Whether income received as an auditor, a mediator, etc. can be viewed as business income other than other income.

Even if the formal name of income is consistent with that listed in the law, if the income is generated in the process of carrying out a project continuously and repeatedly for a certain profit rather than a temporary or incidental income, it shall be deemed business income regardless of its name.

Article 21 of the Income Tax Act

Suwon District Court 2015Guhap65347 global income and revocation of disposition

AA

K Director of the Korean Tax Office

KK Head of the tax office on November 6, 2014, 200* global income tax on the plaintiff 20*

****7,760 won (including additional tax), 20* global income tax **369,6** (additional tax)

imposition, imposition of global income tax*,69,340 (including additional tax), 2012

The imposition of global income tax**261,260 won (including additional tax) for the fiscal year and the defendant KK 20*

11.6. The imposition of local income tax (resident tax) belonging to the year 20***6,820 won against the plaintiff on June 1, 199

20** Local income tax (resident tax) for the year***5,760 won, local income tax for the year 2011

(resident tax) imposition of KRW 1*7,350, 200* Local Income Tax (resident tax) for the year*68,790.

part shall be revoked.

Local income tax (resident tax) for the year**68,820 won among lawsuits against the KK market

Parts exceeding *55,780 won in Sector, 20* Local Income Tax (resident Tax) for the year *55,760 won in Parts*5,760

Part above *36,960 won in the disposition of imposition, 20* Local Income Tax (resident Tax) for the year*

**77,350 of the imposition of KRW **66,940 of the imposition of KRW *66,940 of the imposition, 20* Local Income Tax (ju) of the year

part of the disposition of imposition *68,790, which exceeds KRW **26,120, respectively, in respect of each claim for revocation

As it is unlawful, the plaintiff's claim against the director of the tax office and defendant KK.

To accept the remainder of the claim against the market within the extent recognized in the preceding 3.

Each remaining claim shall be dismissed as it is without merit. It is so decided as per Disposition.

November 16, 2016

January 25, 2017

1. Of the disposition of local income tax (resident tax) for the year 20**68,820 among the disposition of imposition of KRW **5,78,820 among the disposition of imposition of KRW **5,780 among the disposition of imposition of KRW 20*5,78,820 against the defendant KK market, the part exceeding KRW *36,960 in the disposition of imposition of local income tax (resident tax) for the year *36,960 in excess of KRW *36,960 in the disposition of imposition of KRW 1*37,350 in the year 200**6,940 in the local income tax (resident tax) for the year *6,940 in the disposition of imposition of KRW *68,790 in the local income tax for the year *

2. From among the disposition of global income tax reverted to year 20*** 20** 20* 55,780 won against the plaintiff on November 6, 200* *62,231 won, 20* *0**,894 won, **, 467 won, and **4,00 won in the disposition of global income tax reverted to year 201 * *4,944 won in the disposition of global income tax belonging to year 2012, and the disposition of imposition of additional tax due to additional tax *4,944 won in the disposition of global income tax belonging to year 20** 20*5,519,50 won in the disposition of local income tax (resident tax) belonging to year *60*66, 2066, *6466, 2066, *66666, *606, 2066, *6665, *6666, *666665).

3. The plaintiff's remaining claims against the defendants are dismissed.

4. Of the costs of lawsuit, 2/3 is assessed against the Plaintiff, and the remainder is assessed against the Defendants.

Cheong-gu Office

1. Details of the disposition;

A. On August 14, 1998, the Plaintiff joined a law firm AA law office and closed its business on February 25, 200**. From August 9, 201 to March 19, 200****, the Plaintiff served as the representative of a securities investment company. From January 1, 200* to April 30, 200**.

B. During the period from 20* to 2012, the Plaintiff was paid KRW 405,822,580 (hereinafter referred to as “the instant money”) from the YY Insurance Corporation as a member of the GGY Management Foundation’s auditor, EEE court and AUU method Board, and the ECE Insurance Corporation’s standing commissioner, and the ECE Insurance Corporation’s Committee for Deliberation on Non-Performing Liability. From the K KK Foundation, the Plaintiff was paid KRW 405,82,580 (hereinafter referred to as “the instant money”) under the pretext of advisory fees or meeting attendance expenses from the YY court, and the terms of meeting attendance expenses, and was considered as other income. The Defendants reported and paid the global income tax for each corresponding year. The Defendants calculated the Plaintiff’s global income tax for 20* to 200 to 2012, again calculated the amount of global income for which the instant money belongs to “business income,” as the list of the local income tax reported and corrected tax assessment in attached Form 1.

D. The Plaintiff filed an appeal against the disposition of imposition of each of the above Item C above, and the Tax Tribunal rendered a decision on April 20, 200* that the disposition of imposition of each of the global income tax by the Defendant KK superintendent of the tax office excluded the additional tax on negligent tax returns and corrected the tax amount and dismissed the remainder of the claims. Accordingly, the Defendant KK superintendent of the tax office refunded to the Plaintiff the money stated in the column of the "additional tax on negligent tax returns" listed in the attached Table 1 attached hereto (* KRW) around May 27, 200*.

