My Tax Case CEO's Wife's 120 Million Won Salary - Tax Service Called It Fake, but the Tax Tribunal Overturned It

#. A small and medium-sized enterprise in South Gyeongsang Province. The CEO's wife was registered as a board director from the company's establishment. From 2021 to 2024, she received a monthly salary without fail. Total: 120 million won. However, when tax investigators toured the office, there was no desk for her. No commute records or work documents she allegedly produced were found. The National Tax Service concluded the money was "fake salary" and imposed corporate income tax.

In fact, "fictitious payroll"—paying company funds as salary to spouses or children who do not actually work—is a common item detected in tax investigations. Recently, even "salary swapping" has emerged, where clinics and hospitals hire each other's spouses, prompting the National Tax Service to request explanations. However, not all spouse salaries end up being fake. In August of this year, the Tax Tribunal overturned the National Tax Service's disposition in this case. Following the case timeline, we can see the point where taxation and relief diverged.

Case Timeline: Four Years of Salary, Until It Was Overturned

△2021 = The CEO's spouse, Ms. A, begins receiving salary from the company where she was registered as a board director and shareholder from its establishment. She held a non-executive position with an annual salary of 24 to 36 million won.

△2021-2024 = Over four fiscal years, a total of 120 million won in salary was paid. Recorded in the ledger as labor costs. During the same period, the company's number of employees and total salary continuously decreased, with many employees leaving mid-year.

△Thereafter = Busan Regional National Tax Service begins comprehensive corporate income tax investigation. Determines that Ms. A had no workspace in the office and no objective evidence proving work, such as commute records or work documents.

△Taxation = Masan Tax Office treats Ms. A's salary as fictitious payroll, excludes it from deductible expenses, and imposes corporate income tax. The company protests and requests a tax tribunal review. The average processing time for tax tribunal cases last year was 225 days—a battle that takes more than six months from receipt of a tax notice to final determination.

△August 12, 2026 = Tax Tribunal rules, "The disposition treating this as fictitious payroll is incorrect," and decides to include the 2021-2024 salary in deductible expenses and recalculate the tax amount (Tax Tribunal Case 2026-1724).

Three Points the Tribunal Focused On

The tribunal's logic was not simple leniency. First, the Enforcement Decree of the Corporate Income Tax Act recognizes remuneration paid to non-executive officers as deductible expenses unless it constitutes unreasonable calculation denial (Enforcement Decree Article 43, Paragraph 4). In other words, the fact of having no desk is not necessarily fatal for a non-executive officer. In fact, the seating arrangement diagram obtained during the investigation showed most seats were empty. Ms. A was not the only person without a desk in that office.

Second, the company's circumstances supported the argument. In a company where the number of employees and amount of wage payments decreased year by year and mid-career resignations were frequent, the tribunal found it "difficult to view as unreasonable" the explanation that a registered director had no choice but to take on actual work.

Third, the amount. Ms. A's annual salary was lower than the average of other employees (approximately 50 million won). It was the reverse of the typical fictitious salary case where idle family members receive more money than employees.

The Dividing Line: Whether 'Active Concealment' Occurred

Whether a spouse's salary ends in taxation or escalates into a criminal case depends on a separate distinction. If recognized as "fraud or other dishonest conduct" (Article 3 of the Penalty Provisions of the Tax Collection Act), the statute of limitations for assessment normally extends from five years to ten years, and prosecution may follow. In one acquisition tax case, the tribunal acknowledged underreporting but denied dishonest conduct because there was no active concealment such as false contracts or proxy accounts (Tax Tribunal Case 2024-1201). Conversely, in a case where a corporation's sales were received into an officer's personal account and falsely recorded as recovery of advances to officers, the tribunal acknowledged dishonest conduct and opened a ten-year assessment (Tax Tribunal Case 2026-1436).

Ultimately, the formula is as follows. If three factors are explained—registered officer status, the company's personnel situation, and the relative salary level—even a "desk-less spouse" receives relief. Conversely, if the appearance was created by fabricating an employment contract from the start, that falls into the realm of tax evasion rather than fictitious payroll. Last year, the Tax Tribunal's approval rate was 23.5%. In three out of four cases, the National Tax Service wins. This case was overturned not by luck, but because four years' worth of explainable facts had accumulated.