Cho High Court Decision 201Do3045 ( November 04, 2011)

No interest income that is subject to separate taxation, so a disposition imposing global income tax is legitimate.

The tax authority's disposition imposed as global income tax is legitimate because the income that the Defendant deemed as the Plaintiff's interest in non-business loan is an interest income withheld under the Income Tax Act, and it is not a interest income subject to separate taxation.

2012Guhap515 Global Income and Revocation of Disposition

United Kingdom AAA

Director of the District Office

July 6, 2012

August 17, 2012

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of KRW 000 of global income tax for the year 2009 against the Plaintiff on February 7, 2011 is revoked.

1. Details of the disposition;

A. On August 3, 2006, the Plaintiff entered into a mortgage agreement (hereinafter referred to as the "mortgage agreement of this case") with respect to KimB and OB, 000 OO2,000 O2,00 OB, Seoul, and entered into a mortgage agreement (hereinafter referred to as the "real estate of this case"), and on August 10, 2006, the Plaintiff entered into a mortgage agreement (hereinafter referred to as the "mortgage agreement of this case") with respect to the above real estate at KRW 00,00, and entered into a mortgage registration near the Plaintiff's name (hereinafter referred to as the "mortgage creation registration of this case").

B. However, on March 6, 2008, KimD applied for a compulsory auction of the above real estate by Seoul Northern District Court Decision 2008Ma4339, and on April 23, 2008, the plaintiff submitted a claim statement (hereinafter referred to as "claim statement") with the following contents to the above auction court on April 23, 2008.

C. On June 30, 2009, in the auction procedure of the above real estate, the distribution schedule was prepared to distribute the Plaintiff KRW 000 to the Plaintiff, and the Plaintiff was paid the above money from the auction court around that time in accordance with the above distribution schedule.

D. Accordingly, on February 7, 2011, the Defendant: (a) considered the remainder of KRW 000,000, after subtracting the Plaintiff’s principal from the Plaintiff’s paid KRW 000 (hereinafter “instant amount”) as the Plaintiff’s non-business profit; and (b) imposed and notified the Plaintiff of KRW 00 of the global income tax for the year 2009 (hereinafter “instant disposition”).

E. On April 14, 2011, the Plaintiff appealed to the Defendant, and the Defendant dismissed the Plaintiff’s objection on May 12, 201. On August 11, 2011, the Plaintiff filed a request for a trial with the Tax Tribunal, but the Tax Tribunal dismissed the Plaintiff’s request on November 4, 2011.

[Based on Recognition] The facts without dispute, Gap evidence 1, Eul evidence 2, Eul evidence 3, Eul evidence 1-2, Eul evidence 1-2, Eul evidence 6-1, and the whole purport of the arguments

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The primary argument

Each provision of Article 127 (1) 1 and 5 of the former Income Tax Act (amended by Act No. 10408, Dec. 27, 2010; hereinafter referred to as the "Income Tax Act") imposes a withholding duty on a person who pays interest income and other income in Korea, and in withholding income tax, a person who is legally liable to pay taxes in relation to the State in relation to the State is a withholding agent and the original taxpayer cannot be the withholding agent. Ultimately, the disposition of this case against the Plaintiff, who was not the original taxpayer despite the fact that the taxpayer was KimB, the seller of the real estate in this case, was the seller of the real estate in this case.

2) Preliminary assertion

The profit gained by the plaintiff through the transaction of the real estate in this case is about 000 won of other income and 000 won of interest income as follows, and therefore the tax amount that the plaintiff is obligated to pay is about 00 won (=00 wonx 20% + 000 wonx 25%).

A) On June 20, 2006, the Plaintiff, the CE, and the MF agreed to purchase the instant real estate in KRW 000, while entering into a sales contract with the KimB on June 20, 2006, and the down payment in KRW 00,000, while the intermediate payment in KRW 00,00,00, and the remainder in KRW 00,00, respectively, was paid on July 10, 2006 and July 31, 2006.

B) On July 28, 2006, the Plaintiff, including the EE, and the KimF made a written confirmation that “The ownership shares in the purchase of the above real estate are KimF 1/3, Professor EE 1/3, and NAA 1/3, and then, at the time of sale of the above real estate or public expropriation compensation, to settle the above at the above rate.”

C) Meanwhile, the Plaintiff, and the KRW 000,000, while the other KRW 100,000, were paid respectively by the KimF.

D) The instant real estate was subject to a land transaction permission in the development restriction zone, and KimB, on July 14, 2006, applied for a land transaction permission to the competent jurisdiction office in the above year by moving one-half of the said real estate under the name of KimG on its own name, and was given the answer that it may obtain a land transaction permission after the lapse of one year.

E) Accordingly, KimB made on August 4, 2006, the establishment registration of a neighboring mortgage with a maximum debt amount of KRW 000 with respect to the instant real estate, and on August 10, 2006, on August 10, 2006, the Plaintiff completed the establishment registration of a neighboring mortgage with a maximum debt amount of KRW 000 with respect to the said real estate.

