Whether a person registered as a representative director in the corporate register is an actual representative director.

The plaintiff argues that it is merely a representative director in the name of the non-party corporation and that it is not an actual representative director, but there is no objective evidence to recognize it.

Article 14 of the Framework Act on National Taxes

Article 67 of the Corporate Tax Act

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of global income tax of KRW 6,914,800 against the Plaintiff on January 9, 2006 shall be revoked.

1. Details of the disposition;

A. On March 7, 2001, 201, ○○○○○○ (hereinafter “Nonindicted Company”) was established for the purpose of leasing construction materials and selling construction materials. The Plaintiff was registered as the representative director on the corporate register between March 7, 2001 and February 19, 2002. B. around 2004, the head of ○○○ Tax Office stated the fact that the Nonparty Company reported the corporate tax for the business year 2001, omitted the sales report and appropriated the processing expenses. The amount of KRW 23,504,100 included in the gross income constitutes a case where it is clearly unclear to whom it belongs, and thus, it is deemed that the amount of KRW 23,504,100 registered as the representative director of the Nonparty Company constitutes a case where it is recognized that the amount of KRW 23,504,100 recorded as the representative director of the Nonparty Company was disposed of as the income for the year 201.

C. Around March 2005, the Defendant notified the head of ○○ Tax Office of the foregoing taxation data. On January 9, 2006, the Defendant issued the instant disposition of imposing the Plaintiff’s global income tax amounting to KRW 6,914,800 in rectification and notification of the global income tax amounting to 2001.

[Reasons for Recognition] Facts without dispute, entry of evidence Nos. 1, 2, and 3 in the evidence Nos. 1, 2, and 3, the purport of the whole pleadings

2. Whether the disposition of imposition is lawful.

A. The plaintiff's assertion

The fact that the Plaintiff was registered as the representative director on the corporate register of the non-party company was merely allowed to be registered in a formal manner upon the request of the U.S. ○○, which practically neglected the non-party company, and the non-party company did not participate in the management of the non-party company. Thus, the global income tax should be imposed on the ○○, who is the actual owner, in accordance with the substance over form principle under Article 14 of the Framework Act

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

(1) Between March 1985 and January 2001, ○○○○○○○○○○, a corporation with 1254-2 1254-2, and was in general in charge of the management of the said corporation.

(2) On June 29, 2006, ○○ was sentenced to two years of imprisonment with prison labor for a crime, such as “the disguised payment of shares in the process of establishing a non-party company in collusion with the Plaintiff, etc.” (Seoul Central District Court 2005Da1223, Jun. 29, 2006). The Seoul High Court appealed as Seoul High Court 2006No1368, and was sentenced to one year and six months of imprisonment.

(3) The non-party company closed its business on December 31, 2004, and the representative director on the corporate register from February 19, 202, which the plaintiff resigned from the representative director to the closure of its business (the plaintiff on the business registration certificate of the non-party company was stated as the representative from March 7, 2001 to February 25, 2002, respectively).

(4) The shares of the non-party company held 8,00 shares (20%) and 4,00 shares (10%) of the non-party company, 12,00 shares (30%) of the non-party company, and 16,000 shares (40%) of the non-party company.

(5) The Plaintiff received benefits equivalent to KRW 23,502,00 from the non-party company in 2001, and was refunded the Class A employment income tax at the year-end adjustment.

(6) According to the minutes of the extraordinary general meeting of shareholders around February 2002, the Plaintiff’s meeting as the chair pursuant to the articles of incorporation, stated that the Plaintiff was able to refer to the agenda items on which the Plaintiff and the director’s ○○○○○ and the director’s ○○ were appointed, and deliberated.

(7) In the written objection regarding the instant disposition submitted on March 28, 2006, the Plaintiff stated that “the Plaintiff owned the seal imprint of the Nonparty Company’s company, carried on its business outside the company without attending the company from December 20, 2001, and continued to carry on the business until January 2002, the Plaintiff continued to carry on the business and operated its employees and the company.”

[Reasons for Recognition] Facts without dispute, Gap evidence 1, Gap evidence 10-1, Gap evidence 11-1, 2, Gap evidence 15, 17, 18, Eul evidence 3, 4, Eul evidence 5-1, 2, Eul evidence 8-6, Eul evidence 9-1, and Eul evidence 9-2, the purport of the whole pleadings

D. Determination

(1) According to Article 106 (1) 1 of the Enforcement Decree of the Corporate Tax Act, when determining or correcting the corporate tax base, the amount of which attribution is unclear shall be deemed to be reverted to the representative. The representative of the corporation under the Corporate Tax Act is deemed to represent the corporation externally and have been in charge of the corporation's business operations, and if the amount included in the calculation of the income was leaked to the company externally, the representative must act according to his/her will. Thus, if the representative does not disclose it, it is highly probable that he/she will be attributed to himself/herself if he/she is in charge of the corporation's business operations, and the representative must be deemed to be attributed to him/her unless he/she discloses the subject of attribution even though he/she does not belong to himself/herself, and the purpose of this is to deem that it is fair to realize the corporate tax and that it belongs to the representative as a sanction, and the burden of proving that the amount belonging to the withdrawn corporation's revenue is clear (see, e.g., Supreme Court Decision 92Nu62747, Aug. 14, 1992).

(2) Each statement of evidence Nos. 3, 4, 9, 19, and 20 returned to the instant case is insufficient to recognize that the person to whom the income accrued out of the company was the ○○○, and there is no other evidence to acknowledge it.

Rather, as seen earlier, ① the Plaintiff was convicted of having committed a crime in collusion with the Plaintiff for the disguised payment of the share capital to the non-party company; ② the Plaintiff was also indicated as the representative director of the non-party company as well as 20% of the shares of the non-party company on the business registration certificate of the non-party company. However, there was no evidence to acknowledge that the actual owner of the shares was not the Plaintiff, ③ the Plaintiff was paid the non-party company’s wages of KRW 23,502,00 in 201, and the Plaintiff was paid the non-party company’s income tax at the year of year-end settlement; ④ the Plaintiff was paid the non-party company’s income tax upon year-end settlement; ④ according to the minutes of the temporary general shareholders’ meeting around February 202, the Plaintiff proposed the agenda at the temporary general shareholders’ meeting as the representative director of the non-party company; ⑤ the Plaintiff’s personal seal impression was owned, and the Plaintiff’s written application prepared by the Plaintiff was stated as having operated the non-party company’s business.

(3) Therefore, the Defendant’s disposition of this case, which deemed the Plaintiff as the person to whom the income accrued, is lawful, and the Plaintiff’s assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim shall be rejected as it is without merit, and it shall be decided as per Disposition.

Related Acts and subordinate statutes

○ Article 14 of the Framework Act on National Taxes

(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.

(2) The provisions concerning the calculation of tax base in tax-related Acts shall apply according to the substance, notwithstanding the name or form of income, profit, property, act or transaction.

Article 67 of the Corporate Tax Act

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

Article 106 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17457, Dec. 31, 2001)

(1) The amount included in gross income pursuant to Article 67 of the Act shall be disposed of pursuant to the following subparagraphs:

The same shall also apply to nonprofit domestic corporations and non-profit foreign 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 to have been reverted to the representative (where the sum of stocks, etc. owned by persons with a special relationship under the provisions of Article 87 (2) is in excess of 30/100 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

(a) Where the person of accrual is a stockholder (not including stockholders who are executives 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;