff’s above assertion is without merit.

3) Whether the principle of retroactive taxation prohibition is violated

On the other hand, the following circumstances, which are acknowledged by comprehensively taking account of the evidence and the overall purport of the pleadings as seen earlier, i.e., ① the National Tax Service’s established rules of May 22, 200, which the Plaintiff cited merely expressed the general view that the attorney’s “temporary provision of services as a trustee in bankruptcy without connection with his/her business” constitutes other income, and the trustee’s remuneration continues to be accumulated continuously and repeatedly so that it is subject to business feasibility, it does not mean that it should be imposed only on other income even if it becomes subject to business feasibility, and ② the tax authority’s receipt of tax amount by the taxpayer’s report in the form of tax return is merely an act of fact, but cannot be deemed as a confirmative disposition, and thus, it cannot be deemed that the trustee in bankruptcy has generally established the practice of imposing tax only on any case or other income. In light of the above, the Plaintiff’s assertion that the disposition of this case was unlawful as it violates the principle of prohibition

4) Whether the principle of equality is violated

Article 49 (1) of the Attorney-at-Law Act provides that "a law firm shall perform services belonging to an attorney-at-law under this Act and other Acts," and Article 49 (2) of the Attorney-at-Law Act provides that "a law firm may perform such services on its own or on the account of a third party if it recognizes that an attorney-at-law is qualified under other Acts." Article 52 (1) of the Attorney-at-law Act provides that "a partner or an associate attorney-at-law may perform such services on its own or on the account of a third party."

In light of Article 49 (1) and (2) of the Attorney-at-Law Act, the term "law firm's duties" under Article 49 (1) and (2) of the Attorney-at-Law Act should be interpreted as "the duties of an attorney-at-law under other Acts and subordinate statutes" in the same meaning as "the duties of an attorney-at-law under other Acts and subordinate statutes". However, since Article 355 through 366 of the Debtor Rehabilitation and Bankruptcy Act provides that a person who is not an attorney-at-law may be a trustee in bankruptcy, and in fact, a person who is not an attorney-at-law shall not be a member or a member attorney-at-law shall not perform his/her duties on his/her own account or a third party's account, and therefore, it is difficult to see that the law firm's duties cannot be viewed as "the duties of an attorney-at-law" under Article 52 (1) of the Attorney-at-law Act or "the duties of an attorney-at-law who is not a member of the law firm or a third party's account."

5) Whether the imposition of additional tax is illegal

Under the tax law, where a taxpayer violates various obligations, such as a 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, a taxpayer’s intentional or negligent act is not considered as administrative sanctions imposed as prescribed by the Act, and the site, error, etc. of statutes does not constitute justifiable grounds that make it unreasonable for the taxpayer to be unaware of his/her obligations (see, e.g., Supreme Court Decisions 2002Du10780, Jun. 24, 2004; 2005Du10545, Apr. 26, 2007; 2007Du3107, Apr. 23, 2009). Such sanctions cannot be deemed to constitute justifiable grounds for not knowing the obligations due to a taxpayer’s failure to do so (see, e.g., Supreme Court Decision 2007Du3107, Apr. 24, 2009).

On the other hand, the following circumstances, which are acknowledged by comprehensively taking account of the evidence and the overall purport of arguments as seen earlier, i.e., ① the National Tax Service’s established rules on May 22, 200 provide temporary services and withhold taxes from other income as the trustee in bankruptcy appointed by the court. From the Plaintiff’s standpoint, it is highly likely that the remuneration received as the trustee in bankruptcy based on the above established rules would be other income. ② The trustee in bankruptcy has a character of public interest different from the business performed by other general business operators. As the trustee in bankruptcy’s duties have a characteristic of public interest, it is difficult to view that the remuneration received by the trustee in bankruptcy is business income generated continuously and repeatedly through his own calculation and responsibility for profit, or other income paid in the aspect of public interest. ③ The Seoul Central District Court also withheld taxes by deeming the remuneration of this case as other income for the first time and imposed additional taxes on the Plaintiff, unless the Plaintiff is a lawyer specialized in tax-related Acts, and thus, it is difficult to expect that the Plaintiff’s remuneration should be recorded and managed by double entry into the account books of this case.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.