2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The imposition of global income tax (including additional tax) on the Plaintiff on August 11, 2015 shall be revoked by the Defendant.

A. The Plaintiff is a single shareholder who has invested 100% of the equity interest in foreign corporation BB established under the English Decree BVI.

BB owned 70% of the DD shares, which held the extracting rights of Russia ○○ mine through CCC, a complete subsidiary established in the Republic of Lussia.

C. On October 31, 2008, BB transferred 90% of the CCC shares held by BB and 90% of the shareholder loan claim against CCC (hereinafter collectively referred to as “instant shares”) to FF with a view to bypassing the Hong Kong Stock Exchange (hereinafter referred to as “the instant underwriting contract”). In return, BB entered into an underwriting contract with the FF with a view to receiving convertible bonds equivalent to US$ 000,00 issued by EE (hereinafter referred to as “instant underwriting contract”).

D. BB transferred the CCC’s shares to ○○○ in accordance with the instant underwriting agreement, and sold them to ○○○○○ after converting the shares into EE shares (hereinafter “2009 converted shares”) with convertible bonds equivalent to ○○○○○○○ in accordance with the instant underwriting agreement. In 2010, BB transferred the CCC’s shares to ○○○○ in the year of 2010 and converted the shares into EE shares with convertible bonds equivalent to ○○○○○○ (hereinafter “converted shares”) and sold them to ○○○○.

E. Meanwhile, on May 25, 2009, BB entered into an additional contract with EE for self-financial transit (hereinafter “instant self-financial transit contract”) and partially lent 2009 converted shares and converted shares to EE.

F. BB drafted a profit and loss statement for the business year 2010 in which the acquisition cost, conversion, and disposal loss are deducted from the ○○○○○○○○ dollars of convertible bonds converted into EE stocks in 2010 and the sum of the appraised value of the promissory note was added to the total ○○○○○○○○ dollars in the same business year, and the expenses, etc. paid during the same business year are the expense, and the difference is the net income. BB’s statement for the business year 2010 financial statements, the amount of loan claims on EE and its subsidiaries (hereinafter “loan claims”) is written as the amount of ○○○○○○○, while the amount of loan claims on the EE and its subsidiaries prior to the disposal was written as the amount of ○○○○○○.

G. As of the financial statements of BB for the business year 2010 (hereinafter “the instant financial statements”), the Defendant: (a) deemed the distributable reserve income stipulated in Article 17 of the former Adjustment of International Taxes Act (amended by Act No. 11126, Dec. 31, 201; hereinafter “International Tax Adjustment Act”); and (b) imposed an additional tax on the Plaintiff on August 11, 2015 (including additional tax) on global income tax for the year 2015 (hereinafter “instant disposition”).

G. The Plaintiff filed an appeal against the instant disposition, but the Tax Tribunal dismissed the appeal on January 29, 2016.

Each entry of Gap evidence Nos. 1, 3, 7, and Eul evidence Nos. 1 to 5, and 9 (including each number), and the purport of the whole pleading.

2. The plaintiff's assertion

A. There is no generally accepted accounting principles in BVI, which is the resident state of BB. Thus, the earned surplus prior to disposal stated in the instant financial statements cannot be the “pre-sale earned surplus calculated in accordance with the generally accepted accounting principles in the country of residence” under the main text of Article 31(1) of the former Enforcement Decree of the Adjustment of International Taxes Act (amended by Presidential Decree No. 23600, Feb. 2, 2012; hereinafter “Enforcement Decree of the International Tax Adjustment Act”). Therefore, the distributable earned surplus in BB’s 2010 business year under Article 17(1) of the International Tax Adjustment Act shall be calculated by applying Korean corporate accounting standards in accordance with the proviso of Article 31(1) of the Enforcement Decree of the International Tax Adjustment Act.

According to the corporate accounting standards, it can be recognized that the transferor would lose control over the securities when the transferee is able to sell the securities in substance without restricting the securities, and that the transferor would be deemed to have transferred the securities at that time. Since CCC shares were offered as security to BB and could not be actually disposed by the transferee, BB did not lose control over the stocks of this case, and thus, it cannot be recognized that income accrued from the transfer of the CCC shares was not recognized. This is also the same in accordance with the International Accounting Standards (hereinafter referred to as “International Financial Reporting Standards”). Thus, even if the IFR is deemed to be the generally accepted accounting principles in BVI, it is difficult to view that the instant financial statements were appropriately prepared from the perspective of the IFRS. Ultimately, the instant disposition based on the contents stated in the instant financial statements was unlawful.

