한중 조세조약 제2의정서 제5조 제1항 후문은 세액공제대상 조세의 세율을 10%로 간주하는 것임[국패]
Cho Jae-2014-west-5707 (Law No. 115, 2015)
The latter part of Article 5(1) of the Protocol 2 to the Korea-China Tax Treaty shall be deemed to be 10% of the tax rate subject to the tax credit.
The purport of the Korea-China Tax Treaty stipulating the differential limited tax rate is to grant benefits to companies making more investments in China by applying a relatively lower tax rate, and to uniformly consider the tax rate subject to tax credits as 10%, thereby preventing unreasonable tax benefits. In addition, the latter part of Article 5(1) of the Protocol is a special agenda.
Article 57 (Foreign Tax Credit)
2015Guhap78335 Revocation of Disposition of Rejecting Corporate Tax
KKK Ltd.
Head of Seocho Tax Office
July 12, 2016
September 8, 2016
1. The defendant's rejection disposition against the plaintiff is revoked both of the disposition of correction of 000 won of corporate tax belonging to the business year 201 and the disposition of correction of 000 won of corporate tax belonging to the business year 201 and 000 won of corporate tax belonging to the business year 2014 and the disposition of correction of 200 won of corporate tax belonging to the business year 2012.
2. The costs of the lawsuit are assessed against the defendant.
Cheong-gu Office
The same shall apply to the order.
1. Details of the disposition;
A. The Plaintiff is a legal entity that runs the manufacture and sales business of BB, and around 2004, invested 50% and 30% of shares in the People's Republic of China (hereinafter "China") and established D and FF Investment Limited Corporation (hereinafter "the instant Chinese subsidiaries") respectively.
B. From 2010 to 2012, the Plaintiff received dividends from the instant Chinese subsidiaries (hereinafter “instant dividends”) and filed a corporate tax with the Defendant by applying a foreign tax credit directly.
[Report] The dividend amount for the business year 2010 to 2012 and the amount of foreign tax credit (unit: source)
Business Year
Distribution Amount
Source Collection Rate
Direct Foreign Tax Amount payable
Deemed foreign payable tax amount
Tax Credit carried over
Amount of corrected claim
2010
00
5%
00
00
00
-
2011
00
00
00
-
00
2012
00
00
00
00
00
Total
00
00
00
00
00
C. On January 1, 2008, the Plaintiff filed a request for a correction to reduce the amount of corporate tax 00 won (the amount according to the carried-over of the amount of foreign tax deemed to be reverted to the business year 2010), and the amount of corporate tax 00 won (the amount according to the carried-over of the amount of foreign tax deemed to be reverted to the business year 201) to the Defendant on the ground that each of the items stated in the table [Attachment] should be additionally deducted in relation to the return of corporate tax for the business year 2010 to 2012, since the dividend of this case, which was deemed to be paid as a direct foreign tax amount, as well as deemed to be paid foreign tax amount, should be deducted from the amount of tax paid for the business year 2010 to 2012.
D. However, on May 8, 2014 and August 4, 2014, the Defendant rejected the Plaintiff’s respective request for correction of reduction or exemption (hereinafter “instant disposition”) on the ground that “where the tax rate of 5% is applied and imposed pursuant to the “Agreement between the Republic of Korea and the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income” (hereinafter “instant tax treaty”), the Defendant refused the Plaintiff’s request for correction of reduction or exemption of taxes pursuant to the first sentence of Article 5(1) of the “Rules of the Agreement between the Republic of Korea and the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income” (hereinafter “Protocol 2”).
E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Director of the Tax Tribunal on August 5, 2014, but the appeal was dismissed on August 11, 2015.
[Reasons for Recognition] Unsatisfy, each entry in Gap evidence 1 to 3 (including each number in the case with a serial number) and the purport of the whole pleadings
2. Whether the instant disposition is lawful
(a) Relevant statutes and treaties;
It is as shown in the attached Form.
