Designation of secondary tax liability of a corporation is legitimate, and does not constitute a legitimate invalidation.

(1) The first instance court's decision is that a person who was subject to the second tax liability of an investor of the non-party corporation falls under the Plaintiff's substantial oligopolistic shareholder, and thus, the disposition designating the Plaintiff as the second taxpayer by the non-party corporation is lawful, and even if there is an error, it cannot be deemed that the disposition is null and void.

○○ High Court-2015-Nu-11224 ( November 17, 2015)

AA Industry, Inc.

○ ○ Tax Office

○○ District Court-2014-Gu Partnership-538 ( August 21, 2014)

August 21, 2014

December 17, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The judgment of the first instance shall be revoked. The designation of the second taxpayer against the Plaintiff on May 26, 2008 by the Defendant is made to the Plaintiff.

disposition of occasional corporate tax of 2006 KRW 35,975,940 (including additional charges and increased additional charges; hereinafter the same shall apply);

value-added tax of 17,631,680 won at any time in 2006, value-added tax of 15,495,390 won at any time in 2006;

In 207, it is confirmed that the value-added tax of 8,876,130 won, and the value-added tax of 3,259,90 won for the second year of 2007 is all null and void.

Cheong-gu Office

On May 26, 2008, the Defendant confirmed that the imposition following the second taxpayer designation by an investor against the Plaintiff (the corporate tax in 2006, the first time value-added tax in 2006, the second time value-added tax in 2006, the second time value-added tax in 2007, the second time value-added tax in 2007, the second time value-added tax in 2007, the total value-added tax in 73,385,810, and the respective surcharges 18,884,480) is null and void a year.

1. Details of the disposition;

A. A limited liability company is a company established on May 30, 2003 at ○○○○○○○○○○, 121-6, for the purpose of painting construction, etc. among the construction businesses, and was closed on November 27, 2007. The Plaintiff is a company established on March 12, 2007 for the purpose of the construction business of steel structures, etc. at the same address as AA, and the Plaintiff is a company established on March 12, 2007.

B. In light of the fact that a limited liability company A was delinquent in national taxes and its property is not able to cover national taxes, additional dues, and expenses for disposition on default, the Defendant, on November 15, 2007, designated a subordinate taxpayer pursuant to Article 39 of the former Framework Act on National Taxes (amended by Act No. 8830, Dec. 31, 2007; hereinafter the same) and imposed a second taxpayer on the subordinate B to whom the limited liability company A was delinquent.

C. The Defendant issued a notice of imposition of KRW 35,975,940 (including additional charges and increased additional charges; hereinafter the same shall apply), 17,631,680 (including additional charges and increased additional charges), 15,495, 390, 2006 value-added tax for the second period of February 2006, 2006, 8,876, 130, 130, 207, 207, 3259, 90 of the corporate tax for the year 2006, a limited liability company A was designated as the secondary taxpayer of a limited liability company and limited liability company A was imposed on the Plaintiff on the ground that HB was an oligopolistic shareholder of the Plaintiff.

[Attachment]

2. Whether the dispositions of the instant case are legal.

A. The plaintiff's assertion

The Plaintiff’s representative HB holds only 35% of the Plaintiff’s shares, and does not constitute an oligopolistic shareholder as defined in Article 40 of the former Framework Act on National Taxes. The instant disposition is, without any legal basis, designated the Plaintiff as the secondary taxpayer, and its defect is serious, clear, and void.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) In order for a taxation disposition to be null and void as a matter of course, it is insufficient to say that there is an unlawful ground for the taxation disposition to be null and void. It is objectively clear that the defect violates the important laws and regulations, and it is necessary to determine whether the defect is significant and obvious, and there is a need to reasonably consider the purpose, meaning, function, etc. of the laws and regulations, which serve as the basis for the taxation disposition, and at the same time, about the specificity of the specific case itself. From this perspective, the taxation disposition against a person who has no factual basis for the taxation, is significant and obvious, but if there is objective reason to believe that it is subject to taxation due to any legal relation or factual basis which is not subject to taxation, it cannot be deemed apparent even if the defect is serious, and thus, it cannot be deemed null and void a taxation disposition that misleads the fact of taxation (see, e.g., Supreme Court Decisions 201Du7268, Sep. 4, 2002; 201Nu6364, Jun. 26, 1998).

2) The following circumstances are acknowledged to show the overall purport of the Plaintiff’s statement in the Plaintiff’s No. 1 through No. 9 of this case, namely, HB held 90% of the Plaintiff’s shares as the representative of a limited liability company A; HB established the Plaintiff at the same address as the limited liability company A on March 12, 2007, and was appointed as the joint representative director on May 17, 2007. The Plaintiff was holding 14,000 shares out of the Plaintiff’s total 40,000 shares, and the Plaintiff’s 20,000 shares out of the issued shares were additionally acquired from 60,00 shares out of the issued shares, and HB acquired 20,000 shares out of 7,00 shares out of 40,000 shares, which were listed on the Plaintiff’s △△ shareholder’s 20,000 shares out of 20,000 shares, which were listed on the Plaintiff’s △△ shareholder’s shares.

