Gwangju High Court ( Jeju)-2017-Nu-1799 ( April 25, 2018)

Whether the Plaintiff’s income received from the corporation of this case is the time of attribution, earned income, or other income

In determining the period of attribution of income under the Income Tax Act, the period of attribution shall be determined on the basis of whether the possibility of realizing the income is considerably maturely high, considering the management control of income, the degree of the objective of income generated, and the timing of securing the taxpayer's money. Therefore, the defendant's disposition is legitimate.

Article 20 of the Income Tax Act, Article 21 of the Income Tax Act

Supreme Court-2018-Du-45497 ( October 12, 2018)

AA, BB

○ Head of tax office

The second instance decision

Gwangju High Court ( Jeju) 2017Nu1799 ( April 25, 2018)

October 12, 2018

All appeals are dismissed.

The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Wage and salary income under Article 20(1) of the former Income Tax Act (amended by Act No. 14389, Dec. 20, 2016) includes not only all economic benefits, regardless of its payment form or name, which are related to the provision of labor, but also benefits closely related to the provision of labor on the premise of labor, in addition to direct labor (see Supreme Court Decision 2007Du1941, Oct. 25, 2007). Meanwhile, in order to ensure that income subject to taxation has been realized, even if it is not necessary until the income is realized, it shall be considerably mature and finalized in terms of the possibility of realizing the right to receive income, and the right to receive wage does not reach such degree, but also includes a complex.

The mere establishment of income cannot be deemed to exist at the stage of the mere establishment. Whether the right to generate income is mature or finalized shall be determined by comprehensively taking into account the specific nature and contents of each individual right, and various legal and de facto matters. In particular, in a case where there is a dispute between the payer of income and the beneficiary as to the existence and scope of claims, so long as it is obviously unreasonable in light of the background leading up to the lawsuit and the nature of the case, etc., the right to generate income cannot be deemed to have been established, and the right to receive income shall be deemed to have become final and conclusive at the time the judgment became final and conclusive (see Supreme Court Decision 96Nu2200, Apr. 8, 1997). 2. Review of the reasoning of the lower judgment and

(1) On December 1, 2005, the Plaintiffs joined CCC (hereinafter referred to as “CCC”) and were appointed as a director on April 13, 2007. At the time of CCC work, the Plaintiffs were in charge of granting permission for the tourism business of the CCC, and following the approval for the relevant business, the Plaintiffs were in charge of overall tasks related to the construction fund management of the CCC golf course or the planning and management of the golf course design and the golf course plan. After the completion of the said golf course, the Plaintiffs were in charge of promoting the OOO tourist development project.

(2) On October 8, 2007, the Plaintiffs entered into the instant arrangement with the CCC. The said arrangement was that “the Plaintiffs were separated from other companies to implement the CCC’s tourism development project,” and CCC paid 1 billion won each as a successful compensation according to the terms of oral promise to the Plaintiffs, and that “the amount of KRW 200 million shall be paid up to December 31, 2007, and the remainder shall be paid in principle according to the company’s financial conditions every year or every half year from 2008.” Meanwhile, at the time of the preparation of the instant agreement, CCC was responsible for the loan obligations received by the CCC for construction of golf courses, etc. as part of the development of the CCC tourism zone, and the financial conditions were not sufficiently met, and the Plaintiffs were also aware of such fact, and the CCC did not proceed only to the intermediate development project of the CCC.

(3) Around 2010, the Plaintiffs withdrawn from the CCC. On June 11, 2010, on the ground that CCC did not pay the amount under the instant agreement, the Plaintiffs filed a civil lawsuit seeking the payment of the agreed amount against CCC as Jeju District Court 2010Kahap1537. The said court rendered a judgment ordering the Plaintiffs to pay each one billion won of the agreed amount to CCC.

(4) The CCC appealed against the above judgment. On April 20, 2012, the appellate court concluded the instant conciliation as follows: “CCC paid a total of KRW 3 billion to the Plaintiffs and Park Jong-il, and the Plaintiffs, out of the above amounts, hold the issues of KRW 700 million in proportion to each of the above amounts.” The Plaintiffs received the issues from the CCC around April 2012 following the instant conciliation.

(5) On May 31, 2013, in the process of filing global income tax return for the year 2012, the Plaintiffs filed a request for correction by asserting that the pertinent amount received as above was not 2012 years but 2007, based on the instant agreement, and that the time when income accrued to the key amount was returned and paid each tax amount including wage and salary income accrued in the year 2012, and filed a request for correction of all or part of the claim for refund. The Defendant rejected the instant disposition.

3. Examining these facts in light of the legal principles as seen earlier, since the Plaintiffs performed their duties as a director of the CCC and received the key amount in relation to the performance included in the scope of their duties, it is reasonable to deem the key amount to be wages closely related to economic benefits or labor in relation to the Plaintiffs’ labor provided as a director of the CCC. However, the instant agreement alone cannot be deemed to have become a mature and finalized to the extent that the possibility of realizing income equivalent to the key amount is considerably high in light of the developments leading up to the occurrence of disputes over the overall obligation to pay the amount under the instant agreement between the CCC and the Plaintiffs, and such litigation cannot be deemed to be clearly unreasonable in light of the nature of the case. Therefore, the instant agreement alone is difficult to deem that the key amount of income corresponding to the wage and salary income has become final and conclusive in 2012 according to the instant adjustment, since the time when the income accruing from the key amount was attributed was not 2007 years

Although the reasoning of the lower court did not contain inappropriate or inadequate points, the conclusion that the instant disposition was lawful is justifiable. In so determining, it did not err by misapprehending the legal principles on the timing of attribution of income.

There is no error affecting the outcome.

4. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party, and all costs of appeal are assessed against the losing party.

It is decided as per Disposition by the assent of all participating Justices.