B. Determination
1) Article 57(3) of the Corporate Tax Act provides that "the amount equivalent to the corporate tax reduced or exempted on the relevant foreign source income in the other country to the tax treaty shall be deemed to be the amount of foreign corporate tax which is subject to the tax credit or inclusion in deductible expenses pursuant to paragraph (1) within the extent prescribed by the relevant tax treaty." Article 23(1) of the Korea-China Tax Treaty provides that "the double taxation shall be avoided as follows. It shall be governed by the provisions of Korean tax law regarding the tax credit granted from Korean source income in other countries, whether directly or through the deduction, China's law and this Agreement provide that "if the domestic source income in China would not exceed the portion of the Korean tax credit, equivalent to the ratio of the total income subject to Korean tax payment, and Article 10(2) provides that "the amount of tax credit shall not exceed the portion of the amount of tax credit on the relevant foreign source income," and Article 23(2) of the Korea-China Tax Treaty provides that "the amount of tax credit shall be deemed to be more than 10% of the total dividend income of the Contracting State, and 2.3(b)".
2) Article 57(3) of the Corporate Tax Act, Article 23(1) of the Korea-China Tax Treaty, and Article 5(1) of the Protocol No. 2 are deemed to provide for foreign tax credit for the language and structure thereof. Such deemed foreign tax credit is aimed at treating the amount of tax reduction or exemption as the amount of tax actually paid in accordance with the requirements under the tax treaty and the domestic law of the country of residence, even if the amount of tax reduction or exemption was not actually paid in a foreign country, so that the effect of the tax reduction or exemption benefits granted by the country of origin can be preserved in the country of residence in order to prevent the tax reduction or exemption benefits
Meanwhile, Articles 3 and 4 of the Chinese Corporate Income Tax Act provide that the income tax shall be imposed at a rate of 20% on the income acquired by non-residents within the Chinese territory as the Plaintiff. Article 91 of the Chinese Corporate Income Tax Act provides that the said tax rate shall be 10%. However, as seen earlier, Article 10(2) of the Korea-China Tax Treaty applies 5% to the beneficial owners of dividends held by subsidiaries of the source country (in this case, China) where the equity interest is 25% or more, and 10% where the equity interest is 25% or less, respectively. This also constitutes the maximum tax rate, i.e., a limited tax rate, which may be imposed on the residents or corporations of the Contracting State pursuant to the tax treaty. In general, such a limited tax rate does not apply to the dividend income paid by the residents of one Contracting Party to the other Contracting Party as the source country of the dividend income, and it is difficult to find any more reasonable tax rate between the source country and the source country and the source country for economic development.
Next, this paper examines the history of Article 5(1) of the Protocol and the relationship between the specialist and the latter. Before January 1, 2008, where the total amount of tax on dividend income to foreign capital-invested enterprises under Chinese domestic law exempted from the total amount of tax, and where only specialized provisions are applied without any differential limited tax rate, a large number of capital-invested enterprises can be deemed as 5% foreign tax credit, while a company which has less capital-invested than 10% can be allowed to receive 10% foreign tax credit, and a large number of capital-invested enterprises are more unfavorable than that of the other 10%, the latter part of Article 5(1) of the Protocol of this case is considered as 10% of the tax credit, which is more favorable than that of the other 10% of the tax credit. However, after January 1, 2008, the above foreign-capital-invested enterprises are still subject to 10% of the tax credit under Chinese tax treaty. This is still subject to 10% of the tax credit after it was abolished.
The purport of Article 10(2) of the Act on the Promotion of Investment in Source Countries is to facilitate investment in source countries by granting foreign companies which invest a large amount of capital in source countries tax reduction or exemption to which tax rates lower than those applied by source countries. As such, this is rather consistent with the original purpose and intent of the Korea-China Tax Treaty.
