National Tax Service Review Income 201-008 ( October 28, 2011)

Even if the operation of a corporation is substantially controlled, bonus disposal may not be made if it is not an executive.

A representative who is deemed to be a bonus disposition shall be a person registered as a representative on the corporate register, or a person who actually controls the management of the corporation among the executives such as shareholders meeting the requirements set forth in the overall subparagraph of Article 106(1)1 of the Enforcement Decree of the Corporate Tax Act, and thus, the disposition of imposition shall be unlawful.

2011Guhap1523 Disposition of revocation of comprehensive real estate holding tax

XX Kim

O Head of tax office

June 21, 2011

July 26, 2011

1. The Defendant’s disposition of imposition of global income tax amounting to KRW 628,413,930 for the year 2007 against the Plaintiff on January 7, 201, and KRW 244,363,850 for the year 2008 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. Seoul XX Co., Ltd. (hereinafter referred to as 'Seoul XX') was a legal entity established in Puiju City in order to run oil wholesale and retail business on June 20, 2006, whose corporate register was continuously registered as representative director from the date of the above establishment.

B. From September 18, 2008 to November 13, 2008, the director of the Central District Tax Office confirmed the omission of sales and the omission of processing in the taxable period of the corporate tax in 2008 - confirmed the Plaintiff and the headB as the actual operator of the Seoul XX and notified the head of the tax office having jurisdiction over the pertinent taxation data. The head of the tax office having jurisdiction over the head of the tax office estimated the amount of income in 2007- - 2008 of the Seoul XX to estimate the estimated amount of income in 2008. Upon the above notification, he distributed the estimated amount of income to the Plaintiff and the headB in 1/2 each, the estimated amount of income to be distributed to the Plaintiff in 207, 1,518,205, 420 won, 630,034,705 won to be reverted to the Defendant, and notified the Defendant of the estimated amount of income.

C. Accordingly, on January 7, 2011, the Defendant corrected and notified the Plaintiff of KRW 628,413,930 as global income tax for the year 2007, and KRW 244,363,850 as global income tax for the year 2008 (hereinafter “instant disposition”).

D. The Plaintiff appealed and filed a request for examination with the Commissioner of the National Tax Service on January 26, 201l, but was dismissed on March 28, 2011.

[Reasons for Recognition] Each entry of evidence Nos. 1 and 2, Eul No. 1.2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff is not a representative director, executive officer, and shareholder of the Seoul XX, but not involved in the actual management of the Seoul XX, so it is unlawful to consider the plaintiff as the actual representative and impose the total income tax on the plaintiff on the income from the omission of the Seoul XX.

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

C. Determination

Article 106(1)1 (proviso) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008; hereinafter the same) provides that the upper limit on the disposal of income to the representative based on the disposal of income as stipulated under the proviso of Article 106(1)1 shall not be based on the fact that such income has accrued to the representative, but shall be deemed as a bonus to the de facto representative regardless of the substance of the fact that a certain amount of fact which can be recognized as such act in order to prevent an unfair act under tax laws by the corporation. In such a case, the representative of the corporation subject to the disposal of bonus shall be strictly construed as a bonus driving away from his/her face (see, e.g., Supreme Court Decision 92Nu3120, Jul. 14, 1992). The proviso to Article 106(1)1 of the said Enforcement Decree provides that the representative shall be deemed as a representative if he/she is not a minority shareholder or a person having a de facto special relationship with the representative.

The evidence presented by the Defendant is insufficient to recognize that the amount included in the calculation of earnings was attributed to the Plaintiff. The fact that the Plaintiff was recorded as a director, representative director, etc. under the corporate register of Seoul XX is not discovered, and no ground exists to deem that the Plaintiff met the requirements as an executive officer, such as a shareholder, etc. under the above overall corporate register. Rather, according to the purport of evidence No. 2-2, No. 4, and No. 5, No. 2-2, No. 5, No. 2-2, No. 4, and No. 5, a representative director, under the corporate register of the Central Tax Office, Seo-A, the head of Seo-gu Office, in Seoul Central District Public Prosecutor’s Goyang-gu Office, was investigated by the relevant persons under the corporate register of the Seoul Central District Public Prosecutor’s High School Office, and the head of Seo-gu Office, who was the representative director, should first lend his name only to the Plaintiff, and the Plaintiff’s actual business director and the Plaintiff’s actual business director did not appear to be unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.