B. The instant self-financing contract is not concluded separately from the instant underwriting contract, but is planned as a single transaction from the beginning. As such, the acquisition of the instant shares by BB should be deemed the time when the instant loan claim was actually made and the income accrued therefrom was made effective and EE redeems the loan to BB. However, at the time of 2010 business year, it was unclear whether the said loan claim was recovered and thus, it was unlawful to deem it as the distributable income for the business year 2010.

3. Relevant statutes.

It is as shown in the attached Form.

4. Facts of recognition.

A. Conclusion of the instant underwriting contract and the self-financial intermediary contract

1) It was necessary to meet the listing regulations requirements of the Hong Kong Securities and Futures Commission that the EE, which was not engaged in the previous “mining industry, has to hold funds equivalent to 125% of the working capital currently required by the company for more than 12 months in order to maintain the qualifications of listed corporations engaging in mining business after acquiring CCC stocks.”

2) The BB and EE entered into the instant underwriting agreement on October 31, 2008 and included the contents on the fulfillment of the listing regulations as prior terms. The main contents of the instant underwriting agreement are as follows.

Assets acquired.

Under this Agreement, the transferee (FF) agreed to acquire, on the date of completion of the contract, the sale loan equivalent to 90% of the shares issued by the subject company (CC) and the shares held by the subject company (BB) to the transferor (BB) on a conditional basis and to sell the shares on a conditional basis. A loan extended by the subject company as of September 30, 2008 to the transferor as of September 30, 2008

Debt is USD 00,000.

Payments and indefinite payments 1)

- Price: USD 000 for stocks sold and proceeds from sale will be met by the issuance of the primary convertible bonds by the company (EE) against the transferor on the date of the completion of the contract.

Terms and conditions of conduct.

The instant underwriting agreement can only be concluded when the following conditions are met:

(i) The transferee and the transferor agree on the fact that the business group (EE and its subsidiaries) and the business group subject to the contract (CCC and DD) hold adequate funds for the development of mines for a period of 24 months from the date of completion of the contract.

If the above preceding conditions are not fulfilled by July 31, 2009 (or the date determined by written agreement by the contracting parties), the contracting parties are not obligated to complete the acquisition procedure of stocks, etc. under the instant underwriting agreement.

Conclusion of a contract.

The instant underwriting agreement is concluded on the fifth business day from the date on which all the conditions of the preceding excluding subsection (i) are fulfilled, 'the date on which the conditions of the preceding excluding subsection (i) are all met', ' July 31, 2009, or 'the date determined by written agreement by the parties to the contract'. Paragraph (i) of the preceding conditions must be fulfilled on the date

3) BB and EE concluded the instant self-financial transaction agreement on May 25, 2009 as follows.

Self-Governing Loan Agreement

BB should provide EE to the extent that it is sufficient for EE to develop a mine for a period of 24 months from the date of termination of the contract, "funds of 00 US$00 or less" or "funds to meet the EE reasonably."

In order to secure the fulfillment of the obligations of BB under the instant self-financing agreement, BB shall:

(a) On May 25, 2009, EE and EE have entered into an EE and EP with the broker. Under the above contract, EE broker shall keep the full amount of the purchase price incurred from the sale of the convertible bonds or convertible stocks (i) the convertible bonds of 00 U.S. dollars, (ii) the convertible bonds of Dolle BB, and (iii) the convertible stocks held by BB.

According to the above Scro contract, in a case where the balance of the purchase price deposited in SC falls short of the amount that the EE is entitled to demand under the loan agreement of this case, the EE shall have the right to instruct the EE to dispose of convertible bonds and convertible stocks. EE and BB shall cooperate with the EE so that the broker may sell the above convertible bonds and stocks at the maximum price, and shall deposit the proceeds immediately after the sale into the Ecro. She shall also have the role of the broker under the instant self-financing contract, and all funds transferred from BB to EE under the said self-financing contract shall be delivered by the broker to the EE.

