B. Method for calculating an amount of tax reduction or exemption for foreign currency loan businesses conducted by foreign bank domestic branches under Article 15(10) of the former Regulation of Tax Reduction and Exemption Act (Act No. 2932, Dec. 12, 1976) and Article 27-2(2) of the Enforcement Decree of the same Act (Presidential Decree No. 8353, Dec. 31, 1976

(c) Parts of special bonus deduction under the Income Tax Act for bonuses; and

B. Under Article 15(10) of the former Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 2932, Dec. 22, 1976); Article 27-2(2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 8353, Dec. 31, 1976); long-term calculation of foreign currency loans to the domestic branch of a foreign bank which has been exempted from the defense of corporate tax pursuant to the provisions of Article 27-2(2) of the Enforcement Decree of the same Act shall not be deemed to have the long-term repayment condition only as the foreign loan funds under long-term repayment condition; the domestic branch of the foreign bank shall also take foreign currency loans from the head office to the Korean national in exchange for foreign currency with foreign currency loans from the Bank of Korea and separate from other funds. Therefore, it is impossible to calculate the interest paid on foreign currency loans, which can be used by the domestic branch of the foreign bank in foreign currency, including the foreign currency loan loan funds in total and the foreign currency loan funds in total amount corresponding to the foreign currency loans.

C. If a foreign bank domestic branch pays monthly bonus to its employees in accordance with a labor-management agreement that provides that the said employees shall be paid a bonus equivalent to 40 percent of the annual basic monthly salary, it shall have the nature of bonus paid in supplementary sense of remuneration or salary regardless of the company’s achievements. This constitutes bonus income subject to the special bonus deduction under the Income Tax Act, and thus, special bonus deduction shall be made in calculating the labor income tax.

The costs of appeal shall be assessed against each appellant.

With respect to No. 1:

According to Article 20 of the former Corporate Tax Act (Act No. 2686 of Dec. 21, 1974) and Article 46 (2) 7 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 7464 of Dec. 31, 1974), if a juristic person lends or provides money, or other assets or services to investors and other persons in a special relationship, at a free or low interest rate, rate, or rent, the corporate tax burden on the income of the juristic person shall be deemed to be unjustly reduced and the corporate tax burden shall not be calculated, and it shall be calculated in the business year of the juristic person, and it shall be calculated in the business year of the juristic person. This is because the above transaction between the juristic person and the person in special relationship seems to be an act to avoid corporate tax burden due to lack of objective economic rationality, and it is interpreted to be based on the principle

According to the facts established by the court below, the Seoul Branch established a housing loan and employee loan system for employees and provided housing and other funds at an annual interest rate of 6% only under the name of their spouse, parents or siblings living together with them. In principle, in the event of loans, employees establish a collateral security right on real estate for employees, but in the event of female employees, they establish a collateral security right on real estate for their spouse and unmarried parents, deducts the amount of loans from their monthly salary. According to Article 27 (1) 8 of the Banking Act and the Bank Supervision Regulations of the Bank of Korea, a financial institution provides loans to employees within the limit of 5,000,000 won with housing funds. Thus, it cannot be deemed that the loans exceeded this limit and it is merely a 6% loan interest rate for employees of the Seoul Bank because the Seoul Branch's economic interest rate of 6% is unreasonable or lower for employees of the Plaintiff Bank's loans to those who are not employees of the Seoul Branch or those who are not in special relations with the Seoul Branch. Thus, it constitutes an unfair calculation of the Plaintiff Bank's interest rate of 60% loans.

With respect to the second ground:

According to Article 15 (11) of the former Regulation of Tax Reduction and Exemption Act (Act No. 2932 of Dec. 22, 1976), where a domestic branch of a foreign bank grants a loan in foreign currency to a national and grants a reduction or exemption of corporate tax on the interest and commission that he/she received, under Article 15 (10) of the same Act, the defense tax on the tax base shall be reduced or exempted. Article 11 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 9230 of Dec. 30, 1978) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 9230 of Dec. 30, 1978) provides that where a corporate tax is exempted, the defense tax reduction or exemption shall be calculated by multiplying the corporate tax amount of the business year calculated under Article 22 of the Corporate Tax Act by the ratio of the income exempted from corporate tax to the tax base of the business year in which the tax base is reduced or exempted. Therefore, the defendant's opinion that this is justified.

2. The defendant's grounds of appeal are examined.

With respect to No. 1:

Article 15(10) of the former Regulation of Tax Reduction and Exemption Act (amended by Presidential Decree No. 2932, Dec. 22, 1976); Article 27-2(2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 8353, Dec. 31, 1976) provides that where a domestic branch of a foreign bank lends foreign currency funds to a national with a maturity of three years or longer and receives interest and fees, such long-term loans shall be exempted from corporate tax and defense taxes equivalent to income accrued from such projects. In the case of long-term loans, foreign bank branches shall try to use foreign currency loans as funds for the long-term repayment limitation, securing funds and profitability, but it is reasonable to view that only foreign currency loans are used as funds under the long-term repayment condition, and instead, the domestic branch of the foreign bank shall be deemed to have operated all foreign currency loans under the said long-term repayment condition or short-term repayment condition within the scope permitted by the Acts and subordinate statutes, with the exception of interest paid on loans in Korean currency from the head office.

With respect to the second ground:

According to the facts established by the court below, it concluded a labor-management agreement that the Seoul Branch of the Plaintiff Bank shall pay the employees a bonus equivalent to 40% of the annual basic monthly salary, and the above bonus has been paid in monthly installments between June 1, 1976 and December 1978 at the request of the labor union, and thus, the above bonus has the nature of being paid in supplementary sense regardless of the corporate achievements as an bonus income which is subject to the special bonus deduction under the Income Tax Act, and this constitutes a bonus income which is subject to the special bonus deduction under the Income Tax Act. Therefore, in calculating the labor income tax, it is necessary to make the special bonus deduction (see Supreme Court Decision 81Nu215, May 29, 1984). The judgment of the court below pursuant to this purport is just and contrary to the above opinion, it cannot be adopted to criticize the judgment of the court below on the basis of a justifiable and opposing opinion

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

Justices Kim Jong-sik (Presiding Justice)