Cho Jae-2016-west-3372 ( October 28, 2016)

Remuneration received by the trustee in bankruptcy in the court shall be business income.

Remuneration received from a trustee in bankruptcy in the court shall be the business income earned by the continuous and repeated activity under his/her own account and responsibility for profit-making purposes.

Article 19 of the former Income Tax Act and Article 21 of the former Income Tax Act

2016Guhap84702 Revocation of Disposition of Imposing global income tax, etc.

O KimO

1.O Head of the tax office

2.The head of theO

2017.04.25

2017.05.25

1. The plaintiff's claims against the defendants are all dismissed.

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

The Plaintiff’s imposition of global income tax of KRW 00 (including additional tax of KRW 000), global income tax of KRW 000 (including additional tax of KRW 000), global income tax of KRW 000 (including additional tax of KRW 000) for the year 2012 as of June 8, 2016, and each imposition of KRW 000 (including additional tax) for the local income tax of KRW 201 as of December 19, 2016, and KRW 000 (including additional tax) for the local income tax of KRW 201 as of December 19, 2016 is revoked.

1. Details of the disposition;

A. As an attorney-at-law of law firmO, the Plaintiff was appointed from 2011 to 2012 as a trustee in bankruptcy in multiple individual bankruptcy cases and performed his/her duties.

B. During the above taxable period, the Plaintiff received a total of KRW 000 (hereinafter “instant remuneration”) as remuneration for the conduct of corporate bankruptcy in relation to the individual bankruptcy case, and the ratio of the instant remuneration to the total amount of the annual income accrued to the Plaintiff is as listed below.

C. The Plaintiff considered the instant remuneration as other income under Article 21(1)19 of the former Income Tax Act (wholly amended by Act No. 11611, Jan. 1, 2013; hereinafter the same shall apply) and Article 87 subparag. 1(b) of the former Enforcement Decree of the Income Tax Act (wholly amended by Presidential Decree No. 24823, Nov. 5, 2013), and included the amount of income for each pertinent year, and filed a comprehensive income tax return and payment by applying the provision of 80% of necessary expenses.

D. However, on June 8, 2016, by excluding necessary expenses provisions on the ground that the instant remuneration constitutes business income, Defendant OOO head of the tax office revised and notified the Plaintiff of the global income tax of KRW 000 (including additional tax of KRW 000), global income tax of KRW 000 (including additional tax of KRW 000), global income tax of KRW 200 for the year 2012 (hereinafter referred to as “disposition by Defendant OO head of the tax office”), and accordingly, Defendant OO head of the tax office corrected and notified the Plaintiff of KRW 00 (including additional tax) of the local income tax of KRW 00 for the year 201 and the local income tax of KRW 00 for the local income tax of KRW 00 for the year 2012 (hereinafter referred to as “Defendant O disposition”).

E. The Plaintiff filed an appeal with the Tax Tribunal as to the disposition by Defendant OO head of the tax office, but was dismissed on October 28, 2016.

[Ground of recognition] Unsatisfy, Gap evidence 1 to 4, Eul evidence 1 and 4 (each number)

Each entry, the whole purport of the pleading, including

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Inasmuch as deeming the instant remuneration as business income is unreasonable, the pertinent income ought to be deemed as other income and deemed necessary expense provisions ought to be applied. The reasons are as follows.

① The Plaintiff, as determined by the court, performed a public service entrusted by the State and received remuneration for reimbursement of actual expenses, and cannot be deemed as a work performed under his/her own account and responsibility or a profit-making activity. Even if the continuity and repetition of the work is recognized, this would considerably lower the remuneration of the administrator, but, in most bankruptcy cases, the appointment of the administrator is required.

Since the new personal bankruptcy system should be limited after February 1, 2012 when it was implemented, the remuneration for the previous period should be regarded as other income.