According to the instant self-financial contract, if EE acquires sufficient internal financial resources for the development of mines for a period of 24 months after the date of completion of the contract, or if EE receives funding more than the estimated amount of self-financial instruments under the said contract from outside, E may give written notice proving such fact to EE, and in such a case, BB may declare that the contract has been terminated by giving written notice to EE.

4) Meanwhile, on May 25, 2009, BB and EE agreed on the terms and conditions of issuance of convertible bonds equivalent to USD 253,000,000 under the instant underwriting agreement, and the said agreement includes the following:

6. Guarantee;

6.1. The performance of the EE’s obligation to pay and all obligations under this Agreement and debentures shall be guaranteed by shares security.

6.3 The stock security will be immediately rescinded on the date on which the BB does not hold more than 50 per cent of the convertible bonds issued under the instant underwriting agreement, or on the date on which it would reasonably be practicable to fully meet all present and future obligations and responsibilities owed by EE to BB, and on the date on which three years have elapsed from the date of the establishment of the security, whichever comes earlier.

* The term “stock security” refers to a security right to three bonds, such as a transferee (FF), a company (EE), and a target company (CCC) as a guarantee for such bonds during the existence of the convertible bonds in accordance with the terms and conditions of the definition of the instant underwriting contract, as in the terms and conditions of the Convertible Bonds.

B. Sale and use of the converted shares of this case

1) The convertible shares and the instant convertible shares were kept in the EE account, each of which was sold in 2009 and 2010, and the said sales proceeds were kept in the EE account. A approximately KRW 000 was deposited in BB in 2009, approximately KRW 009, and approximately KRW 000 in 2010 were paid to EE.

2) From 2013 to 2013, EE used the above funds financed by BB from DB to acquire 30% of the remaining shares in DB, DD’s capital increase to acquire extracting rights, expenses related to DD’s debt redemption, design and purchase of land, etc., DP development project, 2009 converted shares and converted shares were used as sales fees, etc., and among them, ○○○ as loans to BB for 2009 business years, and ○○○ was recognized as loans to BB for 2010 business years, and the remainder was considered as paid by BB on behalf of BB.

C. Termination of the instant underwriting agreement

1) The EE announced on May 25, 2009 through the Hong Kong Stock Exchange that the instant underwriting contract was completed, thereby issuing the primary convertible bonds to BB, and that it entered into the instant self-financial transaction contract with BB after May 25, 2009, immediately before the completion of the underwriting contract.

2) The business report for the business year 2010 of the EE announced to the Hong Kong Stock Exchange shall contain the following descriptions:

A) EE and its subsidiaries (hereinafter referred to as “EE, etc.”) completed the acquisition of 90% of the CCC shares around May 2009. CCC holds 70% of the DDR shares in Russia. EE, etc. acquired 30% of the remaining DDR shares on February 2010 through CCC.

B) The consolidated financial statements for the business year 2010 of EE, etc. included DD mining rights newly incorporated as the subsidiary in the items of other intangible assets. Promissory notes issued under the instant underwriting agreement are written in the items of debt, and are written in the amount of capital increased as a result of the conversion of convertible bonds. In addition, the financial statements statement statement notes explain the accounting of the issuance of convertible bonds and the conversion of stocks.

C) The CCC and DD are included in its subsidiaries of EE.

D. Facts related to the instant financial statements

1) From August 30, 2011, a tax investigation into the Plaintiff and five companies (including BB) controlled by the Plaintiff was commenced. On October 31, 201, the Plaintiff submitted the financial statements from 2008 to 2010 of BB, including the instant financial statements, to the Seoul Regional Tax Office, and the standards for preparing the financial statements were confirmed as the generally accepted accounting principles applied in Hong Kong. The instant financial statements and income statements were prepared based on the account details, the instant acquisition contract, the instant financial transaction contract, the receipts, and the EE’s financial records, etc., and were submitted upon confirmation from the Hong Kong assets management company.

2) The accounting principles of general application in Hong Kong were fully collected in the IFRS on January 1, 2005.

