Plaintiff (Law Firm Apex, Attorneys Lee Young-soo et al., Counsel for the plaintiff-appellant)

Head of the tax office;

June 19, 2013

Seoul Administrative Court Decision 2012Gudan3777 decided September 12, 2012

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance is revoked. The Defendant’s imposition of capital gains tax of KRW 1,061,685,358 against the Plaintiff on October 6, 201 shall be revoked.

1. Details of the disposition;

(1) From January 19, 2006 to February 14, 2006, the Plaintiff acquired 1,100,000 shares of Dongyang Integrated Financial Securities Co., Ltd. (hereinafter “Nonindicted Co., Ltd.”) (hereinafter “Nonindicted Co., Ltd.”) (hereinafter “Nonindicted Co., Ltd.”) within the scope of KRW 11,240,391,100,00, and 0.96% of the issued shares; hereinafter “instant shares”). From July 4, 2006 to July 26, 2006, the Plaintiff acquired 13,542,632,80 won in total and transferred 2,302,241,70 won in total within eight occasions from July 4, 2006 to July 26, 2006.

Luxembourg The Plaintiff did not report the transfer income tax on the instant shares by deeming that she himself/herself is a Korean national residing abroad as a nonresident under the Income Tax Act.

Article 22(1) of the Income Tax Act provides that the Plaintiff shall report the transfer income tax on the transfer income to a third party to the Plaintiff on the following grounds: (a) on July 8, 2011, the director of the Seoul Regional Tax Office conducted a tax investigation with respect to the Plaintiff who was a shareholder of the non-party company from April 19, 201 to July 3, 201; and (b) on March 31, 2006, when the total market value of the shares of this case owned by the Plaintiff reaches KRW 10,857,00,000 as of March 31, 2006, the Plaintiff is a major shareholder holding 10 billion or more of the shares of the non-party company and is a resident under the Income Tax Act; and (c) thus,

And the plaintiff filed a request for pre-assessment review on July 26, 201 on the ground that he/she constitutes a nonresident under the Income Tax Act, but the Commissioner of the National Tax Service, around September 9, 201, adopted a request for pre-assessment review by the plaintiff. On October 6, 2011, the defendant issued a disposition to determine and notify capital gains tax of KRW 1,061,685,350 on the shares of this case to the plaintiff (hereinafter “instant disposition”).

(v) The Plaintiff filed a request for examination with the Commissioner of the National Tax Service on October 21, 201, but the Commissioner of the National Tax Service dismissed the Plaintiff’s request on November 30, 201.

[Reasons for Recognition] Unsatisfy, Gap evidence 1 to 5 (including each number), Eul evidence 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

원고는, ① 이 사건 주식이 소외 회사 발행주식 총액의 25%에 달하지 않고, 원고는 재일교포로 국내체류일수는 양도일이 속하는 2006년 183일, 2005년 182일이어서 합계 1년이 되지 않으며 자택이 일본 동경에 있고 경제 생활자금의 원천도 일본에서 발생하고 있으므로, 비거주자인 원고가 이 사건 주식을 양도함으로써 발생한 소득은 구 소득세법 시행령(2006. 2. 9. 대통령령 제19327호로 일부 개정되기 전의 것, 이하 ’구 법 시행령‘이라고 한다) 제179조 제10항 제1호 에 의해 비과세되어야 하고, ② 설령 원고가 구 소득세법(2006. 3. 3. 법률 제7873호로 개정되기 전의 것, 이하 ’구 법‘이라고 한다) 제1조 제1항 제1호 의 거주자에 해당하더라도, 위와 같이 원고의 자택이 일본 동경에 있고 일상 생활도 일본에서 하고 있으며 경제 생활자금의 원천도 일본에서 발생하고 있으므로, 「대한민국과 일본국 간의 소득에 대한 조세의 이중과세회피와 탈세방지를 위한 협약」(이하 ‘한·일 조세조약’이라 한다) 제4조 제2항 ㈎목에서 정한 원고의 항구적 주거가 일본에 있거나 중대한 이해관계의 중심지가 일본에 있다고 할 것이어서, 원고는 일본의 거주자에 해당하므로, 구 법에서 정한 납세의무자가 아니라고 주장한다.

