Cho High Court Decision 2009J0252 (O4. 14)

Whether an exclusive contract for athletes is against the classification of income and the principle of good faith or not.

The amount of exclusive contracts for athletes is the result of continuous and repeated activities for the purpose of earning profits, and it constitutes business income for consideration received under the condition that they will continue to engage in such activities after the exclusive contract and the established rules of the National Tax Service do not violate the principle of trust and good faith under the general opinion of abstract questions.

The contents of the decision shall be the same as attached.

1. The defendant made against the plaintiff on November 3, 2008

(1) impose global income tax of 2004 KRW 17,121,575;

(2) the portion exceeding KRW 57,761,095 in the disposition of imposition of global income tax of KRW 93,764,459 for the 2005;

(3) the portion exceeding KRW 70,200,119 in the disposition of imposition of global income tax of KRW 92,607,245 for the tax year 2007;

B. The portion exceeding KRW 77,431,729, out of the disposition of imposition of global income tax of KRW 111,98,485 on April 27, 2009 as of April 2006

Each cancellation shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. The costs of the lawsuit shall be divided into three parts, and two of them shall be borne by the plaintiff, and the remainder by the defendant respectively.

Each imposition of global income tax of KRW 17,121,575 on November 3, 2008, global income tax of KRW 93,764,459 on global income for the year 2005, global income tax of KRW 92,607,245 on global income for the year 2007, and imposition of KRW 111,98,485 on global income for the year 2006, shall be revoked, respectively.

1. Details of the disposition;

A. On November 24, 2003, the Plaintiff, as a professional camping player, entered into an exclusive contract with BB (hereinafter “B”) for four years. On January 14, 2004, the Plaintiff received the exclusive contract amount of KRW 1,100,000,000 (hereinafter “instant exclusive contract amount”) and reported the global income tax base by deeming it as other income accrued in 2004.

B. On November 3, 2008, the Defendant distributed the instant exclusive contract amount to four years, the contract period of each taxable year, on the ground that the instant exclusive contract amount constituted business income, and then re-calculated the amount of income for each taxable year, and determined and notified the Plaintiff on November 3, 2008, the global income tax of 2004, the global income tax of 122,223,630, the global income tax of 205, the global income tax of 111,304,000, and the global income tax of 100,639,000,000 for the portion reverted to the year 206.

C. On January 1, 2009, the Plaintiff filed an appeal with the Tax Tribunal. On April 14, 2009, the Tax Tribunal decided to the effect that the Plaintiff’s assertion that the instant exclusive contract amount is other income was not accepted, but that the integrated income tax should be calculated again by estimating the income during the said period.

D. Upon the decision of the Tax Tribunal on April 27, 2009, the Defendant corrected the total income tax for the year 2004 to KRW 17,121,575, the total income tax for the year 2005, KRW 93,764,459, and the total income tax for the year 2007 to KRW 92,607,245. The Defendant corrected the total income tax for the year 2006 to KRW 111,98,485 (hereinafter the remaining amount after the reduction to KRW 17,121,575, the global income tax for the year 2004 to KRW 93,764,459, the global income tax for the year 205 to KRW 92,607,245, and the increased amount to KRW 198,1984, the global income tax for the year 2006 to KRW 1985."

[Ground of recognition] Facts without dispute, Gap evidence 1, 3, and 4 evidence 1, 2, Gap evidence 2, Eul evidence 2, 3, Eul evidence 4, Eul evidence 4, Eul evidence 5, Eul evidence 6, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The instant exclusive contract amount is that the Plaintiff, a professional camping player, entered into an exclusive contract with BB and paid the amount received as a consideration therefor, separate from the annual salary. Since the Plaintiff is a price for providing one-time service, which is an exclusive license for BB only from the independent license during the contract period, and a temporary and contingent income provided once for the purpose of compensating for the opportunity cost that the Plaintiff would lose due to the said exclusive license contract, it constitutes “exclusive contract amount” as stipulated in Article 21(1)18 of the Income Tax Act.

(2) Even if the tax authority regards the instant exclusive contract amount as business income, it has consistently interpreted and treated the amount of the exclusive contract for professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional participation in the professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional professional participation in the judgment of the tax authority's 10th of this case.

