〈Case in which the issue was whether income tax may be imposed on dividend income previously paid on employee stock where a member of an employee stock ownership association retired within one year from the date of deposit of the employee stock and thereby lost membership in the association〉[Gong 2024Ha, 1764]

【Holding】

[1] The principle of interpretation of tax laws

[2] In the case of employee stock for which income tax on dividend income was exempted upon satisfying the requirements of each subparagraph of Article 88-4(9) of the Restriction of Special Taxation Act and which was withdrawn after one year had passed from the date of deposit, whether income tax may be imposed on dividend income paid to the employee before the date of withdrawal (negative in principle), and whether the same applies even where the employee retired within one year from the date of deposit and thereby lost membership in the employee stock ownership association (affirmative)

【Summary of Decision】

[1] Under the principle of no taxation without law, the interpretation of tax laws, whether they concern taxation requirements, non-taxation requirements, or tax reduction or exemption requirements, must, absent special circumstances, follow the text of the law.

[2] Article 88-4(9) of the Restriction of Special Taxation Act provides in its main text that income tax shall not be imposed on dividend income from employee stock where the requirements of each subparagraph are satisfied, while providing in its proviso that “where the stock is withdrawn within one year from the date of deposit, income tax shall be imposed on dividend income paid before the date of withdrawal by deeming the dividend income to have been paid on the date of withdrawal.” According to that text, with respect to employee stock for which income tax on dividend income was exempted upon satisfying the requirements of each subparagraph of Article 88-4(9) of the Restriction of Special Taxation Act and which was withdrawn after one year had passed from the date of deposit, income tax may not, absent special circumstances, be imposed on dividend income paid to the employee before the date of withdrawal, and this is no different even where the employee retired from the stock company to which he or she belonged within one year from the date of deposit and thereby lost membership in the employee stock ownership association.

【Referenced Statutes】

[1] Article 59 of the Constitution, Article 88-4(9) of the Restriction of Special Taxation Act [2] Article 88-4(9) of the Restriction of Special Taxation Act, Article 34 of the Framework Act on Labor Welfare

(Source: Supreme Court Decision 2024Da254820, October 8, 2024 [Other (Monetary)] > Comprehensive Legal Information, Precedents)