Whether the representative's imposition of earned income tax from embezzlement of corporate funds is legitimate or not;

Since the actual representative of a corporation embezzled and uses corporate funds, it constitutes earned income. Since the plaintiff's notice of change in income amount was issued after the commencement date of corporate reorganization procedure, the disposition of this case is legitimate.

Article 7 (Disposition of Income)

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition disposition of wage and salary income tax of KRW 5,027,868,30 against the Plaintiff on May 12, 2005 shall be revoked.

1. Details of the disposition;

A. The “○○ Enterprise Co., Ltd.” was established on June 27, 1989 and received a decision to commence corporate reorganization proceedings from the ○○ District Court on January 8, 199. On July 23, 2002, the trade name was changed to ○○○ Co., Ltd., and the Plaintiff was appointed from ○○ District Court as the manager of ○○○○○ Co., Ltd. on May 1, 2004.

B. On October 2004, the director of the regional tax office of ○○○○ has conducted a tax investigation with respect to ○○○○○, a reorganization company, and as a result, Kim○○ has withdrawn KRW 6 billion from ○○○○○’s capital on February 20, 1998, and paid ○○○○○○○○, a retirement allowance for the retirement of the ○○○○○○, a member of the Labor Relations Commission (hereinafter “○○○”). On June 25, 1998, the director of the regional tax office of ○○○○○, a member of the Labor Relations Commission of △△△△○, a chairman of the Labor Relations Commission of △△△○, a company of △△△△○, a member of the Labor Relations Commission of △△△○, a member of the Labor Relations Fund (hereinafter “△△△”), and paid △○, a member of the △△○, a member of the △○○, a religious corporation of KRW 2 billion (hereinafter “○○○”).

C. The director of ○○○ Regional Tax Office notified the Defendant of the result of the above tax investigation, and the Defendant disposed of the instant KRW 12 billion as a bonus to Kim○○, and on April 2, 2005, notified the reorganization company ○○○○○○○, Inc. of change in the amount of income, and on May 12, 2005, issued a disposition to collect withholding tax amounting to KRW 5,027,868,30 on May 12, 2005 (hereinafter “instant collection disposition”).

D. The plaintiff was dissatisfied with the collection disposition of this case and filed an appeal on May 30, 2005, but was dismissed on November 7, 2005.

[Reasons for Recognition] Gap evidence 1, 2, Gap evidence 3-1, 2, Gap evidence 4, Eul evidence 5-1 to 3, and Eul evidence 8

2. Whether the collection disposition of this case is legitimate

A. The plaintiff's assertion

(1) Of the instant KRW 12 billion, ① the person to whom KRW 6 billion occurred is the retired workers of KRW 00 billion or 00 billion, ② the person to whom KRW 4 billion accrues is the retired workers of KRW 4 billion and ③ 2 billion is both ○○○○ and thus, the instant collection disposition based on the premise that the person to whom KRW 12 billion accrues is Kim○○ is the person to whom the instant KRW 12 billion accrues is illegal.

(2) Even if Kim○-○ embezzled the instant KRW 12 billion and the person to whom the instant KRW 12 billion occurred is Kim○-○, the reorganization company ○○○○○, which acquired the right to claim damages against Kim○-○, an embezzlement, and thus, the instant collection disposition that deemed the instant KRW 12 billion was unlawful even if the total amount of the assets on the corporate balance sheet cannot be deemed to have been discharged from the company, since no change was made in the total amount of the assets on the corporate

(3) Even if Kim ○○, out of the total 12 billion won of this case, 6 billion won among the 12 billion won of this case, was embezzled on or around June 25, 1998, and 2 billion won on or around July 11, 1998 and Kim ○ is the person to whom it belongs, the 12 billion won in this case was actually reverted to around 1998, and therefore, the payment deadline for the 6 billion won in earned income tax on ○○○○○○○○, a reorganization company, was the actual labor income. Accordingly, the payment deadline for the 6 billion won in earned income tax on March 10, 1998, and 4 billion won in total, as the commencement date of reorganization proceedings on or around July 10, 1998, all of which was before January 18, 1999, the defendant did not report the reorganization claim under the Company Reorganization Act.

