Article 86-2 (Income Deduction for Special Purpose Companies, etc.)

2. The costs of the lawsuit are assessed against the defendant.

A. The plaintiffs are domestic corporations established for the purpose of the management, operation, and disposal of securitization assets in accordance with the asset-backed securitization plan pursuant to the Asset-Backed Securitization Act (hereinafter referred to as the "Asset-Backed Securitization Act"). ○○○○○○○○○○○○ Korea, and LLC (hereinafter referred to as “lsK”) are companies established for the main purpose of the ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○”). The plaintiffs paid 9 billion won to the Plaintiffs as ○○○○○○○○○○○○○’s consulting 2009.

C. However, it was revealed that the above consulting service costs were processed expenses paid without actual provision in the National Tax Service’s tax investigation conducted on April 2005 with respect to ○○○ other fund, the Plaintiffs, while holding a temporary general meeting of members on September 30, 2005 and then disposing of them as other income. On the other hand, the Plaintiffs submitted to the Defendant an application for income deduction (hereinafter “instant application for income deduction”) on October 18, 2005, which increased 1,000 won of each tax base return of corporate tax base (hereinafter “the revised return”) and each of the above additional dividends to the Defendant around 1,000 won (hereinafter “instant application for income deduction”). On the other hand, the Plaintiffs returned to the Plaintiffs around 206, around 2006, the amount of additional dividends, which was reduced by 1,000 won from each of the above consulting service costs.

D. △△ regional tax office conducted a tax investigation with respect to special purpose companies, including the plaintiffs related to ○○ Fund from April 2005 to September 2005, and then denied the validity of the revised return of this case, and then notified the defendant of the result of tax investigation to correct the corporate tax amount for the business year 2003 (including additional tax on October 18, 2005) after tax adjustment to the defendant that the amount would be considered as processing expenses paid without providing consulting services with respect to ○○○○ right and would not be included in deductible expenses. Accordingly, the defendant issued a revised corporate tax (including additional tax) for each business year 2003 as described in paragraph (1) of this case on October 14, 2005.

[Grounds for recognition: 1,2,2, A9, 10, 11, 11, 1 through 4, and the purport of the whole pleadings and arguments of evidence Nos. 1, 4, 6, 7, and 8 respectively]

2. Whether the disposition is lawful;

A. The parties' assertion

1) The plaintiffs' assertion

The distribution of dividends under Article 51-2(1) of the Corporate Tax Act refers to a resolution of dividend, and in the case of a securitization specialized company, only 90% or more of the distributable profits may be deducted if dividends are distributed, and the dividends that can be deducted from income are possible in excess of the distributable profits are not necessarily the distributable profits. Thus, the revised declaration of this case and the application for income deduction are legitimate, but the disposition of this case that rejected it is unlawful.

2) The defendant's assertion

According to Article 17 of the Asset-Backed Securitization Act and Articles 447, 449, and 583 of the Commercial Act, a special purpose company shall determine the amount of dividends to be paid by directors in each business year and enter the amount of dividends in the appropriation of retained earnings in each business year, and submit them to a regular general meeting of members along with other financial statements. The Plaintiffs’ resolution of additional dividends in the temporary general meeting of members on September 30, 2005 when several years have passed since the resolution of dividend for the business year 2003 became final and conclusive by approval of a regular general meeting of members, rather than the actual resolution of dividend, cannot be deemed as dividends under Article 51-2 (1) of the Corporate Tax Act. Even if it is allowed to distribute dividends in excess of the distributable profits pursuant to Article 30 (3) of the Asset-Backed Securitization Act, the excess dividends cannot be deemed as constituting income deduction, and thus, it cannot be deemed as unlawful since the Plaintiffs’ revised return of income deduction was made under the premise that it did not have been recovered as losses.

(b) Related statutes;

Article 51-2 (Income Deduction for Special Purpose Companies, etc.)

Article 86-2 (Income Deduction for Special Purpose Companies, etc.)

