A person registered as a representative director on the corporate register can be presumed to substantially operate the company.

A person who is registered as a representative director on the corporate register can be presumed to have actually been operating the company, so the representative director on the corporate register must prove that he/she actually failed to operate the company by his/her assertion.

Article 67 of the Corporate Tax Act

Suwon District Court 2017Guhap63031 global income and revocation of disposition

AA

00. Head of tax office

on January 14, 2017

November 16, 2017

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of global income tax of KRW 7,938,540 (including additional tax) and global income tax of KRW 109,372,430 (including additional tax) for the year 2010 for the Plaintiff on January 4, 2016 shall be revoked.

1. Details of the disposition;

A. K Energy Co., Ltd. (hereinafter “instant company”) was established for the purpose of oil sales business, etc. on March 12, 2010, and closed down business on June 1, 2012, and the Plaintiff was registered as the representative director on the corporate register from March 12, 2010 to March 13, 2012.

B. On March 31, 2011, the instant company reported sales of KRW 6,133,267,054 upon filing a return on the amount of income in the business year of 2010, but omitted sales of KRW 61,561,235, and did not report the amount of income in the business year of 2011.

C. On January 4, 2016, the Defendant: (a) deemed that the omitted amount of the income amount in the pertinent business year 2010 and the amount of income in the business year 2011 (the Defendant determined the amount of income in the pertinent business year as KRW 283,883,712) are unclear; (b) disposed of as a representative bonus; and (c) imposed global income tax of KRW 7,938,540 (including additional tax) and global income tax of KRW 109,372,430 (including additional tax) for the year 2011 on the Plaintiff (hereinafter referred to as “instant disposition”).

D. The Plaintiff, who was dissatisfied with the instant disposition, filed a request for a trial with the Tax Tribunal on July 8, 2016, upon filing an objection on March 31, 2016, but was dismissed on January 6, 2017.

2. The parties' assertion

The defendant asserts that the disposition of this case is lawful on the grounds of the disposition and the relevant statutes. The plaintiff asserted that the disposition of this case is unlawful as follows.

1) After an additional investigation, the Defendant determined the amount of income in the business year 201 of the instant company as KRW 283,883,712. The Defendant erred by failing to reflect the actual amount of income close to the truth because the method of the additional investigation was unreasonable and unreasonable.

2) Even if each income amount of the instant company’s 2010 and 2011 business year decided by the Defendant is justifiable, since the actual representative of the instant company is LL in a de facto marital relationship with the Plaintiff, it is unreasonable to dispose of the income as a bonus to the Plaintiff, which is merely a nominal representative.

3. Whether the instant disposition is lawful

(a) Relevant statutes;

It is as shown in the attached Form.

B. Determination

1) Whether the calculation of the amount of income for the business year 201 is lawful

In order for the estimation of the amount of income to be deemed reasonable, it is insufficient to only satisfy the requirements for the estimation of the amount of income. The content and method of estimation must be reasonable and reasonable to reflect the actual amount of income close to the truth in specific cases. In the event of dispute as to the legitimacy of the estimation method, the tax authority has the burden of proving the reasonableness and feasibility, but if the tax authority has estimated it in accordance with the method and procedure prescribed by the relevant provisions, it is necessary to prove that the reasonableness and feasibility have been proven once, and that it is not appropriate to reflect the actual amount of income in a remarkably unreasonable manner (see, e.g., Supreme Court Decision 2008Du7687, Oct. 14, 2010).

In light of the following circumstances, it can be said that the rationality and validity of the Defendant’s decision on the amount of income for the business year 2011 is proven once the Defendant’s decision on the amount of income for the business year is proven.

① In accordance with relevant statutes, the Defendant applied standard expense rate to determine the amount of income of the instant company for the business year 2011.

② The Plaintiff was unable to submit any objective account books and documentary evidence necessary for determining the above income amount.

③ The Plaintiff asserted that the instant company could not engage in any business after September 28, 2011, in Y station located 00:00 Y station located in 00:00 Y station, and that it could not obtain income from KRW 283,883,712 in the business year 2011. However, LL had completed its business registration separate from the instant company and operated the Y station (A evidence 10, 6/10 pages).

Meanwhile, it is insufficient to recognize that the statement of evidence Nos. 3 through 6 by the Defendant alone is inappropriate to reflect the actual amount because the income amount of the instant company for the business year 2011 decided by the Defendant is considerably unreasonable, and there is no other evidence to acknowledge it. Therefore, the Plaintiff’s assertion on this part is without merit

2) Whether the Plaintiff is a substantial representative

Even if a person is registered as a representative director on the corporate register of a company, if the company does not actually operate the company, no comprehensive income tax shall be imposed on the person whose income is unknown, but a person who is registered as the representative director on the corporate register can be presumed to substantially operate the company. As such, the representative director on the corporate register must prove that he/she actually failed to operate the company (see, e.g., Supreme Court Decision 2010Du116, Dec. 23, 2010).

The facts that the plaintiff was registered as the representative director on the corporate register of the company of this case in the year 2010 and 2011 are as seen earlier. In light of the following circumstances, Gap's evidence Nos. 10, 14, Eul evidence Nos. 4, 5, and 6 and the overall purport of the pleadings, it is not sufficient to acknowledge that the plaintiff did not actually operate the company of this case merely with the descriptions No. 4, 6, 7, 11, 12, 13, 15, and Eul evidence No. 2, and part of Gap evidence No. 14, and there is no other evidence to acknowledge them, the plaintiff's allegation in this part is without merit.

① KK presented to a notary public with a power of attorney affixed a seal imprint and a certificate of seal imprint affixed by the Plaintiff and two promoters of the instant company, the Plaintiff and the OOO of the instant company, and it appears that it prepared the articles of incorporation of the instant company within the scope of the delegated authority as the above two agents.

② The Plaintiff owned 50% of the company’s shares in each business year of 2010, 2011, and 2012.

③ Since the Plaintiff is a de facto spouse of the LL and is in the position of enjoying economic benefits from business operation as well as economic benefits, it is difficult to readily conclude that the Plaintiff did not actually operate the instant company solely on the basis of the fact that the Plaintiff is a family head office, and there is no objective evidence supporting the fact that the LL independently operated the instant company.

④ The Plaintiff asserts that the Plaintiff filed a complaint for the crime of forging private documents, etc. after the Plaintiff entered the Plaintiff as the representative director of the instant company by gathering the Plaintiff’s name.

However, the Plaintiff was in a de facto marital relationship with LL, and the Plaintiff was transferred to the same address between October 10, 207 and April 7, 2013, and thus, it appears that he received information on the establishment and management of the instant company. Even according to the Plaintiff’s assertion, the Plaintiff was aware of the fact that the Plaintiff was registered as the representative director of the instant company on June 1, 2012. However, the Plaintiff filed a complaint for LL only on March 30, 2016, after the commencement of the dispute over the legitimacy of the instant disposition, and the Plaintiff explained that the investigation of the instant case was suspended because LL was in a foreign country, and the Plaintiff did not submit data on the progress of the instant case, but considering that LL entered March 21, 2017, it is difficult to believe the Plaintiff’s assertion.

4. Conclusion

Thus, the disposition of this case is legitimate, and the plaintiff's claim seeking its revocation is dismissed as it is without merit.