B. Relevant statutes

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

C. As to the Plaintiff’s assertion

(i)Recognition

At the time of the transfer of the shares of the corporation, the Plaintiff owned the shares of the non-party company at least 10 billion won, but the shares of this case did not reach 25 percent of the total shares issued by the non-party company.

The number of days of stay in the Republic of Korea of the Plaintiff and his wife and Nonparty 6 are as follows, and the number of days of stay in the Republic of Korea of the Plaintiff for two years immediately before the first day of July 4, 2006 (from July 2, 2004 to July 3, 2006) shall be 405 days, and the number of days of stay in the Republic of Korea of the Plaintiff wife for 415 days.

The plaintiff himself, 87288 287 288 235 183 183 181 915 288 244 192 in 2004, 2005, total of the number of stay days in the Republic of Korea related to the name of the vote contained in the main sentence

B. The Plaintiff and Plaintiff wife’s domicile at the National Tax Service’s data processing place is “Seoul Jongno-gu ( Address 1 omitted), but the Plaintiff and Plaintiff’s wife were residing in the “Seoul Seongbuk-gu (Road 2 omitted)” which is owned by the Plaintiff when staying in Korea, and Nonparty 6 of the Plaintiff’s wife paid the health insurance fee to the National Health Insurance Corporation since 2006.

㉣ 이 사건 주식 양도 당시 원고는 아래 표와 같이 위 성북동 주택 외에도 고액의 국내골프회원권 및 이 사건 주식뿐만 아니라, 자신이 이사로 재직 중인 법인의 비상장주식 등도 보유하는 등 국내에 고액(최소 15,499백만 원)의 자산을 보유하고 있었다.

Non-party 4,00 non-party 5,00 non-party 5,00 non-indicted 70 shares non-party 1,00 shares non-party 1,00 shares non-indicted 50 shares non-indicted 50 shares non-indicted 50 shares non-indicted 50 shares non-indicted 50 shares non-indicted 50 shares non-indicted 14,000 shares non-indicted 50 shares non-indicted 50 shares non-indicted 500 shares non-indicted 14,000 shares non-indicted 50 shares non-indicted 50 shares (50%) of non-indicted 50 shares non-indicted 50 shares non-indicted 14,00 (35%)

As of June 2006, the Plaintiff was serving as a director of a continuing business corporation, such as Nonparty 5 and Nonparty 4, who employed employees and paid payment fees, and the Plaintiff was serving as the representative director of Nonparty 5. The Plaintiff was serving as the representative director of Nonparty 5.

Non-party 4 Co., Ltd. / Warehouse director who has no record of sales after 96, and no record of sales shall be reported after 96 years.

On September 21, 2004, the non-party 4 corporation, the plaintiff of which is the largest shareholder and the director, agreed to make an investment of KRW 3.8 billion in the construction of the LAC. The above amount was prepared by the plaintiff to pay KRW 3.9 billion in advance to the non-party 4 corporation on September 22, 2004. The non-party 4 corporation made an investment by lending KRW 3.8 billion in the construction of the LAC in the same day to the non-party 4 corporation. The interest income therefrom was also generated to the plaintiff.

The Plaintiff loaned 1.5 billion won to Nonparty 2 at around November 2006, and thereafter lent 1.5 billion won to Nonparty 2 on January 3, 2007. On October 25, 2007, the Plaintiff invested 10 billion won in the “Chobu”.

[Reasons for Recognition] Evidence, Evidence Nos. 4 through 8 (including each number), Evidence No. 7, 8, and 14, the purport of the whole pleadings

Shed Judgment

㈎ 관련 법리 등

An individual who has a domicile in Korea or has a domicile in Korea for not less than one year is liable for tax payment under the former Act (Article 1(1)1 of the former Act); an address is determined based on objective facts of his/her living relationship, such as the existence of a family member living together in Korea and of assets located in Korea (Article 2(1) of the former Enforcement Decree of the Act); and a determination of which individual has a domicile or a domicile in Korea should be made in light of his/her living relationship, such as his/her family relationship or assets in Korea; rather, a determination should not be made in light of his/her living relationship, such as his/her activity in a foreign country and holding of assets (see Supreme Court Decision 92Nu1695, May

