[1] The type and content of the disposition of income, which Article 67 of the former Corporate Tax Act delegates to the proviso to Article 106(1)1 of the Enforcement Decree of the former Corporate Tax Act, includes “where the ownership of the amount included in the gross income that was leaked is unclear” (affirmative)

[2] Whether a notice of change in income amount issued later is legitimate in cases where a taxpayer’s liability to pay income tax terminates due to the excess of the exclusion period for imposition of income tax (negative)

[3] Where a representative of a corporation received a false tax invoice and concealed income in excess of the purchase amount on the account book, the case holding that the exclusion period for income tax on the portion belonging to the relevant year shall be five years pursuant to Article 26-2 (1) 3 of the Framework Act on National Taxes, since it is difficult to view such act to have been committed to evade income tax imposed because the representative was presumed to have been out of the company because the representative was not identified as the person to whom the income accrued in the future was not identified

[1] The disposal of income under Article 67 of the former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007) is a procedure for ex post facto confirmation of the income that has already been reverted to a specific taxable year, by specifying the type of income if the amount included in the calculation of the income was leaked out of the company, in filing a return, determination, or correction of the corporate tax base, and by stipulating that the amount included in the calculation of the income was reserved in the inside of the corporation, or leaked out of the company. If the amount was leaked out of the company, then it is clear that the amount included in the calculation of the income has been leaked out of the company, and therefore, it is clear that the taxation data alone can sufficiently anticipate the case of "distincing in the calculation of the income," and thus, even if the above provision provides that "the amount included in the calculation of the income shall be disposed of according to the person to whom it reverts," the proviso to Article 16 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619 of Feb. 22, 20008).

[2] The amount of income disposed of as a result of the recognition of the representative of a corporation pursuant to the provisions of the Corporate Tax Act is deemed to have been paid by the corporation concerned on the date of receipt of the notice of change in income amount, but this does not mean that the corporation actually pays the amount to the representative, but merely means the legal fiction of law. Thus, in order to establish the corporate withholding obligation that received the above notice of change in income amount, it must be deemed that the income tax liability of the source taxpayer was paid at the time of receipt of the above notice of change in income amount. If the income tax liability of the source taxpayer already extinguished due to the excess of the exclusion period for imposition of income tax, the corporate withholding obligation cannot be established, and thus,

[3] In a case where a representative of a corporation received a false tax invoice and concealed income in excess of the purchase amount on the account book, the case holding that since it is difficult to see that the representative was made in order to evade the income tax to be imposed as the representative of the corporation because the representative did not know that the representative was out of the company, it does not constitute "where the taxpayer evades the national tax by fraud or other unlawful act" as provided by Article 26-2 (1) 1 of the former Framework Act on National Taxes (amended by Act No. 8139 of Dec. 30, 2006), the exclusion period of imposition of the income tax for the corresponding year should return to the principle of exclusion period of the income tax for the corresponding year pursuant to Article 26-2 (1) 3 of the former Framework Act on National Taxes (amended by Act No. 9911 of Jan. 1, 2010).

[1] Article 67 of the former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007); Article 106 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619 of Feb. 22, 2008) / [2] Article 67 of the former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007); Article 106 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619 of Feb. 22, 2008) / [3] Article 26-2 (1) 1 of the former Framework Act on National Taxes (amended by Act No. 8139 of Dec. 30, 2006); Article 106 (1) of the former Framework Act on National Taxes (amended by Act No. 9110 of Jan. 11, 2010)

[1] Supreme Court en banc Decision 2006Da49789 Decided April 24, 2008 (Gong2008Ha, 1421) Decided September 18, 2008 / [2] Supreme Court Decision 85Nu451 Decided March 14, 1989 (Gong1989, 610), Supreme Court Decision 91Da38075 Decided May 26, 1992 (Gong192, 2001), Supreme Court Decision 91Da40931 Decided September 22, 1992 (Gong192, 2959), Supreme Court Decision 2007Du209059 Decided January 28, 2010 (Gong2007Du2095059 decided Jan. 28, 2010)

[Defendant-Appellee] Plaintiff 1 and 2 others (Attorney Hwang Jong-sung et al., Counsel for defendant-appellee)

Head of Cheongju Tax Office (Attorney Han Han-chul, Counsel for defendant-appellant)

Daejeon High Court Decision 2006Nu1874 decided May 16, 2007

The part of the judgment of the court below concerning the notification of change in the amount of income in the business year 195, 1996, and 197 shall be reversed, and this part of the case shall be remanded to the Daejeon High Court. The remaining appeals shall be dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. On the first ground for appeal

Article 67 of the former Corporate Tax Act (amended by Act No. 8831, Dec. 31, 2007; hereinafter the same) provides that "in filing a return, determination, or correction of the corporate tax base, the amount included in gross income shall be disposed of as bonus, dividend, other outflow from the company, internal reserve, etc. according to the person to whom the corporate tax belongs, as prescribed by Presidential Decree," and Article 106 (1) 1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008; hereinafter the same) provides that "where the reversion is unclear, it shall be deemed that it belongs to the representative."

