Cho High Court Decision 2013Nu0427 (O4, 2013)

The expiration of the exclusion period of taxation by the withholding agent due to the notice of change in income amount should be determined at the time of notification of change in income amount.

A corporate withholding agent is deemed to have paid the relevant income to the person to whom the income as stated in the notice of income change was given on the day when the notice of income change was received, and at the same time the liability to pay the income tax withheld is established, so whether the exclusion period for taxation by the withholding agent has expired or not shall be determined as of

Article 67 of the Corporate Tax Act

Article 192 of the Enforcement Decree of the Income Tax Act shall give notice of change in income amount due to disposal of income.

2013Guhap3307 Other revocation of revocation of the imposition of income tax

AA Development Corporation

○ Head of tax office

December 12, 2013

January 9, 2014

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of OOOO on June 5, 2012 against the Plaintiff is revoked.

1. Details of the disposition;

A. The Plaintiff, a corporation operating real estate leasing business, etc., transferred 1/3 of the total of 1,443 square meters and the total of 323.8 square meters and the total of 5 square meters of buildings and 323.8 square meters and standing timber (hereinafter collectively referred to as “the instant real estate”) to a newB, NewCC, and NewD (hereinafter referred to as “newB, etc.”) who is a person with a special relationship under the Corporate Tax Act. Meanwhile, at the time of the transfer, the market value of the instant real estate was a total of OO members.

B. On March 21, 2006, with respect to the transfer of the instant real estate, the Plaintiff reported the gift tax for each 1/3 of the total amount of the foregoing difference on August 29, 2005 by adding the difference between the market price and the low-price transfer to OOO(OOO-OOOOO) in accordance with the unfair calculation calculation calculation calculation report, disposing of it as other outflow of the real estate, and filing a corporate tax for the business year 2005.

C. The director of the Busan Regional Tax Office pointed out that in relation to the acquisition of the instant real estate by the newB, etc. from the comprehensive audit of the Central Tax Office of Busan Central Tax Office, the difference between the market price by the transfer at the low price and the income tax should be collected as other income, and that the newB, etc. shall not pay gift tax. The director of the Busan Central Tax Office notified the Defendant of the details thereof.

D. On October 4, 2010, the Defendant corrected the Plaintiff’s corporate tax for the business year of 2005 on October 4, 2010, and disposed of the foregoing difference as other income, and sent a notice of change of income amount to the Plaintiff on October 5, 2010 (hereinafter “instant notice of change of income amount”). However, on February 11, 2011, the Plaintiff failed to perform its withholding duty following the notice of change of income amount, the Defendant issued a notice of correction and notification of the tax withholding amount and other OOO (including additional tax) of the income tax on other income attributed to the Plaintiff in 205.

E. Since then, the Defendant determined that the time of attribution of the above other income is the date of settlement of accounts for the business year 2005, and revoked ex officio the disposition of correction and notification on June 1, 201, and changed the same amount to the Plaintiff on the same day, but changed to 2006 and notified the correction and notification.

F. Since then, the Defendant rendered a decision on June 5, 201 as to the period of attribution of the above other income in 2005, and revoked ex officio the disposition of correction and notification on June 5, 2012 and changed the same amount to the Plaintiff on the same day to the year to which the Plaintiff belongs, but changed to 2005 and notified the correction and notification (hereinafter

G. On December 28, 2012, the Plaintiff filed an objection and filed an appeal to revoke the instant collection disposition with the Tax Tribunal on September 4, 2012, but the claim was dismissed on June 14, 2013.

[Ground of recognition] Facts without dispute, Gap evidence 1, Eul evidence 1 to 3, the purport of the whole pleadings

2. Whether the collection disposition of this case is legitimate

A. The parties' assertion

1) The plaintiff's assertion

The Plaintiff asserts that the other income tax liability of the person to whom income accrued is unlawful since it was made after May 31, 201, for which the period of exclusion expires after five years from the following day of each global income tax return deadline, regardless of whether a notice on change in income amount was served on the corporation.

2) The defendant's assertion

The defendant asserts that the collection disposition of this case is legitimate, since the newB, etc. did not report the comprehensive income tax for the year 2005, the exclusion period of imposition should be applied to seven years, and even if the exclusion period of imposition of five years is applied, the exclusion period of imposition has not elapsed from five years at the time of notification of change in income amount.

