Whether a person registered as a representative director on the register has actually been the representative director

The grounds of appeal by appellant are without merit under Article 4 of the Act on Special Cases Concerning the Procedure of Appeal.

Article 14 of the Framework Act on National Taxes

Article 67 of the Corporate Tax Act

The appeal is dismissed.

Litigation costs shall be borne by the plaintiff.

We examine the grounds of appeal in comparison with the records and the judgment of the court below. Since it is clear that the grounds of appeal by the appellant fall under Article 4 of the Act on Special Cases Concerning the Procedure for Appeal, it is dismissed under Article 5 of the same Act. It is so decided as per Disposition by the assent

[Seoul High Court 2007Nu4638 ( November 21, 2007)]

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant shall revoke the disposition of imposition of global income tax of KRW 109,386,940 on March 1, 2005 against the plaintiff on March 1, 2005.

1. Details of the disposition;

A. From July 7, 1999, ○ Construction Co., Ltd. (hereinafter referred to as ○○ Construction Co., Ltd.) discontinued construction business on September 18, 2004. After undergoing a tax investigation on ○○ Construction Co., Ltd., the head of Seocho District Tax Office issued a notice of KRW 24,377,00, total purchase amount of KRW 3,300, and KRW 247,677,000, total of KRW 247,67,000, and KRW 247,777,000, the above amount was included in deductible expenses for processing, and the amount was transferred from January 1, 2001 to August 16, 201 to the Plaintiff who was registered as ○○ Construction Co., Ltd.’s representative director’s corporate register change and transferred it to ○○ Construction Co., Ltd., Ltd., and notified the Defendant of KRW 175,787,707.

B. As above, the Plaintiff did not report and pay the Plaintiff’s global income tax amounting to KRW 61,231,00 on the earned income data accrued from 175,437,870 and ○○ Construction in 2001. The Defendant issued the instant disposition imposing global income tax on the Plaintiff on March 1, 2005, on which the Defendant imposed the global income tax amounting to KRW 109,386,940 (including additional tax) for the year 2001.

[Ground of recognition] Facts without dispute, Eul evidence Nos. 1 to 4, 6, Eul evidence No. 2-1, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(i)The plaintiff's assertion

The Plaintiff was registered as a representative director on the corporate register of ○○ Construction, but only lent KRW 50,00,000 to Hong○, the actual president, the representative director, in investing in the name of the representative director, and did not have any fact of holding the office of the representative director, and there was no fact of receiving benefits from ○○ Construction. Therefore, the instant disposition on different premise was unlawful as it violates the principle of substantial taxation under Article 14 of the Framework Act

(2) The defendant's assertion

As an investor of ○○ Construction and the nominal representative director, the Plaintiff participated in the management of ○○ Construction and actually, it is legitimate that the Defendant deemed the Plaintiff as the representative of ○○ Construction and disposed of the Plaintiff, and even if not, the Plaintiff bears the liability to pay global income tax on the dividend income exceeding the amount of income disposed, so the instant disposition should be maintained.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) The recognition contribution system for representatives under the Corporate Tax Act is not based on the facts that such a representative has generated income, but it is intended to consider certain facts that can be recognized as such to be a bonus to a de facto representative, regardless of their substance, in order to prevent unfair conduct under the tax law by a corporation. In such a case, the representative of a corporation subject to the bonus disposal should be interpreted strictly.

(2) According to the facts that ○○○○○○○○ Construction, etc., ○○○○○○○○○○○○ Construction, etc., ○○○○○○○○○○○○○○○○○ Construction, etc., 6, and 3-1 through 4-1, 2, and 9, 11 through 13, the Plaintiff’s corporate register was indicated as the representative on May 8, 200 and resigned on August 16, 200; 15,00 shares of ○○○○ Construction, etc., 200 (total issued shares 50%) were transferred to the Plaintiff for 200, 15,000 shares of ○○○○○ Construction, etc., 200, an office of ○○○○○○○ Construction, which was named as the ○○○○○○○○○○○○ Construction, which was named as the 2003, supra.

(3) On the other hand, in light of the facts that ○○○○○ Construction Project was carried out by ○○○○○○○○○○○○○○○○○○○○ Construction Project, KRW 13, and KRW 8-1 to 6, each of the above ○○○○○○○○○○○○○○○○ Construction Project, and the testimony of ○○○○○○○○○○○○○○○○○○ Construction Project, which was not carried out by ○○○○○○○○○○○○○○○○○○○○○ Construction Project, and the overall purport of the pleadings, ○○○○○○ Construction Project was established to promote a project to purchase two parcels of land and become a representative director, and thus, it was difficult for the Plaintiff to receive a loan from ○○○○○ Construction Project, which was not carried out by ○○○○○○○○○○ Construction Project, with the Plaintiff’s consent of 15,000 shares of ○○○ Construction Project.