Furthermore, even if HB did not constitute the Plaintiff’s oligopolistic shareholder, even if the Defendant violated the disposition of this case against the Plaintiff, comprehensively taking account of the above circumstances, it can be found that the Defendant could have discovered that there was an objective circumstance that could mislead the Defendant as to the factual basis, which is the premise of the disposition of this case, to be subject to taxation, and that it could only be discovered whether it was subject to taxation or not. Thus, the defect of the disposition of this case is apparent in appearance and thus cannot be deemed null and void as a matter of course. Accordingly, the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

Relevant statutes

former Framework Act on National Taxes (amended by Act No. 9263, Dec. 26, 2008)

Article 26 (Extinguishment of Liability for Payment)

The liability to pay national taxes, surcharges, or expenses for disposition on default shall be extinguished in any of the following cases:

1. When the payment, appropriation, or cancellation of the imposition is made;

Article 39 (Secondary Liability to Pay Taxes by Investor)

(1) Any corporation (excluding any corporation whose stocks are listed on the securities market under Article 2 (1) of the Korea Securities and Futures Exchange Act).

c)appropriating the property of the corporation for national taxes, additional charges, and disposition fees for arrears that are imposed or payable by the corporation;

any of the following subparagraphs as of the date on which the liability to pay the national tax is established, if the tax falls short of all such requirements:

A person shall be subject to the secondary tax liability for such shortage: Provided, That an oligopolistic stockholder under subparagraph 2 shall be subject to the secondary tax liability.

(1) The total number of shares issued by the corporation (excluding non-voting shares; hereafter the same shall apply in this section).

(u) The number of oligopolistic stockholders held (excluding nonvoting stocks) the amount divided by or out of the total amount of investment;

C) The amount of investment or investment (in the case of oligopolistic shareholders under subparagraph 2 (a) and (b), the substantial rights of such oligopolistic shareholders;

shall be limited to the amount calculated by multiplying the number of stocks or amount of investment in the exercise.

1. General partners;

2. An oligopolistic stockholder who falls under any of the following items:

(a) Stocks or investments in excess of 50/100 of the total number of issued stocks or investments of the relevant corporation;

Persons who exercise de facto rights to shares;

(b) The management of a corporation, regardless of its name, such as honorary chairperson, president, vice president, chief executive officer, senior executive officer, director, or any other person;

A controlled person

(c) The spouse (including the person in de facto marital relations) and the person prescribed in items (a) and (b);

Lineal ascendants and descendants living with such lineal ascendants and descendants

(2) The term " oligopolistic stockholder" in paragraph (1) 2 means a stockholder or one limited partner and other partners as prescribed by the Presidential Decree.

A relative or a person with a special relationship, whose total amount of stocks owned or invested is the corporation concerned.

person who exceeds 50/100 of the total number of issued stocks or the total amount of investment (hereinafter referred to as “ oligopolistic stockholder”)

section 3.

Article 40 (Secondary Liability to Pay Taxes by Juristic Person)

(1) A corporation at the expiration of the payment period of national taxes (in cases of two or more national taxes, the national taxes which comes later

Property of the general partner or oligopolistic stockholder (hereinafter referred to as “investors”) (stocks issued or invested by the juristic person concerned)

(other than shares) that the investor is not able to pay for national taxes, additional charges, and disposition fee for arrears.

corporation shall have owned or withdrawn from the corporation, only in the case of any of the following subparagraphs:

The secondary tax liability for any shortage within the limit of the value of treasury shares shall be subject to the secondary tax liability.

1. A case where the Government intends to sell the stocks owned or shares contributed by the contributors by auction or private contract;

Even if there is no applicant for purchase;

2. When the transfer of investors’ stocks or investment shares restricted by Municipal Ordinance or the articles of incorporation of the juristic person.

(2) The secondary tax liability of a corporation under paragraph (1) shall be the total amount of assets of the corporation minus the total amount of liabilities.

The value of stocks owned by the investor divided by the total amount of stocks issued or total amount of investment in the corporation.

amount calculated by multiplying the amount of investment or by the amount of investment.

Article 42 (Mortgage’s Physical Tax Liability)

(1) Where a taxpayer fails to pay national taxes, surcharges or expenses for disposition on default, the property transferred for security shall be the taxpayer.

of the taxpayer's other property is insufficient to collect even if the taxpayer's disposition on default is conducted.

taxpayer's national taxes and property transferred for security in accordance with the National Tax Collection Act.

Additional dues and expenses for disposition on default may be collected: Provided, That the transfer which is the object of security before the legal term of the national tax is transferred;

This shall not apply to the secured property.

(2) The property transferred for security in paragraph (1) shall be transferred by a taxpayer under a contract between the parties concerned.

property substantially becomes the object of security for an obligation to the transferor.