3) 또한 이 사건 제2의정서 제5조 제1항 후문의 문언 그 자체에 의하더라도, 이 사건 한중 조세조약 제10조 제2항의 경우 배당금에 대한 세액의 세율은 10%로 간주된다고 명확히 규정하고 있는 점에서도 위와 달리 해석하기는 어렵다. 이에 대하여 피고는 이 사건 제2의정서 제5조 제1항 후문은 문언상 이 항의 목적상 이라고 규정하고 있어 전문과 후문을 별개로 해석할 수 없다고 하면서, ① 전문에서 조세경감, 면제 또는 경제발전 촉진을 위한 그 밖의 조세유인조치 관련 법률규정이 없었더라면 납부했어야 할 세액 에 대해서 간주외국납부세액공제를 할 수 있는 것으로 규정하고 있고, ② 2008. 1. 1. 이후에는 더 이상 중국 국내법상 조세감면규정을 두고 있지 아니하며, ③ 가사 이 사건 한중 조세조약 제10조 제2항을 조세유인조치라고 본다고 하더라도 이는 '조약'일 뿐 '법률규정'에는 해당하지 아니하므로 원고에 대하여 전문과 별개로 후문을 독자적으로 적용할 수 없다는 취지로 주장한다. 그러나 이 사건 제2의정서 제5조 제1항 후문의 이 항의 목적상 의 영어 원문이 For the purpose of this paragraph 라고 되어 있는 것에 비추어 볼 때, 이는 '전문에 해당하는 경우에 한하여'라는 식으로 제한적 해석을 할 것이 아니라 '전문의 입법취지를 살리기 위하여'라고 해석하는 것이 합리적이고, 따라서 이 사건 제2의정서 제5조 제1항이 전문 외에 후문을 추가로 규정한 것은중국 국내법률보다 낮은 제한세율을 규정하여 조세감면혜택을 부여하고 있는 이 사건한중 조세조약 제10조 제2항이 조세유인조치에는 해당하나 그 형식상 이 사건 제2의정서 제5조 제1항 전문의 '조세유인조치 관련 법률규정'에는 해당하지 아니하기 때문에 전문을 곧바로 적용할 수 없는 문제가 있어 이를 해소하기 위해 전문과 마찬가지의 간주외국납부세액공제 효과를 부여하기 위하여 특별의제규정으로 둔 것으로 해석할 수있는 것이다.
4) If the latter part of Article 5(1) of the Protocol of this case is interpreted to apply only when the Chinese domestic law rate is more reduced than the limited tax rate as alleged by the Defendant, it is interpreted that the latter part of Article 5(1) of the Protocol of this case applies only to foreign-invested enterprises holding 25% or more of the Chinese domestic law rate is applied only to 5% of the reduced tax rate if there is no Chinese domestic law rate that reduces the reduced tax rate than 5% of the reduced tax rate. If there is a Chinese domestic law rate that reduces the reduced tax rate than 5% of the reduced tax rate, for example, if there is a provision that applies the reduced tax rate to 10% lower than 5% of the reduced tax rate, it would be subject to 10% of the reduced tax rate if there is a provision that applies the reduced tax rate to 10% below 5% of the reduced tax rate, which is very unfair, and as a result, the defendant's position and logic to recognize the reduced tax rate between the reduced tax rate and the reduced tax rate under Article 10(2).
5) Comparing the contents of the tax treaty established with the government of the Republic of Korea regarding similar matters other than the instant tax treaty, even if the latter part of Article 5(1) of the Protocol provides for a limited tax rate lower than that prescribed by the Internal Tax Act, it may be deemed that the said foreign tax credit is recognized as identical to that prescribed by the Internal Tax Act. For example, the Convention between the Government of the Republic of Korea and the Government of the Republic of the Philippines for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as the “Convention”) separates Article 10 as 10% (paragraph 2(a) and 25% (paragraph 2(b)) of the limited tax rate related to dividend income from the Republic of Korea’s tax treaty, and it is difficult to interpret Article 23(1) of the said Treaty as 30% of the dividend income of the Republic of Korea’s tax treaty for the purposes of Article 20(3) of the said Treaty without the difference between the two countries’s tax treaty and its corresponding provisions.
6) Meanwhile, the Defendant asserted that the Plaintiff’s tax authorities in China also maintained the position that the tax amount equivalent to 5% of the tax amount actually paid is eligible for foreign tax credit when the Plaintiff paid the tax amount to which Article 10(2)(a) of the Korea-China Tax Treaty applies to China. However, it is difficult to conclude that the Defendant’s answer (No. 3-2) submitted by the Chinese tax authorities in China is an official opinion of the Chinese government, and even in light of the expression and content thereof, it is merely a defensive opinion in terms of the Defendant’s argument rather than supporting the Defendant’s argument.
7) Upon organizing the above discussions, it is reasonable to view that the amount of tax on the dividend income that the Plaintiff should pay to China pursuant to the latter part of Article 5(1) of the Protocol is eligible for tax credit under Article 57(3) of the Corporate Tax Act, since 10% of the total amount of dividend, or the Plaintiff paid to China the amount of tax to which Article 10(2)(a) of the Korea-China Tax Treaty applies, which is 5% of the difference.
C. Sub-committee
The disposition of this case to this different purport is unlawful, and the plaintiff's assertion disputing it is reasonable.
3. Conclusion
Therefore, the plaintiff's claim is reasonable, and it is decided as per Disposition.