(4) As above, the Plaintiff’s promise to make investment returns from Hong○○○ and invested in ○○ Construction upon the request of Hong○○○○○, where the credit standing was not good, was recorded as the representative director for the loan of ○○ Construction; the implementation of the housing site creation project, which is the sole business objective of ○○ Construction, led by Red○○○○ and Red○○○. The Plaintiff did not give specific instructions or make important decisions on the project; Hong○ managed the corporate passbook and seal impression; it can be deemed that the Plaintiff paid the office rent, etc. of ○○○ Construction as an investor; the Plaintiff’s payment of the office rent, etc. is difficult to be considered as a financing; the Plaintiff’s external contracting director, even if on the nominal representative director, did not necessarily require confirmation of the representative’s corporate register as a matter of course; the Plaintiff’s actual representative director did not have any special authority to do so in the process of signing the contract; and thus, it is not unlawful to recognize that the Plaintiff did not have any other specific authority to do so.

(5) As to this, the Defendant, on December 31, 2001, received dividend income from ○○ Construction to receive 260,000,000 won from the Plaintiff, and thus, was obligated to pay the global income tax on dividend income. The dividend income is also subject to global income tax. Meanwhile, the above dividend income exceeds 175,437,870 won that was disposed of to the Plaintiff, and thus, the instant disposition of taxation should be maintained even if the disposition of income against the Plaintiff was unlawful.

On December 31, 2001, the fact that the Plaintiff received 260,000,000 won from ○○ Construction, as seen earlier. The fact that ○○ Construction deemed it the Plaintiff’s dividend income and filed a withholding tax or that the Plaintiff did not file a global income tax return on the dividend income, can be acknowledged by taking into account the following: (a) there is no dispute between the parties, or that the Plaintiff did not file a global income tax return on the dividend income, and thus, (b) the Plaintiff is liable to pay the global income tax on the dividend income for the year 201.

In addition, wage and salary income and dividend income are added together and constitute a single tax base as global income. The assertion of only the source of income generated within a specific taxable period within the scope of global income subject to added-up constitutes a change in the grounds of disposition within the scope of maintaining the identity of disposition, and thus, it is also allowed to claim that the Defendant actually belonged to the Plaintiff with respect to the instant disposition imposing the comprehensive income tax by disposing of the income under the Corporate Tax Act against the Plaintiff, and the Plaintiff’s dividend income exceeds the amount of income disposed of to the Plaintiff. Accordingly, the instant disposition is legitimate

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

Related Acts and subordinate statutes

Basic Act

Article 14 (Real Taxation)

(1) If the ownership of income, profit, property, act or transaction subject to taxation is merely nominal and a person to whom such ownership belongs exists, the tax-related Acts shall apply to such person to whom such person actually belongs as a taxpayer.

Corporate Tax Act

Article 67 Disposal of Income

In filing a report on the tax base of corporate tax on income for each business year under the provisions of Article 60 or in determining or revising the tax base of corporate tax under the provisions of Article 66 or 69, the amount included in gross income shall be disposed of to the person to whom it belongs as bonus, dividend, other outflow from the company, internal reserve, etc.

Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17457 of Dec. 31, 2001)

§ 106. Disposal of income

(1) The amount included in the calculation of earnings under the provisions of Article 67 of the Act shall be disposed of under the provisions of the following subparagraphs. The same shall apply to non-profit domestic corporations

1. Where the amount included in the calculation of earnings has clearly leaked out of the company, the dividends, bonuses from the disposition of profits, other income, and other outflow from the company under each of the following items according to the person to whom they accrue: Provided, That where the accrual is unclear, it shall be deemed as accrual to the representative (where the total number of stocks held by an officer who is not a minority shareholder under the provisions of Article 87 (2) and persons with a special relationship under the provisions of paragraph (4) of the same Article is 30% or more of the total number of stocks issued or total investment amount of the relevant corporation and the officer actually controls the operation of the corporation, he shall be deemed the representative, and where a corporation which has been exempted from withholding taxes under the provisions of Article 46 (12) of the Restriction of Special Taxation Act reports that there is a separate representative among the officers who are stockholders, etc., the reported person shall be the representative, and where there are