2. The costs of appeal shall be borne by the Defendant.

The Defendant’s disposition of imposing corporate tax of KRW 103,686,790 for the year 2008, corporate tax of KRW 70,702,850 for the year 2009, corporate tax of KRW 66,465,860 for the year 2010, corporate tax of KRW 816,813,090 for the Plaintiff on December 17, 2012 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked, and the plaintiff's claim is dismissed.

A. Status of the parties

On November 29, 1966, the Plaintiff is a German limited-liability company established for the purpose of managing investment funds in the Federal Republic of Germany (hereinafter referred to as the “ Germany”).

(Name of the Fund (Name omitted of the Fund) is a listed or public model investment fund established in accordance with German Investment Law on October 28, 2002.

On October 11, 1999, the Magdong Espher Co., Ltd. (hereinafter “Magdong”) was established for the purpose of building lease business, etc., and then, around 2005, the real estate rental business was operated by acquiring △△△△△ building located in the Jung-gu Seoul Metropolitan Government, Jung-gu, but the real estate rental business was sold in February 23, 2012, and the sale was dissolved on July 23, 2013.

The plaintiff manages ○○ Fund and owns 100% of the above Maridong's shares in its own name.

B. Payment of dividend and taxation

During the period from September 2008 to June 2012, 25,070,060,813 won (hereinafter “instant dividend income”) totaling the dividend income, which was withheld at 5% of the limited tax rate under Article 10(2)(a) of the Convention 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”), remitted KRW 23,816,57,72, excluding KRW 113,816,57,72 of corporate tax withheld at 5% of the limited tax rate under Article 10(2)(a) of the Convention between the Republic of Korea and the Federal Republic of Germany (hereinafter “Korea- Germany Tax Treaty”).

However, the Defendant excluded the application of the limited tax rate of 5% under Article 10(2)(a) of the Korea- Germany Tax Treaty, and rendered a disposition of collecting KRW 2,418,08,940,00,000,000,000,000,0000,000,0000,000,000,0000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,0000,000,000,000,000,000

On December 17, 2012, on the premise that the Plaintiff constitutes an oligopolistic shareholder under Article 39(1)2 of the Framework Act on National Taxes with respect to the shortage amount after appropriating the residual property of Maridong for KRW 2,418,080,940 among the above collected amount, the Defendant notified the Plaintiff of the payment of KRW 1,057,68,790 for corporate tax withheld in 2008, and KRW 70,702,850 for corporate tax withheld in 209, KRW 66,465,860 for corporate tax withheld in 209, KRW 816,813,090 for corporate tax withheld in 2012, KRW 1,057,68,590 for corporate tax withheld in 209 (hereinafter “instant disposition”).

(c) Procedures of the previous trial;

On March 7, 2013, the Plaintiff, who was dissatisfied with the instant disposition, filed a request for adjudication with the Tax Tribunal on March 7, 2013, but did not receive notice of the decision of adjudication within 90 days, and filed the instant lawsuit on March 2, 2014.

[Ground of recognition] Unsatisfy, Gap evidence 1 to 5 (including the paper number; hereinafter the same shall apply)

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The assertion that ○○ Fund was not a taxpayer under the Corporate Tax Act

As ○○ Fund does not bear a tax liability under the Corporate Tax Act, the instant collection disposition on the ○○ Fund’s premise that it is a taxpayer under the Corporate Tax Act is unlawful, and the instant tax disposition on the premise that the instant collection disposition on ○ Fund is valid is also unlawful.

2) The assertion that the 5% limited tax rate under the Korea- Germany Tax Treaty should be applied to the dividend income of this case

○ The Plaintiff, a corporation that is not a formal corporation, but a corporation that has a substance without the purpose of evading taxes, acquired the shares of ice without the purpose of evading taxes, and received the instant dividend income, and thus, the beneficial owner of the instant dividend income under the Korea- Germany Tax Treaty is the Plaintiff. Therefore, 5% of the limited tax rate should be applied on the instant dividend income by deeming that the said dividend income satisfies the equity requirement of Article 10(2)(a)

○○, even though the beneficial owner of the instant dividend income is ○○ Fund, ○○ Fund was unable to directly acquire the nominal shares due to the restriction under the German Investment Law, and thus, did not have the purpose of tax avoidance because it was acquired in the Plaintiff’s name. The meaning of “direct possession” under Article 10(2)(a) of the Korea- Germany Tax Treaty does not necessarily mean that only the case where the meaning of “direct possession” is in the position of shareholder. Accordingly, ○ Fund satisfies the equity requirement of Article 10(2)(a) of the Korea- Germany Tax Treaty, and thus, 5% of the limited tax

B. Relevant statutes and the articles of incorporation

As shown in the attached Form (including the German Investment Act, the German Corporate Tax Act, the Korea- Germany Tax Treaty).