(4) Article 135(4) of the Income Tax Act delegates only the bonus disposed of under the Corporate Tax Act to the Presidential Decree, but Article 192(2) of the Enforcement Decree of the Income Tax Act, which was enacted upon delegation, stipulates the date of payment as well as the bonus and other disposition other than the bonus disposed of under the Corporate Tax Act. Thus, Article 192(2) of the Enforcement Decree of the Income Tax Act is unconstitutional and unlawful beyond the scope of delegation under Article 135(4) of the Income Tax Act, which is the delegated Act.

(5) Article 135 (4) of the Income Tax Act shall be interpreted as limiting the timing of payment of income with respect to bonus disposal for executive officers and employees, the timing of payment of which is clearly clear due to the existence of the person to whom income accrued and the time of attribution is unclear, not with respect to bonus disposal for such executive officers and employees, but with respect to the disposal of dividends recognized as a representative whose time of payment is unknown due to the uncertainty of the person to whom income accrued and the time of attribution. Therefore, the deadline for payment of withholding income tax on the reorganization company of this case shall be deemed as restricting the time of payment of income. Accordingly, the period for payment of withholding income tax on March 10, 1998 and the amount of 4 billion won shall be deemed as the date of commencement of reorganization proceedings on August 10, 1998 for all of the reorganization company of this case shall be deemed as reorganization claims under the Company Reorganization Act, since the date of commencement of reorganization proceedings on the reorganization company of this case is before January 8,

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

(1) When ○○ owns 100% of the shares of ○○ Company, ○○ was a director of ○ Company from July 22, 1993 to October 7, 199, and as a single shareholder, ○ Company was a de facto manager, such as participating in all funding and enforcement of ○ Company through executives and employees.

(2) Around December 1997, ○○○○○○○ Group was subject to business suspension and its business license was revoked on or around February 1998, △△ Branch was subject to business suspension on or around June 1998, and its business license was revoked on or around August 1998. ○○○○○○○○○○ Group was strongly demanded to take measures for livelihood of employees set aside from ○○○○○○○ Group. During that process, ○○○○○○○○ Group’s loans exceeding the limit for the same loans were to be raised, ○○○○○○○○○○○○○○○ Group’s deposits in the meeting room in Seoul, ○○○○○○○○○○○○○○ Group’s 60 billion won, which was in the course of business-related to ○○○○○○○ Group’s ○○○○○○○ Group’s deposits in the name of 60 billion won, and paid the amount to ○○○○○○ Group’s 9.

(3) On July 15, 1998, the ○○ Company was in collusion with ○○○○, which was the care of ○○○○○○○○ in order to deduct the ○○ Company’s funds. Around July 11, 1998, the ○○ Company deposited 2 billion won in the ○○○○○○○○○○○○○○ Account, which was under the custody of ○○○○○ Company, and deposited the said 2 billion won into the ○○○○○○○○ Account, and deposited the said 2 billion won into the ○○○○○○○○○ Account, and thereafter, he deposited the said 2 billion won into the ○○○○○○○○ Account on account of the deposit of donations on August 14, 1998, and embezzled it for personal use around the said time.

(4) When the ○○○ Company appropriates each of the above retirement consolation benefits as a loan for ○○○○ and △△ Branch, and when filing a corporate tax return for business year 1998, it deemed that the above loan falls under the amount of provisional payment unrelated to business, and included the amount of KRW 1,216,00,000 in the gross income. The amount of KRW 1,48,000,000 as interest on the loan equivalent to the above loan was excluded from the deductible expenses, and the amount of KRW 2 billion deposited into the account under the name of ○○○○○○○○○○○○○○○ was included in the expenses as a designated donation with the receipt received from each of the two ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○

(5) On June 12, 2004, the Joint Control Group of Public Funds found that Kim ○○ embezzled each of the above retirement consolation benefits in the course of investigation into the corruption of public funds, and notified the director of the regional tax office of ○○○○. The director of the regional tax office of ○○○ Regional tax Office discovered the embezzlement of KRW 12 billion by Kim○○○, Inc. after conducting a tax investigation with respect to the reorganization company ○○○○, Inc., and notified the Defendant of the result of the tax investigation on October 2, 2004.