E. On July 2, 200*, as the global income tax was corrected as stated in the above d. above, the defendant KK market corrected ex officio the imposition of each local income tax (resident tax) as stated in the d. above. The amount of tax revised as stated in the d. List of Attached 2 Tax Dispositions, and refunded the amount indicated in the d. List of Attached 2 Tax Dispositions to the plaintiff (hereinafter referred to as "each disposition of this case"), and the Tax Tribunal dismissed the plaintiff's appeal against the defendant K market on August 27, 200*.

2. Whether a request for cancellation of the reduced amount of duty is legitimate.

ex officio, we examine whether the part of the claim for revocation regarding the excess of the stated amount is legitimate in relation to the imposition disposition of local income tax (resident tax) for the local income tax belonging to the year 20** or 20* among the lawsuits in this case.

If an administrative disposition is revoked, such disposition is no longer effective as it becomes void due to the revocation, and a lawsuit seeking revocation against non-existent administrative disposition is unlawful as there is no benefit of lawsuit (see, e.g., Supreme Court Decision 2004Du5317, Sept. 28, 2006). However, part of the disposition imposing local income tax (resident tax) belonging to the defendant K K market 20*68,820, which is sought by the plaintiff, exceeds KRW 15,780, in the disposition imposing local income tax (resident tax) belonging to the year 200*5,760, in the disposition imposing local income tax (resident tax) belonging to the year 200*36,960, in the disposition imposing local income tax (resident tax) belonging to the year 200*6,940, in the disposition imposing local income tax (resident tax) belonging to the year *68,790, in the previous part of the disposition imposing reduction of tax ex officio over the amount exceeding KRW 16, as mentioned in the preceding part of the disposition.

3. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

1) Business income under the Income Tax Act is income derived from continuous and repeated activities under one’s own account and responsibility for profit-making purposes. The Plaintiff’s duties are not for profit-making in light of its nature and form, etc., not for profit-making purposes, and the instant amount constitutes other income, not for business income, since it is a consideration for temporary activities. Accordingly, each of the instant dispositions based on the premise that the instant amount is business income is illegal.

2) The RRR District Court, JY Management Foundation, and LL Insurance Corporation: (a) all of the instant funds constituted other income and withheld income tax corresponding thereto; and (b) there are no cases where such income was classified as business income; (c) the Plaintiff was unable to accurately report and pay income tax on the instant funds because it was not aware that the instant funds were business income; and (d) there was no cause attributable to the Plaintiff, and thus, the part on imposition of penalty tax for unfaithful payment by Defendant KK Head of the instant disposition is unlawful.

(b) Related statutes;

Attached Table 3 shall be as stated in the relevant statutes.

(c) Fact of recognition;

1) The Plaintiff, as an attorney-at-law, was appointed as an auditor of the LY Management Foundation on April 22, 200*, and was promoted on April 13, 200* as a standing commissioner of the JJ Court and the KJK District Court on April 13, 200*, and was commissioned as a member of the PP insurance Corporation’s LL Non-Performing Liability Deliberation Committee on July 15, 200*.

2) The Plaintiff did not receive money in the name of salary as an auditor of the LYY Management Foundation, or did not work full-time at the office of the said Foundation. However, during the term of office, the Plaintiff performed duties such as interpreting and applying relevant laws and regulations, reviewing the enactment of internal regulations, and consultation on litigation cases related to dormantY or insurance money, etc., by visiting the office of the said Foundation more than once a month, and by visiting the office of the said Foundation more than once a month, and making a decision-making related to the work upon receiving visits from the employees of the said Foundation more than three times a month, and accordingly, received allowances for attendance at the audit activities or the board of directors’ meetings.

3) As a standing commissioner of the FF court, the Plaintiff is regularly involved in the resolution of the conciliation case by receiving a certain conciliation case as a dividend, and was paid a certain daily allowance and allowance every month in return therefor.

4) The Plaintiff was commissioned as a member of the Y Insurance Corporation’s Committee for Deliberation on Unfair Liability (such as a legal and financial expert) under the Y Insurance Corporation’s control as its main business, and attended a meeting of the Committee held once and twice a month to provide advice and opinions on the agenda and received advisory fees and attendance expenses.

5) For the period from 20* to 2012, the Plaintiff received total of KRW 1300,00 from the HumanY Management Foundation as follows, for audit service activity or for attendance at the board of directors, as allowances **,800,000 from the KK District Court as allowances ***,80,000, total of KRW ****72,580 from the YY Examination Corporation as advisory fees, meeting attendance expenses, and total of KRW ***72,580 from the YY Examination, and its aggregate amount ***,822,580,580.

