[E-Daily Reporter Choi Jeong-hee ] Established in 1996 in Uiryeong County, South Gyeongsang Province, this shipbuilding equipment parts manufacturer is a typical family-owned business, with CEO Lee holding a 70% stake and his wife, Ms. Kim, holding a 20% stake.

Ms. Kim, who had been a teacher, began assisting with company operations in 2021. Under that arrangement, she received a monthly salary from the company for four years, from 2021 to 2024. Over those four years, a total of 120 million won was paid to Ms. Kim as salary.

Then, in August 2025, the Busan Regional Tax Office raided this shipbuilding equipment parts company. What the tax authorities wanted to verify was, “Did Mrs. Kim actually work at this company?” As far as the tax investigators could tell, there was no desk for Mrs. Kim in the office, and there was no record of her having worked there in the company’s computer records.

Suspecting “corporate income tax evasion,” a tax investigator discreetly asked an employee of Company A, which shared the office space: “Does Ms. Kim work here? Do you know what kind of work she does?” The employee replied, “Ms. Kim is listed as an inside director, but she doesn’t actually work here.” For some reason, even CEO Lee was unable to provide evidence that Ms. Kim had actually performed any work. That was the moment the NTS investigator concluded, “They paid her a fake salary to underpay corporate income tax.”

The National Tax Service recalculated the corporate tax and issued a notice, stating that the four years’ worth of payroll expenses paid to Mr. Kim were improper. The company filed a request for a pre-assessment review (a system to examine the appropriateness of taxation before receiving a tax bill) but had it rejected. Feeling wronged, Mr. Lee filed a petition for adjudication with the Tax Tribunal in February of this year. When he received the result about six months later, was Mr. Lee able to smile?

“My wife is the one who saved the company.”

Mr. Lee was deeply grateful to Ms. Kim. From the company’s founding, Ms. Kim had served as a registered director for nearly 30 years, and she was both a collateral guarantor and a joint management guarantor. In other words, she had pledged to share the responsibility if the company went under—and she actually did just that.

Mr. Lee’s company faced such severe difficulties that it received approval for a reorganization plan from the Changwon District Court in 2009. Mr. Kim sold an apartment in Geumjeong-gu, Busan—which he had purchased during his 32-year career as a teacher—to help the company recover. Thanks to this, the reorganization proceedings were concluded in 2014.

The key issue is whether Mr. Kim actually performed any work. According to Mr. Lee’s account, the company downsized its workforce as its financial situation deteriorated, and Mr. Kim began working for the company in 2021. After the accounting staff resigned in the second half of 2023, there were no employees left other than the facilities manager. Therefore, he argues that Mr. Kim had no choice but to take on everything himself—from stamp sales and real estate leasing to facilities management and financial management—alongside Mr. Lee.

Then why did an employee of Company A, which shared the same office, state that Mr. Kim did not work? Mr. Lee explained, “Since Mr. Kim worked irregularly—such as coming in on weekends—there was no need for a designated desk for him,” adding, “The Company A employee simply misunderstood and answered off the cuff.” There was also no evidence that Mr. Kim had served as a registered director. Mr. Lee argued that it is not customary for a part-time registered director to keep a record of work hours.

Mr. Lee said, “If you cannot recognize the full amount of labor costs, please at least recognize a minimal amount of compensation, taking into account the remuneration for part-time directors at small and medium-sized enterprises.”

No Evidence of Work… Tax Tribunal Rules “Mr. Lee Is Correct”

From the National Tax Service’s perspective, the claim that Mr

.

Kim had performed

work

was based solely on

Mr. Lee’s

assertion, with absolutely no supporting evidence. The materials the company submitted to the

Tax Tribunal

were also insufficient.

The minutes of the November 2025 general meeting of shareholders listed four attendees, but only Mr. Lee and Mr. Kim signed the document. Even this was drafted after the tax audit had concluded, during the pre-assessment review process. Evidence of Mr. Kim’s work was so scarce that even Mr. Lee went so far as to sign a statement confirming that “there is no proof that Mr. Kim worked.”

Yet, for some reason, the Tax Tribunal ruled in Mr. Lee’s favor.

The Tribunal focused on the company’s employment income payment statements obtained by the National Tax Service. This was because the number of employees and the total payroll at the company had continued to decline from 2021 to 2024. Employee B worked only from January 2021 to June 2022. Director C, who was in charge of the stamp business, received a monthly salary only from June 2023 to November 2024. By the end of 2024, Mr. Lee and his wife were the only people receiving salaries from the company. The Tribunal determined that Mr. Kim was the company’s sole part-time executive.

The Tribunal also closely examined the office seating chart obtained by the National Tax Service. Most of the seats were empty. It appeared not only that Mr. Kim’s desk was missing but that the office itself was completely empty. This aligned with the argument that “someone had to do the work at a company with no employees, and that person was Mr. Kim.”

According to the Corporate Tax Act (Enforcement Decree, Article 43, Paragraph 4), compensation for non-executive officers is recognized as a deductible expense unless it is excessively high and results in an unjustified reduction of taxes. Therefore, what mattered was not the attendance records but the amount of the salary. Mr. Kim’s annual salary started at 24 million won and increased to 36 million won as the number of employees decreased and his workload increased. This amount was less than the annual salaries (over 50 million won) of B and C, who were employees of the company.

The Tax Tribunal found the argument that Mr. Kim had no choice but to perform company work amid a continuous decline in staff to be valid. It ordered the National Tax Service to treat all four years’ worth of payroll expenses paid to Mr. Kim as deductible business expenses and to recalculate the corporate income tax accordingly. The seating chart presented by the National Tax Service as evidence that “there was no seat for the boss’s wife” was interpreted by the Tribunal as evidence that “the only person available to work was the boss’s wife.” This irony saved Mr. Lee.

※ This article reconstructs the sequence of events based on the Tax Tribunal’s decision. Since the real names of the individuals involved and some specific monetary amounts were not disclosed in the Tribunal’s decision, the content was composed solely within the scope of verified facts. No details not present in the decision were arbitrarily inferred.