② As the Plaintiff’s partner attorney-at-law can include office deposits, rents, remuneration paid to an employee of a law firm who is an assistant, etc. in the expenses of the law firm, it cannot be treated as expenses corresponding to the fees paid by a trustee in bankruptcy. Thus, even if the trustee in bankruptcy, who is an individual attorney-at-law, enters the office rents, personnel expenses, etc. of the law firm in comparison with that which the trustee in bankruptcy, who is an attorney-at-law, may impose unfair taxes on the law firm

(3) The trustee in bankruptcy falls under the duties of attorney-at-law as general legal affairs and litigation affairs, and when it is business income, a partner or an affiliated attorney-at-law of a law firm is unable to perform the duties of attorney-at-law for his/her own or a third party's account.

2) The National Tax Service, around 200, expressed the official view by interpreting that the remuneration of the trustee in bankruptcy constitutes other income, and has been dealt with as such for 15 years thereafter, and thus granted legitimate trust to the same trustee in bankruptcy as the Plaintiff. However, Defendant OO head of the tax office changed the past interpretation contrary to such trust and imposed retroactive taxation, and did not take such measures as well as having notified the court and the trustee in bankruptcy, the withholding agent, of the fact that the remuneration of the trustee in bankruptcy was reported and paid as business income under a new personal bankruptcy system enforced from February 1, 2012. Accordingly, the disposition of the head of Defendant OO head of the tax office is unlawful in violation of the principle of trust protection and the principle of trust and good faith, and the tax base determined according to the disposition of the head of Defendant OO head.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Where the instant remuneration constitutes business income and other income

A) According to Article 19(1) of the former Income Tax Act, income (excluding research and development business prescribed by Presidential Decree) generated from a specialized, scientific, and technical service business (excluding research and development business prescribed by Presidential Decree) in the pertinent taxable period, or income similar to income under subparagraphs 1 through 19, generated from continuous and repeated activity under his/her own account and responsibility for profit-making purposes (Article 20) constitutes business income. Meanwhile, pursuant to Article 21(1)19(c) of the former Income Tax Act, income, other than interest income, dividend income, business income, labor income, pension income, retirement income, and capital gains, which an attorney temporarily receives for services provided by him/her by taking advantage of his/her knowledge or function, constitutes other income.

The determination of which income is business income shall not be based on the form, name, and appearance of the transaction between the parties, but on the substance of the transaction, and shall be based on the substance of the taxpayer's occupational activity, the period, frequency, mode, and manner of the transaction, and shall be

Whether a Dong is for profit-making purposes and whether it has continuity and repetition of business activities to the extent that it can be seen as business activities ought to be determined according to ordinary social norms (see Supreme Court Decision 2001.

6. 15. See, e.g., Supreme Court Decision 2000Nu5210 Decided 15.

B) In full view of the following circumstances revealed through the facts acknowledged as well as the purport of the entire pleadings, it is reasonable to view that the instant remuneration constitutes business income obtained by the Plaintiff, a trustee in bankruptcy, through continuous and repeated activities under his/her own account and responsibility for profit-making purposes. Accordingly, the Plaintiff’s assertion on this part is without merit.

① In light of the fact that the Plaintiff was appointed as a trustee in bankruptcy for two years from 2011 to 2012 and performed multiple bankruptcy-related corporate affairs, it cannot be deemed that there was no continuity or repetition of the Plaintiff’s activities, and the attorney-at-law’s fees acquired therefrom cannot be deemed as the remuneration that he received by providing “temporaryly” by utilizing his knowledge or skills. In the Plaintiff’s assertion, the number of cases handled in 2012, which was after the enforcement of the amended Act, and the amount of revenue, are larger, but the number of cases involving bankruptcy-related corporate affairs performed in 2011 and the amount of revenue therefrom are sufficiently continued and repeated.