(3) In full view of the existing practices of the tax authority on the instant exclusive contract amount and the developments leading up to the instant disposition, the additional tax rate cannot be imposed on the Plaintiff on justifiable grounds that the Plaintiff did not declare the instant exclusive contract amount as the business income, or that the instant exclusive contract amount as the business income was not paid in advance. Therefore, the portion of the disposition imposing additional tax in the instant disposition is unlawful.

B. Relevant statutes

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

(c) Fact of recognition;

(1) The Plaintiff entered EE in 1995 and started its activities as a professional camping player, and entered into an exclusive contract with BB since 2004, and worked as a player belonging to BB, and worked as a DNA player until 2007 when the exclusive contract term expires according to the trads of BB and DD (hereinafter “D”).

(2) On November 24, 2003, the Plaintiff entered into a contract with BB with the following content.

[Purpose] Article 1 [Purpose] BB concludes MCC as a player of BB, and MCC is faithfully performing its duties as a player of BB group.

Article 2 [Contract Term: February 1, 2004.- November 30, 2007

Article 3 [Remuneration: (1) Consideration: KRW 100 million per day. 2. Annual salary: KRW 100 billion.

In addition, on the 25th day of the month of complete payment, he entered into the Hague player Agreement in 2004 with the following contents:

Article 4 [Escoping Activities] A player shall participate in the 2004 old group related to the 2004 old group, in a non-official contest, in a year-to-year player competition and in a game designated by the Gu group, and shall accept participation in the Pscopon match when the Gu group has entered the Pscopon match, and when the player has been selected before the Psopon match, he shall participate in that activity.

Article 19 [Restriction on Participation in Games] A player accepts during the duration of this Agreement that he does not participate in a field competition for any individual or organization other than the Gu group.

[Reasons for Recognition] Class A 3 1 and 2

D. Determination

(1) Whether the exclusive contract amount of this case is other income

(가) 소득세법 시행령에서 기타소득으로 정한 "전속계약금"은 사업소득 이와의 일시적ㆍ우발적 소득에 해당하는 경우만을 의미하는 것으로서 취득한 소득의 명칭이 "전속계약금"이라고 하더라도 그것에 사업성이 인정되는 한 이를 사업소득으로 보아야 하고, 탤런트 등 연예인이 독립된 자격에서 용역을 제공하고 받는 소득이 사업소득에 해당하는지 또는 일시소득인 기타소득에 해당하는지 여부는 당사자 사이에 맺은 거래의 형식ㆍ명칭 및 외관에 구애될 것이 아니라 그 실질에 따라 평가한 다음, 그 거래의 한쪽 당사자인 당해 납세자의 직업 활동의 내용, 그 활동 기간, 횟수, 태양, 상대방 등에 비추어 그 활동이 수익을 목적으로 하고 있는지 여부와 사업활동으로 볼 수 있을 정도의 계속성과 반복성이 있는지 여부 등을 고려하여 사회통념에 따라 판단하여야 하며, 그 판단을 함에 있어서도 소득을 올린 당해 활동에 대한 것뿐만 아니라 그 전후를 통한 모든 사정을 참작하여 결정하여야 할 것이다(대법원 2001. 6. 15. 선고 2000두 5210판결 등 참조). 따라서 구 소득세법(2007. 12. 31. 법 제8825호로 개정되기 전의 것) 제21조 제1항 제18호에서 '전속계약금'을 기타소득의 하나로 규정하고 있더라도, 당해 납세자가 전속계약금이란 명칭의 수입금을 창출한 활동의 실질적 내용이 일시적ㆍ우발적 활동이 아니고 사업활동으로서의 계속성과 반복성올 인정할 수 있으면 이는 기타소득이 아닌 사업소득에 해당한다고 봄이 옳다.

(B) The following circumstances are revealed by comprehensively taking account of the facts and purport of the above facts. ① the Plaintiff’s content of the contract concluded with BB, especially the fact that the Plaintiff participated in the sports designated by the Gu sports team, not the Gu sports team, and that it did not participate in the sports team for individuals or organizations other than the Gu sports team, B entered into the exclusive contract for the purpose of preventing the Plaintiff from working as players belonging to the other Gu sports team, rather than paying the instant exclusive contract amount, the Plaintiff’s participation in the sports team’s business income during the term of the contract, which was recognized as having been included in BB’s exclusive business income as having been included in BB’s business income, and thus, it appears that the Plaintiff continued to engage in the above exclusive contract for the sports team’s business income during the period of the contract. ② The Plaintiff’s participation in the sports team’s business income as well as the Plaintiff’s exclusive business income as having been included in BB’s business income during the period of the contract.