(6) ○○○○지방법원은 2004. 10. 29. 김○○이 이 사건 120억 원을 횡령한 부분에 대해 유죄판결을 선고(2004고합XXX호 등)하였고, 2005. 6. 10. 위 판결은 대법원에서 확정되었다(2005도XXXX호).

(7) The Defendant disposed of the instant KRW 12 billion as a bonus to Kim○-○, and notified the change in the amount of income to ○○○○, Inc. on April 2, 2005, and issued a notice of change in the amount of income on May 12, 2005, the Defendant collected withholding tax on the amount of KRW 5,027,868,30 from May 12, 2005.

[Grounds for Recognition] Facts without dispute, 6-17 evidence, 3-6 evidence, 8 evidence, and the purport of the whole pleadings

D. Determination

(1) Determination as to the person to whom the instant 12 billion won occurred

The Plaintiff asserted that the instant collection disposition based on the premise that the person to whom KRW 12 billion belongs is Kim○ does not belong to Kim○, and thus, the instant collection disposition was unlawful. However, according to the above facts of recognition, Kim○○ as a single shareholder of ○○ enterprise at that time, which actually operated ○○○ enterprise, revealed the excess loan interest rates of the same lending limit to the same ○○○○○○ Group. In addition, the Plaintiff embezzled KRW 6 billion out of the ○○○ enterprise’s funds, and paid KRW 4 billion to ○○○○ who is the chairman of ○○○○○○○○ Group, as retirement consolation benefits for its members. The Plaintiff embezzled KRW 4 billion and paid KRW 4 billion to △△△△△△○○ as retirement consolation benefits for its members, and deposited KRW 2 billion in the head of ○○○○○○○○ in order to deduct the funds of ○○ enterprise prior to the bankruptcy of ○○ enterprise. Therefore, the Plaintiff’s allegation above cannot be accepted.

(2) Determination as to whether the 12 billion won of the instant case was out of the company

The plaintiff argues that even if the 12 billion won in this case was reverted to Kim○○, the ○ enterprise has the right to claim damages against Kim○○, and that the 12 billion won in this case was not out of the company because the ○○ enterprise did not waive or waive the right to claim damages.

According to the above facts, ○○ enterprise accounts for KRW 10 billion deposited in the account under the name of ○○○○○○ as a designated donation, and did not make any effort to recover by filing a complaint against Kim○○, such as embezzlement, etc., or filing a lawsuit against Kim○○ in respect of the property owned by ○○, and filing a claim for damages against Kim○○, and there was little possibility of recovery for more than three years from the time of embezzlement. Thus, even if ○○ enterprise has a claim for damages against ○○, it cannot be deemed that 12 billion won was not out of the company, and thus, the Plaintiff’s above assertion cannot be accepted.

(3) Determination as to whether a reorganization claim has been forfeited

(A) The plaintiff embezzled 12 billion won in around 1998 and, if the person to whom the 12 billion won in this case belongs is Kim ○○, the person to whom the 12 billion won in this case occurred and the time of her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her her she was actually embezzled

(B) According to Article 192(2) of the Enforcement Decree of the Income Tax Act, with respect to bonuses disposed of under the Corporate Tax Act, the pertinent corporation is deemed to have paid the amount of income on the date of receipt of the notice of change of income amount. According to Articles 21(2) and 22(2) of the Framework Act on National Taxes, the obligation to pay income tax withheld at the time of payment of income is established at the time of payment of income amount, and it is finalized without any special procedure. Thus, a claim for taxation on bonus disposal under the Corporate Tax Act is established at the time of delivery of the notice of change of income amount to the pertinent corporation (see Supreme Court Decision 90Nu4631, Feb. 26, 1991) and is determined at the same time when the notice of change of income amount was served on the company (see Supreme Court Decision 90Nu4631, Feb. 26, 199).