② Even considering the fact that the bankruptcy-related re-election has a strong nature as a public interest, in view of the amount of the instant remuneration or the ratio of the instant remuneration to the total amount of the Plaintiff’s annual income attributed to the Plaintiff, it is difficult to deem that the Plaintiff did not have profit-making purposes or that the instant remuneration is equivalent to the compensation for actual expenses. Furthermore, although the bankruptcy trustee was appointed by the court, it cannot be deemed that the Plaintiff performed long-term bankruptcy-related re-election regardless of his/her will

③ From the business income of the instant remuneration, the Plaintiff may be recognized as necessary expenses by submitting evidentiary data in calculating global income tax. In the event that a trustee in bankruptcy additionally performs his/her business without additional expenses, using the office fee and personnel expenses of the law firm to which the Plaintiff belongs, such as office fee and personnel expenses, the Plaintiff may not be recognized as necessary expenses because there is no additional expenses incurred in performing the trustee’s business. On the contrary, if there is rent or personnel expenses additionally paid by the Plaintiff for performing the trustee in bankruptcy, this may be proven to be necessary expenses, and thus, there is no unreasonable or inequality problem.

④ Article 52(1) of the Attorney-at-Law Act provides that a partner or partner attorney-at-law who is not a partner of a law firm may not perform the duties of attorney-at-law on his/her own or a third party’s account. Article 49(1) of the same Act provides that a law firm shall perform the duties of attorney-at-law under this Act and other Acts. Thus, the performance of duties that do not belong to the duties of attorney-at-law for his/her own or a third party’s account does not constitute a violation of Article 52(1) of the Attorney-at-law Act. However, Article 355(1) of the Debtor Rehabilitation and Bankruptcy Act provides that a bankruptcy trustee shall be appointed by the court after hearing the opinion of the management committee, and Article 355(2) of the same Act provides that a bankruptcy trustee may also become a trustee in bankruptcy. In addition, whether Article 52(1) of the Attorney-at-Law Act is in question depending on the substance

2) Whether the Defendants’ disposition violates the principle of trust protection or good faith

Article 18(3) of the Framework Act on National Taxes provides that “any act or calculation according to a tax law interpretation or practice shall be deemed lawful after such interpretation or practice has been generally accepted by taxpayers, and no tax shall be imposed retroactively by a new interpretation or practice.” In a tax law relationship, in order to establish the good faith principle or non-taxation practice as provided in Articles 15 and 18(3) of the Framework Act on National Taxes with respect to an act of a tax authority, there is an objective fact that the tax authority had not imposed any tax on certain matters over a long period, and there is a wish that the tax authority would not impose any tax on any specific taxpayer with the knowledge that it may impose tax on such matter, and such intent shall be expressed externally and explicitly or implicitly (see, e.g., Supreme Court Decision 90Nu10384, Jul. 27, 1993). In addition, the phrase “an interpretation or practice of the tax-related law” under Article 18(3) of the Framework Act on National Taxes, which is a general taxpayer, is unreasonable interpretation or practice, but rather than a specific taxpayer.

In this case, although the authoritative interpretation by the National Tax Service asserted by the Plaintiff is unclear, it seems not to be about the case where the service is provided continuously and repeatedly as a trustee in bankruptcy as in this case. The fact that Defendant OO chief received the income return from the trustee in bankruptcy, including the Plaintiff, as other income, is insufficient to recognize that the above Defendant’s remuneration was accepted as being a public view that it is miscellaneous income or as other income to the extent that it is recognized that it is not unreasonable for the taxpayer to trust such interpretation or practice. Moreover, there is no other evidence to acknowledge it. Moreover, as global income tax is determined by the method of return and payment, it is determined specifically by the taxpayer’s duty to pay taxes by the act of reporting and paying the tax base and tax amount, and there is no obligation for the tax authority to inform or notify in advance the taxpayer of whether the taxpayer is subject to the return and payment or the legitimate tax amount. The Plaintiff’s assertion on this part is without merit.

Therefore, it is difficult to see that the disposition of the head of Defendant OO is in violation of the principle of trust protection, the good faith, and non-taxation practice, and accordingly, the disposition taken by the head of Defendant OO is legitimate. Therefore, the Plaintiff’s assertion

D. Sub-committee

The plaintiff's assertion is without merit, and the disposition by the defendants is legitimate.

3. Conclusion

Therefore, the plaintiff's claim against the defendants is dismissed in its entirety as it is without merit. It is so decided as per Disposition.