1. Regarding ground of appeal No. 1

A. Article 2(1)2 of the former Corporate Tax Act (amended by Act No. 9267, Dec. 26, 2008; hereinafter the same) provides that a foreign corporation is liable to pay corporate tax only when it has income generated from sources in Korea. Articles 2(4) and 98(1) provide that a person who pays a foreign corporation a certain amount of income generated from sources in Korea, such as Article 93 subparag. 9, shall be liable to withhold corporate tax. Articles 93 subparag. 2 and 98(1)3 provide that the withholding tax rate for the dividend income that is a domestic source income of the foreign corporation shall be 25%.

Meanwhile, Article 10(1) of the Agreement between the Republic of Korea and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (hereinafter “Korea- Germany Tax Treaty”) provides that “The dividends paid by a corporation which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other Contracting State,” and Article 10(2) provides that “However, with respect to such dividends, the corporation paying the dividends may also be taxed in the Contracting State, which is a resident, in accordance with the laws of that State: Provided, That if the beneficial owner of the dividends is a resident of the other Contracting State, the taxes imposed thereon shall not exceed the following items; and (a) provides that “5% of the total amount of the dividends if the beneficial owner is a corporation (excluding a partnership) which directly holds at least 25% of the capital of the corporation paying the dividends,” and (b) provides that

B. citing the reasoning of the judgment of the first instance, the lower court, citing the reasoning of the judgment, ① C Company, a limited partnership company in Germany (hereinafter referred to as “C”).