(C) According to the above facts, ○○○○, Inc., a reorganization company, commenced the company reorganization procedure on Jan. 8, 199 according to the decision of the company reorganization procedure. The defendant sent a notice of change of income amount to ○○○, a reorganization company, Apr. 2, 2005, and ○○, a reorganization company, delivered the above notice on Apr. 4, 2005. Thus, since the above notice was served on Apr. 4, 2005, the tax claim of this case constitutes a public-interest claim under the Company Reorganization Act, which was established and confirmed on Apr. 4, 2005, which was served on ○○, a reorganization company's notice of change of income amount on Apr. 4, 2005. Accordingly, the plaintiff's argument that the tax claim of this case constitutes a reorganization claim under the Company Reorganization

(4) Determination as to whether Article 192(2) of the Enforcement Decree of the Income Tax Act is unconstitutional or unlawful and invalid

Article 135 (4) of the Income Tax Act stipulates that the period of payment shall be determined by the Presidential Decree only for the bonus disposed of by corporate tax, but Article 192 (2) of the Enforcement Decree of the Income Tax Act, which was enacted upon delegation, stipulates the payment proposal for dividends and other dispositions as well as the bonus disposed by corporate tax. Thus, Article 192 (2) of the Enforcement Decree of the Income Tax Act argues that Article 192 (2) of the Income Tax Act goes beyond the delegation scope of Article 135 (4) of the Income Tax

According to the above facts, the Defendant’s income disposition against Kim○-○ for the instant 12 billion won is a bonus disposition under the Corporate Tax Act, and even if based on the Plaintiff’s assertion, it delegated the time to legal fiction of payment as prescribed by the Presidential Decree under Article 135(4) of the Income Tax Act in the case of bonus disposition under the Corporate Tax Act. Thus, the Plaintiff’s above assertion is without merit, without any need to further determine whether it is unconstitutional or unlawful by deviating from the limit of delegated legislation.

(5) Determination as to whether the restriction on the timing of payment under Article 135(4) of the Income Tax Act is limited only to the recognition of the increase in payment.

Article 135 (4) of the Income Tax Act provides that "the bonus disposed of under the Corporate Tax Act shall be deemed to be paid on the date prescribed by the Presidential Decree", and Article 192 (2) of the Enforcement Decree of the Income Tax Act provides that the income from the bonus disposal shall be deemed to have been paid on the date when the notice of change of income amount is received, and Article 32 (5) of the former Corporate Tax Act (wholly amended by Act No. 5581, Dec. 28, 1998) provides that "the amount included in the calculation of the corporate tax shall be disposed of as prescribed by the Presidential Decree, such as bonus, dividend, outflow in company, reservation in company, etc. according to the person to whom the income is reverted, if it is clear that the amount included in the calculation of the income under Article 32 (5) of the former Corporate Tax Act has been distributed to an employee other than the employee and it is unclear as a bonus, and the proviso shall be acknowledged.

Examining the above relevant laws, the bonus under the Corporate Tax Act which makes the time limit for payment by the Presidential Decree in Article 135 (4) of the Income Tax Act shall be deemed to include the bonus disposal in addition to the recognized bonus disposal in which the attribution is unclear.

3. Conclusion

Thus, the collection disposition of this case by the defendant is legitimate, and the plaintiff's claim of this case seeking its revocation is not accepted as it is without merit.

