Cho Jae-2017-west-0327 (20 March 20, 2017)

A criminal complaint against a person who has infringed a copyright, and the agreed amount, etc. received shall not be business income.

Only on the ground that the act of filing a criminal complaint against the infringer and the receipt of the agreed money continues to be conducted, it cannot be deemed as social activities for profit-making purposes.

Article 19 of the Income Tax Act

2017Guhap65722 global income and revocation of disposition

O KimO

O Head of tax office

2018.03.20

2018.04.05

1. Each disposition of imposing global income tax (including additional tax), global income tax (including additional tax), global income tax (including additional tax), global income tax (including additional tax), global income tax for the year 2013, global income tax for the year 2014, and global income tax for the year 2015, which the Defendant rendered to the Plaintiff on October 1, 2016, shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. The plaintiff is the author of a novel, such as "O" and "O".

B. The Plaintiff filed a criminal complaint or civil claim for damages against those who bought the said novel on the Internet car page or web page in the computer file format on the ground of copyright infringement, and received a total of 00 won as indicated below (hereinafter “the instant money”) from 2012 to 2015 with agreed money, etc.

C. In December 2015, the Seoul OO District Prosecutors' Office notified the Commissioner of the National Tax Service that there was a suspicion of omission without filing a report even though the Plaintiff obtained business income from the agreed amount. Accordingly, on October 1, 2016, the Defendant deemed the instant amount as business income and notified the Plaintiff of the correction and notification of the amount of KRW 00 of global income tax (including additional tax), global income tax for the year 2012, global income tax for the year 2013 (including additional tax), KRW 00 of global income tax for the year 2014, global income tax for the year 2014 (including additional tax), and KRW 00 of global income tax for the year 2015 (including additional tax) (hereinafter referred to as the "instant disposition").

D. The Plaintiff appealed and filed an appeal with the Tax Tribunal on December 1, 2016, but was dismissed on March 20, 2017.

[Reasons for Recognition] Facts without dispute, Gap evidence 1 through 10, Eul evidence 1, 2 and 4 (including each number), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The parties' assertion

1) The plaintiff's assertion

Since the instant money is a consolation money for mental damage suffered by the Plaintiff not falling under the business income listed in Article 19 (1) of the Income Tax Act, the instant disposition that is made on the ground that the instant money is business income is unlawful.

2) The defendant's assertion

Since 2012, the Plaintiff’s act of acquiring revenues above the human tax revenues continuously and repeatedly through criminal complaints and civil lawsuits can be deemed as profit-making activities continuously and repeatedly conducted under his/her own account and responsibility. Since the instant money is income similar to income under Article 19(1)17 of the Income Tax Act, it constitutes business income under Article 19(1)20 of the Income Tax Act.

(b) Fact of recognition;

1) After collecting copyright infringement cases related to his own novels, the Plaintiff filed a complaint with the investigation agency, and then revoked the complaint by receiving the agreement amount of KRW 00,000 or KRW 00 million per case from the accused who requested the agreement. The agreement written between the Plaintiff and the accused states that, in order to estimate the damage of the copyright owner, the amount of damages should be calculated, but the amount of damages cannot be calculated due to the characteristics of the sharing of Internet illegal files, the Plaintiff cannot be calculated, and therefore, agreed to pay consolation money (mental damage compensation) and pay it smoothly.

2) The plaintiff filed a civil lawsuit against the defendant who did not reach an agreement as referred to in Paragraph 1 of the same Article to seek compensation for damages arising from copyright infringement and confirmed the decision of recommending reconciliation that received a certain amount from the court, or partly winning the decision that the plaintiff would pay consolation money in the amount of KRW 00,000 or KRW 0 million as compensation for the plaintiff's mental damage.

[Ground of recognition] Facts without dispute, Gap evidence 9, 10 evidence, Eul evidence 5 (including each number), the purport of the whole pleadings

C. Determination

1) Business income under the Income Tax Act refers to income generated from a business that is a social activity continuously and repeatedly conducted in an independent position for profit-making purposes (see Supreme Court Decision 2017Du36885, Jul. 11, 2017).

However, according to the above facts, the monetary amount of this case is deemed to have the nature of consolation money paid in consideration of the form and degree of copyright infringement, the age, status, and financial ability of the defendant under the circumstances where it is impossible to prove property damage as a result of filing a criminal complaint and civil lawsuit against a specific person infringing copyright. Therefore, it cannot be deemed to constitute a social activity of "for profit-making" solely on the ground that the plaintiff continued to receive consolation money under the pretext of agreement, etc.

2) Article 19(1) of the Income Tax Act provides that "business income shall be the following income generated in the pertinent taxable period:

3. Income generated from manufacturing business, 3. income generated from electricity, gas, steam and water supply business, 5. Income generated from sewage, waste disposal business, raw material recycling and environment rehabilitation business, 6. Income generated from construction business, 7. Wholesale and retail business, 8. Income generated from transportation business, 9. Income generated from lodging and restaurant business, 10. Publication, broadcast communication and information service business, 11. Income generated from financing and insurance business, 12. Income generated from real estate business and insurance business, 13. Specialized, Scientific and Technical Service business, 14. Income generated from business facility management and business support service business, 15. 16. Income generated from health and social welfare service business, 17. Arts and sports and leisure service business, 18. 18. Organization and organization income generated from transportation business, 10. 19. 1. 1. 2. 1. 1. 2. 1. 1. 1. 2. 1. 1. 2. 1. 'income generated from its own activities under the provisions. 15. . . . 1. . . 1. . . 1. 1. . . . . 1.0. . . . . . . . . . . . .

However, it is clear that criminal complaints or civil claims for damages have been filed against those who have infringed copyright, and agreements received from them do not constitute income under Article 19 (1) 1 through 19 of the Income Tax Act.

In addition, such agreements cannot be deemed as income similar to income under the provisions of Article 19 (1) 1 through 19 of the Income Tax Act, so the amount in this case shall not be deemed as business income under the provisions of Article 19 (1) 20 of the Income Tax Act.

3) Article 19(3) of the Income Tax Act provides that “The scope of businesses under each subparagraph of paragraph (1) shall be governed by the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea pursuant to Article 22 of the Statistics Act, except as otherwise provided in this Act.” However, the act of receiving agreements, etc. by filing a criminal complaint or claim for damages on the ground of copyright infringement does not seem to fall under any category of business stipulated in the Korean Standard Industrial Classification publicly notified by the Commissioner of the Statistics Korea.

4) As such, it is difficult to recognize the profit-making nature of the business income with respect to the act of acquiring the instant money, as well as, insofar as the instant money does not correspond to the business income under each subparagraph of Article 19(1) of the Income Tax Act, the instant money cannot be deemed as business income subject to taxation under the current taxation system under the Income Tax Act that lists the source of income. Accordingly, the instant disposition is unlawful.

3. Conclusion

If so, the plaintiff's claim is reasonable, and it is decided as per the disposition.

(c)