㈏ 원고가 국내에 주소를 두었는지 여부

The following facts revealed by the above facts, i.e., ① as of June 2006, the Plaintiff owned high-priced housing in Seongbuk-dong in Seoul, Seongbuk-gu, Seoul, and continued to reside in the above Seongbuk-dong housing in Korea; ② The number of days of stay in Korea of the Plaintiff to Korea was 235 days in 2004, 183 days in 2005, and 181 days in 2006; the number of days of stay in Korea of wife was 244 days in 2004, 191 in 205, 192 in 206; ③ the Plaintiff owned high-priced housing in Korea as of June 1, 2006 and owned high-priced housing in Korea as well as non-listed housing in Korea; ④ the Plaintiff’s total number of days of stay in Korea was 18 years in 200 and 192 days in 19 years in 206, and it is reasonable to view that the Plaintiff continued to reside in Korea as a social welfare foundation, etc.

Therefore, the plaintiff's above assertion is without merit.

D. As to the Plaintiff’s assertion

(i)Recognition

The plaintiff was born in Japan on October 29, 1943, and was married with the non-party 3 on March 11, 1978 and was married with the non-party 1 in South and North Korea. The plaintiff's children are residing in Japan. The plaintiff was divorced with the non-party 3 on May 25, 1994.

The plaintiff has an address in the Dondo in Japan, Dong-gu, Mazoto (resident 3 omitted), and is paying resident tax including special resident tax, Do resident tax, etc. to Japan.

B. From October 24, 2005, the Plaintiff owned the land of 329.61m2 and the building of 2nd floor.

㉣ 원고는 2006년 6월 현재 소외 1 주식회사의 대표이사로 재직하고 있고, 위 회사로부터 월 300만 원 내지 400만 원의 급여를 받고 있다.

As of June 2006, the plaintiff holds shares of a Japanese company, makes transactions with a Japanese bank, holds a driver's license in Japan, has subscribed to automobile insurance, and has three golf membership accounts.

The provisions of the Income Tax Act and the Japanese Income Tax Act stipulate that “resident has the obligation to pay income tax under this Act” (Article 5(1) of the same Act), and that “resident” means a person who has a domicile in the Republic of Korea or has a domicile in the Republic of Korea for at least one year (Article 2(1)3 of the same Act).

[Reasons for Recognition] Evidence, Evidence Nos. 13 through 26, Evidence No. 37, Evidence No. 42 through 44 (including each number), the purport of the whole pleadings

Shed Judgment

㈎ 관련 법리 등

개인이 소득세법상의 국내 거주자인 동시에 외국의 거주자에도 해당하여 그 외국법상 소득세 등의 납세의무자에 해당하는 경우에는 하나의 소득에 대하여 이중으로 과세될 수도 있으므로, 이를 방지하기 위하여 각국 간 조세조약의 체결을 통해 별도의 규정을 두고 있다. 납세의무자가 이와 같은 이중거주자에 해당하는 사실이 인정된다면 그 중복되는 국가와 체결한 조세조약이 정하는 바에 따라 어느 국가의 거주자로 간주할 것인지를 결정하여야 하고 그 조세조약에 따른 거주지국 및 그 세율의 결정은 과세요건에 해당한다. 다만 국내 거주자인 납세의무자가 동시에 외국의 거주자에도 해당하여 조세조약이 적용되어야 한다는 점에 대하여는 이를 주장하는 납세의무자에게 그 증명책임이 있다( 대법원 2008. 12. 11. 선고 2006두3964 판결 등 참조). 한편 한·일 조세조약 제4조 제2항 ㈎목은 ‘어느 개인이 양 체약국의 거주자가 되는 경우, 그는 그가 이용할 수 있는 항구적 주거를 두고 있는 체약국의 거주자로 본다. 그가 양 체약국 안에 이용할 수 있는 항구적 주거를 가지고 있는 경우, 그는 인적 및 경제적 관계가 더 밀접한 체약국(중대한 이해관계의 중심지)의 거주자로 본다.’라고 규정하고 있다.

