Cho High Court Decision 2010Du3081 ( December 29, 2010)

Since it was registered as a member of a corporation in form, a disposition imposing the secondary tax liability is illegal against the principle of substantial taxation.

It is unlawful to impose secondary tax liability in violation of the principle of substantial taxation since it was registered as a member of a corporation in form, not in a position to substantially participate in the operation of a corporation as a general partner.

Article 39 subparagraph 1 of the Framework Act on National Taxes

2011Revocation of disposition of imposition, including value-added tax, 2023

LAA

○ Head of tax office

May 12, 201

June 9, 2011

1. The Defendant’s disposition of imposition of value-added tax, wage and salary income tax, business income tax, and retirement income tax as stated in the separate disposition sheet against the Plaintiff on August 5, 2010 shall be revoked.

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

The primary claim is as set forth in paragraph (1).

Preliminary Claim: On July 16, 2010, the Defendant’s decision to designate the secondary taxpayer on value-added tax, wage and salary income tax, business income tax, and retirement income tax as listed in the attached Form 1 List against the Plaintiff is revoked.

1. Details of the disposition;

A. AA (hereinafter referred to as a "foreign corporation") was established on January 13, 2006 for the purpose of attorney-at-law, etc. on February 25, 2010.

B. The Defendant imposed value-added tax, etc. on the non-party corporation after the non-party corporation imposed value-added tax, etc. in the item of the attached taxation list. The Defendant did not pay the value-added tax by

7. 16. The Plaintiff, a member of the non-party corporation, was designated as the secondary taxpayer.

C. On August 5, 2010, the Defendant issued a notice of payment of value-added tax, etc., indicated in the total value of the attached list, to the Plaintiff, who is the secondary taxpayer (hereinafter “instant disposition”).

[Ground of Recognition] Unsatisfy, Gap evidence 10, 11 (including virtual number), Eul evidence 2;

The purport of all pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

The Plaintiff is an attorney-at-law with at least 10 years of legal experience necessary for the establishment and maintenance of the law firm, and only lent the name so that he can establish and maintain the non-party corporation to KimBJA, and was not involved in the operation of the non-party corporation. Therefore, the Plaintiff cannot be deemed a member of the non-party corporation. Therefore, the Plaintiff is not subject to the second tax liability in accordance

B. Relevant statutes

Attached Table 2 shall be as stated in the relevant statutes.

(c) Fact of recognition;

1) On December 2005, the Plaintiff accepted the proposal from the former AB attorney-at-law to pay 300,000,000 won per week by becoming a member of a law firm in a form of more than 10 years, when the Plaintiff intends to establish a law firm with KimB attorney-at-law as well as KimB-at-law.

2) The former AA and KimB attorney-at-law constituted a non-party legal entity and operated the non-party legal entity. The Plaintiff did not work or visit the office of the non-party legal entity until the dissolution of the non-party legal entity. The non-party legal entity is a self-employed person without any circumstances from the Plaintiff by the formerA and KimB attorney-at-law.

The operation was self-managed.

3) After that, the Plaintiff intended to withdraw from the non-party corporation, but the non-party corporation did not comply with this, the Plaintiff filed a petition with the Minister of Justice to the effect that the authorization was revoked on February 25, 2010 due to the lack of the number of members of the non-party corporation in relation to the above civil petition.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 9 and 12, fact-finding results to the Minister of Justice of this court, the purport of the whole pleadings

D. Determination

In order to impose secondary tax liability on the general partner of a corporation under subparagraph 1 of Article 39 of the Framework Act on National Taxes, it is required that the general partner with unlimited liability is in a position to participate in the operation of the corporation as of the date when the liability to pay delinquent national taxes comes into existence, and merely on the ground that the registration is made in form as a general partner on the register of the corporation,

In light of the facts acknowledged earlier, the Plaintiff, as a member of the non-party corporation, has the status as a general partner of the partnership company pursuant to Article 58(1) of the Attorney-at-Law Act and Article 212(1) of the Commercial Act. However, the Plaintiff was registered as a member of the non-party corporation in form, not as a general partner, but as a member of the non-party corporation. Thus, imposing secondary tax liability on the Plaintiff as a general partner is illegal contrary to the principle of substantial taxation.

3. Conclusion

Therefore, the plaintiff's primary claim is reasonable, and it is decided as per Disposition by admitting it.