Therefore, the instant disposition that reported the instant exclusive contract amount as business income is legitimate, and this part of the Plaintiff’s assertion is without merit.

(2) Whether the instant disposition goes against the good faith principle and the principle of prohibition of retroactive taxation

(A) In general, in tax law relations, in order to apply the principle of trust and good faith to the acts of tax authorities under Article 15 of the Framework Act on National Taxes, the tax authorities must name the public opinion that is the subject of trust to taxpayers. On the other hand, in order to establish a non-frequency practice under Article 18(3) of the Framework Act on National Taxes, there must be not only an objective fact that has not been imposed for a considerable period of time, but also an intent that the tax authorities should not impose taxes on the matter, and such public opinion or opinion needs to be expressed explicitly or implicitly (see Supreme Court Decision 200Du5203, Apr. 24, 2001).

(B) Even if the tax authority imposed an exclusive contract amount for 20 years on the instant case, it cannot be deemed that the taxation authority’s public opinion and opinion that is the premise of the principle of trust and good faith, or that it explicitly expresses a public opinion or opinion that is the whole non-taxation practice under Article 18(3) of the Framework Act on National Taxes. As other income, the exclusive contract amount of the professional camping player shall not be deemed as other income, the direct payment amount of 1264-310, 2001 and 46011-1031, August 29, 2001) of the National Tax Service established by the National Tax Service on March 10, 2098, which was the direct payment amount of 1264-310, 2002, which was the direct payment amount of the taxpayer’s abstract questioning, was not always expressed by the tax authority on other income under the exclusive contract amount recognized as non-taxation practice, and thus, it shall not be deemed that the Plaintiff’s other income under the above Article 18(3) of the Framework Act is not purport.

(3) Whether the imposition of additional tax is unlawful

(A) Under the tax law, penalty taxes are administrative sanctions imposed in accordance with the law in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim, where a taxpayer violates a duty to report and pay taxes, etc. as prescribed by the law without justifiable grounds, and thus, it cannot be imposed if there is a justifiable reason that the taxpayer is not aware of such duty, such as the circumstances where the taxpayer could reasonably present his/her duty, or where it is unreasonable to expect the party to fulfill his/her duty, etc.

(B) In light of the above evidence and evidence No. 1 as to the instant case, the Plaintiff: (a) as other income from the professional camping player’s exclusive contract amount; (b) pursuant to the National Tax Service’s established rules (which was 1264-310, August 29, 1982), the Plaintiff deemed the instant exclusive contract amount as other income; and (c) pursuant to the Plaintiff’s global income tax for the year 2004, the global income tax was assessed on March 11, 2004 by deeming the instant exclusive contract amount as falling under other income; and (d) pursuant to the Plaintiff’s revised tax law, the Plaintiff’s assertion that the amount of the exclusive contract amount of the professional camping player’s global income falls under business income at the time of the Plaintiff’s filing of the global income tax for 200 years after being pointed out by the Board of Audit and Inspection; and (e) the Plaintiff’s assertion that the amount of the instant exclusive contract amount falls under the Plaintiff’s other income tax for 20 years prior to the Plaintiff’s filing of the instant global income tax payment.

Therefore, since the penalty tax amount for failure to make a report and failure to make a payment among the dispositions of this case should be revoked illegally, the plaintiff's duplicate assertion is with merit.

3. Conclusion

Therefore, 17,121,575 won from the disposition of this case is less than the total of 21,182,696 won from the global income tax for the year 2004 and the total of 21,182,69,095 won from the global income tax for the year 205 (the total of 36,003,364 won from the total of 93,764,459 won from the global income tax for the year 2005) and 77,431,729 won from the global income tax for the year 206 (the global income tax for the disposition of this case 111,98,485 - the total of 34,56,756 won from the return failure and payment failure, 70,219, 207 from the global income tax for the year 205 (the total of 36,003,431,729,267).