㈏ 원고가 일본의 거주자인지 여부

In light of the following circumstances that can be seen by the above facts, i.e., (i) the Plaintiff was born in Japan or its children, and the Plaintiff’s children were continuously residing in Japan; (ii) the Plaintiff appears to have been living in Japan if he owns real estate in Japan and is in Japan; and (iii) the Plaintiff is currently serving as the representative director of the Japanese company as of June 2006 and is receiving a certain amount of monthly wage; and (iv) the Plaintiff is holding stocks or golf membership of a Japanese company, etc., it shall be deemed that the Plaintiff also falls under a resident of the Japanese Income Tax Act.

Therefore, since the plaintiff is both a domestic resident and a Japanese resident at the same time, it is necessary to determine which country's resident should be considered as a resident in accordance with the Korea-Japan Tax Treaty in order to prevent double taxation on the income accrued from the transfer of the shares in this case.

㈐ 한·일 조세조약 제4조 제2항 ㈎목에서 정한 원고의 항구적 주거나 중대한 이해관계의 중심지가 일본에 있는지 여부

1) The Plaintiff’s permanent residence

As mentioned above, as of June 2006, the plaintiff owned the building site and building of Dong-gu Emnato ( Address 4 omitted) in Japan, but also owned the building site and building of Seongbuk-gu Seoul ( Address 2 omitted) in Seongbuk-gu in 2004, ② the plaintiff stayed in Korea in 235 days in 2004, 183 days in 2005, 1806, and 181 days in 2006, and most of the remainder remains in Japan; the plaintiff appears to have resided in Japan during his stay; ③ all the above two real estate are high-priced and high-priced, and the plaintiff has been holding the above house for a long time from the time of their acquisition, it shall be deemed that both the plaintiff's permanent residence in Korea and Japan exists.

(ii) the center of the significant interest;

Even if the Plaintiff, even though he/she grow up to Japan and became an economic basis in Japan, it should be determined where the Plaintiff is liable to pay taxes under the former Act, depending on where the Plaintiff’s key interest is at the time of the occurrence of income due to the transfer of shares in this case.

As seen earlier, in light of the Plaintiff’s economic profit from May 25, 1994: (a) the Plaintiff was married to Nonparty 6 in Korea, and was in office as the representative director of the Social Welfare Foundation and the Social Welfare Foundation; (b) Nonparty 5 and Nonparty 4 were in office for profit-making corporations; and (c) Plaintiff’s wife was in office as the representative director of the Social Welfare Corporation; (d) the Plaintiff and Nonparty 4 were actively engaged in social service activities in Korea as of June 2006; (b) the Plaintiff paid KRW 3.9 billion to Nonparty 4 Co., Ltd. (the maximum shareholder and director) around September 2004; (c) the Plaintiff was in office at KRW 60,00,000,000,000,000,000,000,000,000,000 won was more than KRW 1.6,000,000,000,00.

E. Sub-decision

따라서 원고는 한·일 조세조약 제4조 제2항 ㈎목에 따라 한국의 거주자로 보아야 하고, 구 법에서 정한 납세의무자에 해당한다고 할 것이므로, 이와 다른 전제에 선 원고의 위 주장도 이유 없다.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

[Attachment Omission of Related Acts]

Judges Cho Dong-dong (Presiding Judge)

1) In addition, comprehensively taking account of the above circumstances, the Plaintiff shall be deemed to have been residing in Korea for not less than one year pursuant to Article 2(3)2 of the Enforcement Decree of the Act, and Article 2(3)2 of the Enforcement Decree of the Act shall be interpreted as the example provision under Article 2(1) of the Enforcement Decree of the Act. Meanwhile, the Plaintiff asserted that Article 2(3)2 of the Enforcement Decree of the Act is contrary to the principle of clarity of taxation requirements. However, in full view of the relevant provisions and legislative intent of the former Act and the former Enforcement Decree of the Act, it is difficult to anticipate that the above provision is subject to taxation from the taxpayer’s position, or that it is difficult to view that the uncertainty of the pertinent phrase is able to allow the tax authority to apply a arbitrary law. Thus,

2) Although the Plaintiff asserts that it is a re-power holding the property of KRW 100 billion in Japan, the evidence submitted by the Plaintiff alone is insufficient to recognize it, and there is no other evidence to acknowledge it.