법인의 실질적 경영자의 횡령금에 대한 소득세 과세

Abstract

Korean courts have taken the position that misappropriation of corporate funds by a corporate de facto manager of a Korean corporation (the “Misappropriation”) results in outflows of income, none of which are expected to return to the corporation in the future. Under Korean tax law, such Misappropriation is not treated as a deductible expense although it effectively decreases the corporation’s assets from a financial reporting standpoint. With respect to any taxable income arising from such difference between book and tax treatment, so-called “disposition of income” process (the “Process”) would determine the appropriate income category thereof (which mainly depends on whether paid to the shareholders as dividends or re-invested in the corporation) for Korean corporate income tax purposes. In the past, the Korean Constitutional Court had ruled that the Process is unconstitutional, and it was followed by a judicial precedent allowing the imposition of Korean corporate income tax on the Misappropriation without such Process. It should be noted however that this precedent should be viewed as a transitional measure inevitably reflecting the Constitutional Court’s ruling of unconstitutionality. Moreover, the current Korean tax system has been significantly changed after a series of amendments to the relevant corporate tax laws and regulations on such issue, and thus should not conflict with the precedent as the Process is currently deemed constitutional. Meanwhile, in the case when a de facto manager (i.e., a Korean resident) of a foreign corporation misappropriates only Korean-source income, thereby subject to the Process, it is possible under Korea tax law that he may not be able to recognize such income as earned income because the income is not actually attributable to his performance. By contrast, he may be allowed to recognize earned income if only non-Korean source income is misappropriated. Overall, it would be unreasonable to determine the appropriate income category of the misappropriated fund solely based on the source of income. Moreover, there may be an issue as to whether the place of effective management exists in Korea for Korean tax purposes, making it more difficult to distinguish between foreign and domestic entities. In conclusion, regardless of whether it is a domestic or foreign corporation, the Misappropriation should be subject to Korean corporate income tax except to the extent that the Process applies.