Article 30 (Exception to Transfer, etc. of Equity Holdings)

Article 47 (Preparation of Financial Statements)

Article 49 (Approval and Public Notice of Financial Statements, etc. under Commercial Act)

Article 583 (Provisions Applicable Mutatis Mutandis of Commercial Act)

C. Determination

1) Whether a resolution on additional dividend in a provisional general meeting of members constitutes a dividend under Article 51-2 of the Corporate Tax Act

Article 51-2(1) of the Corporate Tax Act and Article 86-2(1) of the Enforcement Decree of the Corporate Tax Act (hereinafter “Enforcement Decree of the Corporate Tax Act”) provide that where a special purpose company under the Asset-Backed Act distributes not less than 90/100 of distributable profits (the amount obtained by deducting carried-over profits or carried-over losses from the current net profit and subtracting earned surplus reserves pursuant to Article 458 of the Commercial Act), such amount shall be deducted in calculating its income for the pertinent business year. The income deduction system for dividends of a special purpose company is a document corporation established for the purpose of asset-backed securitization of bonds, real estate, etc., and it functions as an conduit unlike a general corporation, if the special purpose company distributes dividends not less than 90% of distributable profits, it shall be exempted from corporate tax by deducting the total amount of dividends from the income of the special purpose company at the stage of its members, and it shall be deemed that there is no more than 90% of distributable profits for the pertinent business year after the liquidation of non-performing loans by the financial institution, etc.

In the case of this case, as seen earlier, the plaintiffs discovered that the above consulting service costs were processed expenses paid without actually providing the service, and that ○○○○○○, the representative director of LSAK, embezzled the accounting and tax adjustment of the above consulting service costs and made an additional dividend resolution at a temporary general meeting of partners. Accordingly, the amount equivalent to the above consulting service costs, which was initially handled as expenses and losses, increased distributable profits and business year income, and the plaintiffs applied for an additional dividend and dividend income deduction as to the amount excluding 1,000 won out of the increased profits or income, the above additional dividend resolution shall be deemed to constitute a dividend under Article 51-2 of the Corporate Tax Act, regardless of the purpose of tax avoidance.

2) Whether dividend income deduction ought to be provided as a source of distributable profits

In full view of the relevant provisions such as Article 51-2(1) of the Corporate Tax Act, Article 86-2(1) and (2) of the Enforcement Decree of the Corporate Tax Act, and Article 30(3) of the Asset-Backed Securitization Act, a special purpose company may pay dividends in excess of the distributable profits, but if the dividends exceed the income for the pertinent business year, the special purpose company may receive dividend income deduction only within the scope of income. In this case, in the case of this case, the Plaintiffs’ additional dividends and income for the pertinent business year have increased in the amount equivalent to the initial costs and losses, and the amount of distributable profits and income for the pertinent business year was applied for dividend income deduction within the scope of increased income.

3) Whether it is possible to distribute dividends in cases of disposal of income as a outflow from the company

In general, when a corporation embezzled its assets by deceiving a corporation, it shall not be disposed of as it was out of the company unless it confirms the embezzlement act or renounces the right to claim compensation for damages (see Supreme Court Decision 2002Du9254, Apr. 9, 2004). Although the Plaintiff disposed of the above consulting service expenses as other income (e.g., outflow) without disposing of it as retained earnings, the Plaintiffs did not waive the above consulting service expenses or have the right to claim compensation for damages against ○○○○○-ri employer, and did not ratification the above embezzlement. Furthermore, since the Plaintiff recovered the amount of money equivalent to the above consulting service expenses from lsK around May 30, 206, the increase in income from non-Inclusion of the above consulting service expenses is reserved against the Plaintiffs. Accordingly, the Plaintiffs’ application for dividend income deduction in this case is legitimate.

4) Sub-determination

Therefore, the corporate tax imposition disposition of this case based on the premise that the revised return and the application for dividend income deduction were illegal is illegal.

3. Conclusion

Thus, the plaintiffs' claim of this case is justified, and all of them are accepted.