F) Meanwhile, through the auction procedure in the Seoul Northern District Court Decision 2008Taearo 4339, the Seoul Northern District Court received KRW 000, the Plaintiff received each dividend of KRW 000,000, and received each dividend of KRW 000,000 (hereinafter “the total dividend of this case”), the Plaintiff in the trade of the said real estate, and the benefits acquired by the gramE, and KimF constituted 000,000, the difference between the total dividend and the sales amount, and KRW 00,000, which corresponds to the down payment, constitute other income as damages due to nonperformance of obligation, and only KRW 00,00,00,00,00,00, is interest income.

G) However, since only 1/3 of the instant real property is owned by the Plaintiff, the income gained by the Plaintiff as a transaction of the said ancillary property is KRW 000 and interest income KRW 000.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) As to the plaintiff's primary argument

A) The withholding of taxes can be classified into cases where the source taxpayer’s income subject to withholding is added to the tax base of the source taxpayer and then separate procedures such as filing a return, determination, etc. are carried out (e.g., prepayment withholding) and where the withholding agent terminates and abandons the income through withholding without such procedures (e.g., full-time withholding of taxes). Meanwhile, even if the income tax amount is automatically determined at the same time as the payment of wages, etc., it is only the case where the withholding agent cannot allow the withholding agent to withhold the determined tax amount, but it does not prevent the correction of the income tax amount after the filing of the final return, etc. of the source taxpayer’s tax base by adding up the income subject to withholding to the source taxpayer’s tax base, and if a separate procedure such as filing a return or imposing a tax, etc. is planned, it shall be deemed that the purpose of legislation is to grant the withholding of the tax liability to the source taxpayer, and if any income subject to withholding is excluded from the source tax base, it shall be deemed that the income between the source and the withholding taxpayer should be declared the global income tax base (see 297).

B) In light of the above, Article 127 (1) 1 of the Income Tax Act provides that "interest income" is subject to withholding, and Article 14 (3) of the Income Tax Act lists the amount of income not added when calculating the global income tax base. Article 129 (1) 1 (a) or (2) provides that "interest income withheld at the tax rate under Article 129 (2) 3 shall be "interest income withheld at the tax rate under Article 129 (1) 1 (a) or paragraph (2) of the same Article", and Article 3-3 provides that "interest income received by an organization making financial transactions with its name as an organization which does not distribute income to its members," and subparagraph 4 provides that "income subject to separate taxation under the Special Cases concerning Taxation" shall be "income subject to subparagraph 3, 3-2 and 3-3 of this Article, and that the amount of income subject to separate taxation under Article 127 of the Income Tax Act shall not be added to the amount of income subject to separate taxation under Article 10 (10) of the plaintiff's tax base.

2) As to the Plaintiff’s conjunctive assertion

In light of the following circumstances, it is reasonable to see that the above recognized facts and evidence No. 6-1 and the purport of the entire argument are as follows. The issue amount in this case is the interest income attributed to the plaintiff as the "profit from non-business loans" under Article 16 (1) 11 of the Income Tax Act. Thus, the plaintiff's above assertion on different premise is without merit.

A) As alleged by the Plaintiff, the Plaintiff provided the above KRW 000 to KimB as part of the sales price of the instant real estate, and following the cancellation of the sales contract for the said real estate, even if LB bears the duty to restore it to the Plaintiff, taking into account the following as a whole: (a) the Plaintiff entered into a quasi-loan agreement with KimB at the time of the conclusion of the said mortgage contract and the details of calculation of the account statement of the instant claim.

B) In light of the fact that the maximum debt amount under the mortgage contract of this case is 000 won, which is 1.7 times the amount of loan of this case as 000 won, and that the plaintiff submitted a claim statement stating that "interest 000 won per annum from July 10, 2006 to June 30, 2009 is 36% per annum to the auction court of the above real estate compulsory auction case," it is deemed that there was a interest agreement with the above 00 won at the time of entering into the mortgage contract.

C) On the ground that there was an agreement between the plaintiff, E, and DoF to share 1/3 shares among the real estate in this case, the plaintiff alleged that the sum of the above dividends belongs to KimF, but 1/3 out of the total sum of the above dividends belongs to KimF, and 1/3, and 200 of the evidence (Evidence A-6-1 to 3) submitted that the receipts were issued in the name of KimF in the future, and that there was no evidence to prove that the monthly KimF paid 00 won out of the purchase price of the above real estate to KimB, and that there was no evidence to prove that the sum of the above receipts (Evidence A-6-1 to 3) was 00 won in the above receipts (+ + 000 won in the purchase price of the real estate in this case, + 00 won in the sale price of the real estate in this case, and that there was no evidence to support the plaintiff's assertion that the above plaintiff was paid 1/600 won in the auction of the above real estate in this case.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.