B. Relevant statutes

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

C. Determination

The amount of income disposed of as "other income to a person to whom the income belongs" pursuant to the provisions of the Corporate Tax Act is deemed to have been paid by the relevant corporation on the date of receipt of the notice of change in income amount, but this does not mean the payment to the person to whom the income actually accrues, but merely means the legal fiction of law. Thus, in order to establish a withholding obligation of a corporation that received the above notice of change in income amount, there must be a corporate tax liability for the source taxpayer to be deemed to have received the income at the time of receipt of the above notice of change in income amount at the time of establishment. If the source taxpayer's tax liability for income tax has already ceased to exist due to the intention of exclusion period for imposition of income tax, etc., the corporate tax liability cannot be established. Thus, it is unlawful to impose and collect the source income tax from the withholding agent thereafter (see, e.g., Supreme Court Decisions 85Nu451, Mar. 14, 198; 200

However, a tax payment notice issued by a tax authority as a result of a corporate withholding agent’s failure to fulfill the obligation to pay income tax withheld at source constitutes a disposition ordering the payment of finalized amount of tax, and thus, a tax payment notice, which is issued by the tax authority, is not succeeded as it is to a subsequent disposition, unless there is a defect in the notice of change in income amount, which is a prior disposition, and thus, it does not constitute a ground for invalidation. Therefore, if a tax authority’s disposition and the subsequent notice of change in income amount are issued, the liability to pay income withheld should be contested in an appeal litigation on the notice of change in income amount that becomes final and conclusive, and the notification of change in income amount cannot be asserted in an appeal litigation on the collection disposition unless it is void and void as a matter of course (see Supreme Court

The Plaintiff asserts that the collection disposition of this case was made after the expiration of the exclusion period of income tax on the newB, etc., and thus, it is unlawful. In the event the tax authority’s disposition of income and the notice of change in the amount of income are given, the corporation, which is the withholding agent, is deemed to have paid the relevant amount to the person to whom the income recorded in the notice was reverted on the date of receipt of the notice of change in the amount of income, and at the same time, the liability to pay income tax withheld is established (see Supreme Court Decision 2009Du14439, Jan. 26, 2012). Thus, whether the obligation to pay income tax of the source taxpayer has already expired due to

In light of the above legal principles, with respect to whether the income tax liability of the newB, etc. at the time of notice of change in income amount expired after the exclusion period expires, first of all, the exclusion period of imposition of income tax liability of the newB, etc., the global income tax liability of the person to whom the income is reverted is established when the taxable period to which the income is reverted as prescribed by Article 21(1)1 of the former Framework Act on National Taxes (amended by Act No. 8139, Dec. 30, 2006) expires. Therefore, the global income tax liability for other income accrued in 2005, such as the newB, etc. from the disposition of income, is established at the time of the termination of the pertinent taxable period, and the exclusion period of imposition is the starting date of the exclusion period of imposition after the termination of the reporting period of global income tax pursuant to Article 70(1) of the former Income Tax Act (amended by Act No. 10408, Dec. 27, 2010).

Meanwhile, under Article 26-2 (1) 2 and 3 of the former Framework Act on National Taxes, the general exclusion period for the imposition of national taxes is 7 years if a taxpayer fails to file a tax base return within the statutory return period, compared to five years from the date on which the national tax can be imposed. As seen earlier, newB, etc. filed a gift tax return on August 29, 2005 without filing a comprehensive income tax return on other income belonging to 2005 in relation to the acquisition of the real estate in this case. In light of the purport of Article 26-2 (1) 2 of the former Framework Act on National Taxes for which the exclusion period for imposition of national taxes has been extended 7 years in consideration of whether the national tax is imposed if a taxpayer fails to file a tax base return, and thus, it is reasonable to deem that the exclusion period for imposition of national taxes is 5 years.

However, as seen earlier, the Defendant’s notification of the change in the income amount of this case was given to the Plaintiff on October 5, 2010, when five years have elapsed since June 1, 2006, and the Defendant’s notification of the change in the income amount of this case was made within the exclusion period of imposition, and there is no evidence to prove otherwise that there was any illegality in the collection disposition of this case.

Therefore, the plaintiff's assertion is without merit, and the collection disposition of this case is legitimate.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.