The disposition of income under Article 67 of the former Corporate Tax Act, in filing a report on, or determining or revising the corporate tax base, determines whether the amount included in the calculation of the income was reserved or leaked to the inside of the corporation, and if the amount was leaked to the outside of the company, it is the procedure under the tax law specifying to whom the amount included in the calculation of the income belongs and the type of the income is confirmed ex post facto as the income that has already been reverted to a specific taxable year. However, it is clear that the amount included in the calculation of the income has been leaked to the outside of the company, and therefore, even though the taxation data alone is necessarily a person to whom it belongs, it is sufficiently possible to anticipate the case of the "distincing unrest" in which it cannot objectively determine who is the person to whom it belongs, so even if Article 67 of the former Corporate Tax Act uses the phrase "the amount included in the calculation of the income shall be disposed of to the person to whom it belongs," and it is reasonable to view that the type and content of the disposition of income delegated by Presidential Decree includes the amount included in the outflow (see, etc.).

In the same purport, the decision of the court below is just under the premise that the proviso of Article 106 (1) 1 of the former Enforcement Decree of the Corporate Tax Act is not an invalid provision beyond the delegation scope of the parent law, and there is no violation of law such as omission of judgment, etc. as alleged in the ground for appeal.

2. On the second ground for appeal

After comprehensively taking account of the adopted evidence, the court below found facts as stated in its decision. The non-party 1 and the non-party 2 are merely nominal representative directors, who operate the plaintiff and are the representative of the plaintiff who is subject to the disposition for recognition of representative. In light of the relevant legal principles and records, the recognition and judgment of the court below are just in light of the relevant legal principles and records, and there is no violation of the rules of evidence or misapprehension of legal principles as otherwise alleged in the ground of appeal, and the argument that leads

3. On the third ground for appeal

The amount of income disposed of as a result of the recognition of the representative of a corporation pursuant to the provisions of the Corporate Tax Act is deemed to have been paid by the corporation on the date of receipt of the notice of change in the amount of income; however, this does not mean that the corporation actually pays the amount of income to the representative, but merely means the legal fiction of the law. Thus, in order to establish a withholding obligation of the corporation that received the above notice of change in the amount of income, the income tax liability of the original taxpayer should be established when he received the above notice of change in the amount of income, which is the time of establishment. If the original taxpayer’s liability to pay income tax has already ceased to exist due to the intention of exclusion period for imposition of the income tax, the corporate withholding obligation cannot be established. Thus, the subsequent notice of change in amount of income is unlawful (see Supreme Court Decisions 85Nu451, Mar. 14, 1989; 2007Du20959, Jan. 28,

Based on its adopted evidence, the court below acknowledged the following facts: (a) the Plaintiff received purchase tax invoices amounting to KRW 10,331,942,292 from Nonparty 4 and 26 companies from 1995 until 2001 without real transactions, and included the purchase amount in deductible expenses for the purpose of calculating the income amount of each business year; (b) the Defendant, on the ground that the above purchase tax invoices were false tax invoices, excluded the purchase amount from deductible expenses; and (c) deemed that the part of the income was leaked to others but it is unclear, and issued a notice of change in the income amount (hereinafter “the notice of change in income amount”) on August 11, 2003; and (d) determined that it was legitimate before the exclusion period of imposition of national taxes and the amount of income amount imposed on the Plaintiff’s representative was included in deductible expenses for the reason that it is considerably difficult for the Plaintiff to impose and collect taxes by including the purchase amount in deductible expenses from the customer without real transactions, and thus, it constitutes a fraudulent act under Article 97-19 of the former Framework Act (amended by Act).

However, we cannot accept the judgment of the court below for the following reasons.

Even based on the facts acknowledged by the court below, the plaintiff's excessive appropriation of the purchase amount on the books after receiving the false tax invoice as above can be seen as an act to evade corporate tax by concealing the plaintiff's income in light of its circumstances, and it is difficult to view that the non-party 3 was made to evade income tax imposed on the plaintiff's representative because the plaintiff's income concealed as above was out of the market as above and it was not known that the non-party 3 was subject to disposition as the plaintiff's representative. Thus, it cannot be viewed as an "case where the taxpayer evades national tax by fraud or other unlawful act" under Article 26-2 (1) 1 of the former Framework Act on National Taxes, which provides that the non-party 3-195, 196, and 197 should not be viewed as an "case where the taxpayer evades national tax by fraudulent or other unlawful act," and therefore, the exclusion period of imposition for income tax for the portion on the account of the non-party 3's income tax for 199, 1997 should be returned to the exclusion period of imposition period of imposition.

Nevertheless, the court below held that the notice of the change in the income amount for the business year 195, 1996, 199, and 197 was made before the exclusion period for imposition of income tax imposed on the non-party 3. In so doing, the court below erred by misapprehending the legal principles on the change in income amount and the exclusion period for imposition of national taxes, and the ground for appeal pointing this out has merit.

4. Conclusion

Therefore, the part of the judgment below regarding the notice of change in the amount of income in the business year 195, 1996, and 197 shall be reversed, and this part of the case shall be remanded to the court below for a new trial and determination, and the remaining appeals shall be dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Sung-tae (Presiding Justice)