Related Acts and subordinate statutes

Basic Act

Article 26-2 (Period for Excluding Assessment of National Tax)

(1) No national tax may be levied after the period as provided in the following subparagraphs expires: Provided, That if the mutual agreement procedures are in progress under the provisions of a treaty concluded to prevent double taxation (hereinafter referred to as "tax treaty"), Article 25 of the Adjustment of International Taxes Act shall apply:

1. Where a taxpayer evades a national tax, or receives a refund or deduction by fraudulent or other unlawful means, for ten years from the date on which the national tax is assessable;

2. If the taxpayer fails to file a written tax base return within the legal return term, for seven years from the day on which the national tax is assessable;

3. If it does not fall under subparagraphs 1 and 2 above, for five years from the day on which the national tax is assessable; and

(3) The day when national taxes may be levied pursuant to each subparagraph of paragraph (1) shall be prescribed by Presidential Decree.

Enforcement Decree of the Framework Act

Article 12-3 (Initial Date in Counting National Tax Exclusion Period)

(2) National taxes may be levied on the dates set forth in the following subparagraphs, notwithstanding the provisions of paragraph (1):

1. For the national taxes levied on the withholding agent or tax association, the day following the statutory due date for payment of the withheld or tax amount collected by the tax association;

Corporate Tax Act

Article 67 (Disposition of Income)

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

Enforcement Decree of Corporate Tax Act

Article 106 (Disposition 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 concerned 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, the reported person shall be the representative, and

(a) Where the person of accrual is a stockholder (not including stockholders who are officers or employees), the dividends of the person of accrual;

(b) If the person to whom it belongs is an officer or employee, the bonus to the person to whom it reverts;

(c) Where the person to whom it belongs is a corporation or an individual operating the business, other outflow from the company: Provided, That it shall be limited to where the distributed profit constitutes the income for each business year of a domestic corporation or a domestic business place of a foreign corporation under the provisions of Article 94 of the Act or the business income of a resident or a non-resident under

(d) Other income of the person to whom it reverts, in case where the person to whom it reverts is the person.

former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998)

Article 32

(5) In filing a report on the tax base of corporate tax under the provisions of Article 26, or determining or revising the tax base of corporate tax under the provisions of paragraphs (1) through (4), the amount included in gross income shall be disposed of according to the person to whom the corporate tax is reverted as bonus, dividend, other outflow from the country, internal reserve, etc.

Enforcement Decree of the former Corporate Tax Act (before the full amendment by Presidential Decree No. 15970 on December 31, 1998)

Article 94-2 (Disposition of Income)

(1) The amount included in the calculation of earnings under the provisions of Article 32 (5) of the Act shall be disposed of under the provisions of the following subparagraphs. The same shall also apply to non-profit domestic corporations

1. Where the amount included in the calculation of earnings has clearly leaked out of the company, it shall be any bonus, dividend, other income, or other outflow based on the disposal of profits as follows: Provided, That where the accrual is unclear, it shall be deemed that it has been reverted to the representative (where the sum of the executives who are investors and the stocks or equity shares owned by the stockholders with a special relationship under Article 46-2 (3) together with the stockholders holding not less than 30/100 of the total issued stocks or equity shares of the relevant corporation and the officers actually control the operation, they shall be deemed the representative, and where a corporation has been exempted from withholding taxes pursuant to Articles 36 (5) and 40-5 (6) of the Regulation of Tax Reduction and Exemption Act and there is a separate representative among the directors who are investors, the reported person shall be the representative, and where there are not less than 2 representatives, the de facto representative;

(a) Where the person to whom benefits accrue is an investor (excluding an investor who is an executive officer), the dividends shall be paid to the person to whom benefits accrue;

(b) If the person to whom it belongs is an officer or employee, it shall be the bonus to the person to whom it reverts;

(c) Where the person to whom it belongs is a corporation or an individual operating a business, it shall be other outflow from the company: Provided, That such divided profits constitute the income for each business year of a domestic corporation or a domestic business place of a foreign corporation under Article 56 of the Act or the business income of a resident or a non-resident under Article 13

(e) If the person to whom it belongs is a person other than those under items (a) through (c), it shall be other income for such person.