D. Determination

1) Whether the instant money constitutes business income

A) Article 19(1)13 of the Income Tax Act provides that "income generated from specialized, scientific, and technical service business shall be classified as business income, and Article 21(1) provides that "other income shall be income, other than interest income, dividend income, business income, earned income, pension income, retirement income, and capital gains, as prescribed in the following subparagraphs." One of the provisions provides that "the cost for the services provided temporarily by a lawyer, certified public accountant, certified public accountant, certified tax accountant, architect, surveyor, patent attorney, or any other person with professional knowledge or special skills using his/her knowledge or skills and for remuneration or other consideration." According to the above provisions, other income listed in each subparagraph of Article 21(1) of the Income Tax Act can be recognized only in cases of income other than that listed in the main sentence of the above Article. It is clear in the text of the Act that it means temporary and incidental income, and even if the formal name of income conforms with those listed in each subparagraph of the above Article, if such income is continuously and repeatedly made in the process of performing the business, it should be viewed as its name.

In addition, the issue of which income constitutes business income or temporary income does not go through the form, name, and appearance of the transaction entered into between the parties, but is evaluated according to its substance. It shall be determined according to social norms in consideration of the substance of the taxpayer's occupational activity, duration, frequency, mode, other party, etc. of the transaction, as well as the continuity and repetition of such activity to the extent that it can be seen as business activity. In such determination, it shall be determined in consideration of not only the profit-making activity but also all the circumstances before and after it (see Supreme Court Decision 200Du5203, Apr. 24, 200). 1) In this case, it is reasonable to view that the Plaintiff's business as an auditor of the YY Foundation was continuously related to the operation of the Foundation, (3) it is reasonable to consider that the Plaintiff's business was related to the Plaintiff's professional knowledge and consultation about the establishment of internal regulations, and (4) it is not related to the Plaintiff's business as a member of the KYK's standing Insurance Foundation's business.

C) Meanwhile, the plaintiff asserts that the amount received from the DormantY Management Foundation and the Y Insurance Corporation constitutes "non-taxable income" under Article 12 subparagraph 3 (i) of the Income Tax Act, and Article 12 subparagraph 1 (i) of the Enforcement Decree of the Income Tax Act. However, Article 12 subparagraph 3 (i) of the Income Tax Act provides that "wages in the nature of compensation for actual expenses prescribed by Presidential Decree out of earned income and retirement income" as non-taxable income. Article 12 subparagraph 1 of the Enforcement Decree of the Income Tax Act provides that "the allowances received by the members of the National Academy of Sciences and the Academy of Arts (including the members of the Academy of Sciences) who are not paid by the Commission pursuant to the Act and subordinate statutes" (including the funds received from the YY Management Foundation and the Y Insurance Corporation). As seen in the above B, the plaintiff's assertion that the plaintiff's provision of services, such as continuous legal advice, constitutes "business income" or "retirement income" for profit-making purposes. Therefore, the plaintiff's assertion is not justified.

D) Furthermore, the Plaintiff asserts that, even if the instant money falls under business income, the Plaintiff cannot be deemed as a lawyer business in light of the nature and content of the business performed by the DoY Management Foundation, the KKK District Court, and the Y Insurance Corporation, in calculating the income amount, the standard and simple expense rate applicable to other self-employed businesses should be applied. However, when considering the classification of business codes in the application of the expense rate publicly notified by the National Tax Service, the “law-free service business” includes not only the “business activities mainly conducted by legal consultation, such as defense of civil, criminal and other cases, filing a lawsuit, filing a lawsuit, filing a petition, and filing an objection, but also the “legal advisory fees, allowances, and other similar costs” on behalf of the parties, as seen in the above B, the instant money was received in return for the provision of legal advice, etc. by the Plaintiff, so it cannot be said that the Defendant erred in applying the expense rate of the “legal-related service business.” This part of the Plaintiff’s assertion is without merit.

2) As to the additional tax for insincere payment

Under the tax law, additional tax is an administrative sanction imposed as prescribed by the Act in cases where a taxpayer violates various obligations, such as a tax return and tax payment, without justifiable grounds, in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim. Therefore, it cannot be deemed that there is no room to see that the taxpayer is liable to pay additional tax on negligent tax returns on the ground that it is unreasonable for him/her to be aware of such obligations, or that it is unreasonable for him/her to expect the performance of his/her obligations to be fulfilled. (See, e.g., Supreme Court Decision 2016Du44711, Sept. 27, 2016). In this case, it is reasonable to see that the Plaintiff is not obliged to pay additional tax on negligent tax returns on the ground that there is no reasonable ground to see that there is no reasonable ground to see that the amount constitutes business income of this case, and that there is no additional tax on negligent tax returns on the ground that there is no other reason for the Plaintiff’s failure to pay additional tax on negligent tax returns.

Therefore, the part on which Defendant KK Head of the District Tax Office imposes additional tax on the part of each disposition of this case;

In other words, from among the disposition of global income tax for the imposition of 20**, 362,231 won, 20* 5,00,894 won for unfaithful payment among the disposition of global income tax for the imposition of global income tax for the year 200***4,467 won, 20**94,94 won for unfaithful payment from among the disposition of global income tax for the imposition of global income tax for the year 20** 20* local income tax for the year *5,780 (resident tax) *19,50 won from among the disposition of global income tax for the imposition of global income tax for the year * 20* 206, * 206, *206, *206, *206, *206, *64, *606, *206, *64, *206, *605, *606, *206, *6366.

4. Conclusion