1. Plaintiff’s ground of appeal

Article 57(1)1 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides that the amount of foreign corporate tax may be deducted from the amount of corporate tax for the relevant business year, within the limit of the amount calculated by multiplying the amount of corporate tax for the relevant business year by the ratio of income generated from overseas to the amount of corporate tax for the relevant business year, where income generated from overseas is included in the tax base of a domestic corporation for each business year and there is the amount of foreign corporate tax paid or payable on such income generated from overseas (hereinafter

As can be seen, Article 57(1)1 of the former Corporate Tax Act provides that the amount of foreign corporate tax may be deducted from the amount of corporate tax for the pertinent business year in order to adjust international double taxation, setting the limit of deduction as “amount calculated by multiplying the amount of corporate tax for the pertinent business year by the ratio of income generated from overseas sources to the tax base for the pertinent business year,” and allow the deduction of the amount of foreign corporate tax only within the scope of the amount of corporate tax to be paid to the Republic of Korea on income generated from overseas sources. This is intended to prevent the occurrence of foreign corporate tax if the amount of foreign corporate tax is allowed to be fully deducted from the source country where income generated from overseas sources is located, as part of the corporate tax to be paid on income

In light of the language and purport of Article 57(1)1 of the former Corporate Tax Act, and Article 14(1) of the former Corporate Tax Act provides that income for each business year of a domestic corporation shall be the amount calculated by deducting the total amount of deductible expenses belonging to the business year from the total amount of gross income belonging to the business year concerned without asking whether the source is a domestic or a foreign country or not. In calculating the limit of deduction of foreign corporate tax pursuant to Article 57(1)1 of the former Corporate Tax Act, “amount of income generated from overseas” shall be calculated by deducting the total amount of deductible expenses related thereto from the total amount of gross income accrued overseas belonging to the domestic corporation’s business year, and this also applies where a domestic corporation bears corporate tax calculated by multiplying the amount of income generated from overseas by a certain withholding tax rate, as it did not have a permanent

In the same purport, even if the Plaintiff, who did not have a foreign permanent establishment, was liable for the corporate tax calculated by multiplying the income amount from overseas sources by a certain withholding tax rate on the income from overseas sources of this case, which was acquired by the Plaintiff from selling the foreign broadcasting business to the foreign broadcasting business, the court below is justifiable in holding that when calculating the limit of foreign corporate tax credit under Article 57(1)1 of the former Corporate Tax Act, the amount of income from overseas sources should be calculated by deducting the expenses related thereto from the income amount. In so doing, there is no error of misapprehending the legal principles on the foreign corporate tax credit system under Article 57(1)1 of the former Corporate Tax Act, or the calculation of

2. As to the Defendant’s ground of appeal

For reasons indicated in its holding, the lower court determined that the instant disposition, based on which the Defendant allocated common expenses based on the total production cost of each business sector including copyright royalties, was unlawful to the extent that it exceeds the reasonable tax amount calculated by allocating common expenses based on the labor cost of each business sector, on the grounds that the causes of the instant business, which is the general management cost of the management sector, which is common expenses for the Plaintiff’s domestic source income and the foreign source income (hereinafter “common expenses”) are reasonable relations with the labor cost of each business sector.

Examining the record, the above determination by the court below is just, and there is no error of exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or of misapprehending the legal principles as to the standards for reasonable allocation of common expenses domestically and overseas.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against each party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)