(c) Fact of recognition;

1) The Plaintiff, as a asset management company, manages real estate funds or infrastructure funds, etc. and provides investment advisory services related thereto. The size of assets as of December 31, 2010 is equivalent to 66,712,110 (including stocks and non-determined interest rates) and the profits from which a corporate tax return was filed in 2010 are 219,345,939.

2) Article 2(2) of the German Investment Act provides that ○○ Fund is an investment fund under the German Investment Act and does not have a separate decision-making body. Article 2(2) of the German Investment Act provides that “a group of domestic investment assets organized in accordance with the laws and regulations governing the legal relations between an asset management company and an investor on behalf of an investor” means a group of domestic investment assets managed by an asset management company on behalf of an investor. Article 30(1) provides that “a property belonging to a fund shall be owned by an asset management company or jointly owned by an investor.” Moreover, the German Investment Tax Act considers that an investment fund as a “special purpose foundation” under the German Corporate Tax Act, which is an unlimited taxpayer under the German Corporate Tax Act, and is exempt from corporate tax and business tax on such income. Meanwhile, on November 30, 2011, ○○ Fund was certified as a resident by the National Tax Service in Germany as a German resident.

3) As to the instant dividend income, ○○ Fund reported the instant dividend income to the German tax authorities on its own revenue.

4) The instant dividend income was deposited into the account in the name of the ○○ Fund. The said account is the Plaintiff’s account opened on behalf of the Plaintiff on September 25, 2002. Meanwhile, Magdong-dong stated that “The amount received” column as “the Plaintiff (Deka 1mbH) who represented the ○ Fund” on behalf of the Plaintiff when remitting it to the said account.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 7 through 17 (including virtual number), the purport of the whole pleadings

D. Determination

1) The defendant's ground for disposition of this case

The Defendant: (a) deemed ○○ Fund as a taxpayer under the Corporate Tax Act; and (b) deemed ○○ Fund as subject to withholding corporate tax on the dividend income of this case as subject to withholding tax; and (c) rendered the instant tax collection disposition on Maridong as to the amount that the Plaintiff was not collected from Maridong as a secondary taxpayer of Maridong.

2) Whether ○○ Fund constitutes a taxpayer under the Corporate Tax Act

A) Article 1 of the former Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013) at the time when the corporate tax subject to withholding becomes final and conclusive, defines a foreign corporation liable to pay taxes for domestic source income as “a corporation with its head office or principal office in a foreign country (limited to where the place of actual business management is not located in the Republic of Korea)”.

In cases where a foreign unincorporated association, foundation or other organization constitutes a profit-making organization that obtains domestic source income provided for in the Corporate Tax Act and distributes such income to its members, if it can be deemed a foreign corporation under the Corporate Tax Act, the organization shall be liable for tax payment and shall collect corporate tax on domestic source income. If it cannot be deemed a foreign corporation under the Corporate Tax Act, the organization’s members shall be liable for tax payment and shall collect income tax or corporate tax on income distributed to each of them according to their members’ status. In addition, whether such organization can be deemed a foreign corporation under the former Corporate Tax Act shall be determined depending on whether it can be deemed a separate right and obligation independent of its members, in light of the content of the law of the country established and the substance of the organization, unless otherwise provided for in the former Corporate Tax Act (see Supreme Court Decision 2011Du4411, Jul. 11, 2013).

Meanwhile, Article 1 of the Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013) provides that a foreign corporation refers to an organization with its head office or principal office in a foreign country (limited to an organization with no place of actual business management in the Republic of Korea) which meets the standards prescribed by Presidential Decree, and upon delegation, Article 1 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 24575, Jun. 11, 2013; hereinafter the same) provides that “a foreign corporation shall be the subject of direct rights and obligations, such as owning assets independently from members or becoming a party to a lawsuit,” and Article 1 of the former Enforcement Decree of the Corporate Tax Act provides that “a foreign corporation shall be a corporation meeting the standards prescribed by Presidential Decree, such as the Commercial Act.”

B) However, in the case of ○○ Fund, it is deemed to be a special purpose foundation under the German Investment Tax Act for the tax purposes, and it does not constitute an organization granted under the German law, and does not own property in its name, and since ○ Fund does not have a decision-making body or an operating body on its own other than the Plaintiff, it cannot be deemed to be an entity subject to the ownership of separate rights and obligations independent of members of an organization under the private law of Korea. Therefore, the instant disposition of imposition premised on the fact that ○ Fund does not constitute a foreign corporation with a tax liability under the Corporate Tax Act and constitutes a foreign corporation with a tax liability

3) Since the instant disposition should be revoked on the grounds of the foregoing illegality, the instant disposition is not further determined on the Plaintiff’s remaining arguments.

3. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted in its entirety on the grounds of its reasoning, and the judgment of the court of first instance is just and the defendant's appeal is dismissed as it is without merit, and it is so decided as per Disposition.

[Attachment]

Judges Cho Jong-tae (Presiding Judge)