Income Tax Act

Article 20 (Earned Income)

(1) Earned income shall be the following incomes generated during the relevant year:

1. Class A:

(a) Salary, salary, remuneration, remuneration, annual allowance, wage, bonus, allowance, and other benefits of a similar nature, which are received due to the provision of labor;

(b) Income received as a bonus by a resolution of the general meeting of stockholders or general meeting of members of a corporation or similar deliberative organ;

(c) Amount treated as a bonus under the Corporate Tax Act;

(d) Income received owing to a retirement, which is not included in the retirement income; and

Article 70 (Final Return on Global Income)

(1) Any resident having global income amount for the current year shall file a return on the tax base of global income with the head of tax office having jurisdiction over the place for tax payment from May 1 to 31 of the year following the current year as prescribed by

○ Article 127 (Liability for Withholding)

(1) Any person who pays the following income or revenue amount to a resident or nonresident in Korea shall withhold the income tax on such resident or nonresident pursuant to the provisions of this Section:

4. Employment income amount of Class A;

Article 135 (Fictitious Payment Date of Labor Income)

(4) Any bonus disposed of under the Corporate Tax Act shall be deemed paid on the date determined by the Presidential Decree.

Enforcement Decree of the Income Tax

§ 192. Deemed the date of payment of dividends, contributions, and other income by disposal of income

(1) When the head of a tax office or the director of a regional tax office determines or revises the corporate income amount under the Corporate Tax Act, he/she shall notify the corporation concerned by a notice of change in the income amount as prescribed by the Ordinance of the Ministry of Finance and Economy within 15 days from the date of the determination or correction of the corporate income amount: Provided, That where the location of the corporation concerned is not clear or it is impossible to serve the notice, or where the corporation concerned falls under the provisions of Article 86 (1) 1, 2 and 4 of the National Tax Collection Act, he/she shall notify the relevant stockholder and the resident who has received the disposition

(2) In cases falling under paragraph (1), the relevant dividend, bonus, and other income shall be deemed paid or recovered on the date when such notice is received.

(3) In filing a return on the income amount of a corporation, the dividend, bonus and other incomes disposed of pursuant to the provisions of Article 106 of the Enforcement Decree of the Corporate Tax Act shall be deemed to have been paid by the relevant corporation on the date of declaration

Enforcement Decree of the former Income Tax Act (amended by Presidential Decree No. 15967 of December 31, 1998)

○ Article 192 (Fictitious Payment Date of Dividend, Prize and Other Incomes Obtained by Disposal of Income)

(1) In determining or correcting the corporate income amount under the Corporate Tax Act, the chief of the tax office shall, within 15 days from the date of determination or correction, notify the corporation concerned of the change in the income amount as prescribed by the Ordinance of the Ministry of Finance and Economy: Provided, That in case where the location of the corporation concerned is unclear or it is impossible to serve the notice, he shall notify the stockholder concerned and the resident who received the disposition of other incomes.

(2) In cases under paragraph (1), the relevant dividend, bonus, and other income shall be deemed paid or recovered on the date when the notice is received.

(3) In filing a return on the income amount of a corporation, the dividend, bonus and other incomes disposed of under the provisions of Article 94-2 of the Enforcement Decree of the Corporate Tax Act shall be deemed to have been paid by the corporation on the date of declaration

Company Reorganization Act

Article 102 (Adjustment Claim)

Any claim in respect of company property arising prior to the commencement of reorganization proceedings, shall be a reorganization claim.

Article 208 (Public-Interest Claims)

Claims referred to in the following subparagraphs shall be regarded as priority claims:

9. Tax, value-added tax, special consumption tax, liquor tax, traffic tax, and local tax to be collected and paid by a person responsible for special collection among reorganization claims, the payment deadline of which has not yet expired or has not yet arrived at the time the reorganization proceedings commence