"3) In the written opinion(Evidence 9), the local law firm does not stipulate the accounting principles that the company should adopt, and in accordance with the purpose of its enactment, the company's law allows considerable flexibility in the book keeping format to the company by recognizing the circumstances that the company is mainly used as a tool for holding the assets located all the world, and there is no "generally recognized accounting principles" ("GGAP") that are used by the company in a specific fiscal year in experience, and in applying the IFR or the accounting principles "generally recognized accounting principles" or "specificly recognized accounting principles", when the company intends to enter books or to apply the accounting principles, it usually adopts the accounting principles that conform to the IFS or the assets owned by the company (or the place of management of the company), the company's accounting principles that conform to the requirements for reporting, or the most internationally accepted accounting principles that conform to the requirements of investors, and ordinarily, GAPP, USP, US heading 1 to 1 to 51 to 36 IP, and its opinions are included in the evidence No. 1 to be adopted.

Gap evidence No. 16 and the purport of the whole pleadings

5. Determination

(a) Criteria for judgment and accounting;

1) Article 17(1) of the International Tax Adjustment Act provides that, where a national has invested in a foreign corporation with its head office or principal office in a state or region in which the corporation’s tax burden is 15% or less of the actually accrued income, the amount to be reverted to the national out of the distributable retained earnings as of the end of each business year of the corporation having a special relationship with the national (hereinafter “specific foreign corporation”) among the said foreign corporations, shall be deemed to have been paid to the national, and Article 31(1) of the Enforcement Decree of the International Tax Adjustment Act, which sets the scope of distributable retained earnings pursuant to delegation under Article 17(4) of the Act, provides that the distributable retained earnings under Article 17(1) of the Act shall be the amount adjusted by deducting or adding each of the following amounts from the amount adjusted by the earned surplus before disposal computed in accordance with the generally accepted accounting principles at the

However, in cases where the generally accepted accounting principles in the resident state are substantially different from the Korean corporate accounting standards, the following amounts shall be deducted or added as distributable retained earnings from the amount adjusted by the earned surplus before disposition, which was calculated by applying the Korean corporate accounting standards, which is determined by Ordinance of the Ministry of Strategy and Finance. According to the language and structure of the relevant provisions, the distributable retained earnings of a specific foreign corporation shall, in principle, be calculated based on the earned surplus before disposition, which was computed by applying the generally accepted accounting principles in the resident state, and only when the generally accepted accounting principles in the resident state of the specific foreign corporation are substantially different from the Korean corporate accounting standards, the calculation may be made by applying the Korean corporate accounting standards. In such cases, the assertion that the generally accepted accounting principles in the resident state of the specific foreign corporation

In the meantime, the BVI Company Act (THE BVI BU2S COMS COMS ACT) does not stipulate the obligation to report financial statements, but the company can demonstrate and explain its transactions, and at any time maintain considerably accurate 'Fincrecs' in the form of a document, etc., which can determine its financial status, and if it is violated, it may be punished by a fine of USD 10,000, and the director of the company may inspect and copy the company's documents and books (see, e.g., Fincrecs, 99 Form, 10.9.9.2), and each of the following circumstances recognized by each evidence, it is reasonable to view that the financial statements of this case were prepared in accordance with the IFR and prepared in the form of a document, etc., and are not deemed to have been prepared in the state of residence which is generally recognized to have not been prepared in accordance with the BB's accounting principles at the time of disposal of the financial statements of this case.

A) In light of the aforementioned provisions of the Company Law of BVI, it is reasonable to understand that the opinion of the local law firm of BVI is not a general accounting principle that is accepted only in BVI, but a single accounting principle that is not accepted only in BVI.

(B) The Plaintiff asserts that the IFRS is an accounting standard established or approved by the government or an institution entrusted by the government under Article 8(1) of the former Enforcement Rule of the Adjustment of International Taxes Act (amended by Ordinance of the Ministry of Strategy and Finance No. 272 of Feb. 28, 2012) and is not a general standard for accounting and reporting to be applied at the time of the preparation of financial statements by the company. However, in light of the provisions such as the maintenance of the BV company law's "FRS" and the accounting standards used at the time of the preparation of financial statements by the BV company, the IFS can be regarded as one of the accounting principles generally accepted in BV. (c) Since the IFS provides for the method of accounting of financial assets in IFS, such as stocks, bonds, etc., to be transferred from the account book to the transferee, the transfer of the book value and the transfer of the assets in question should be made after the completion of the transfer of the book value and the transfer of the assets in question.

D) The Plaintiff asserts that the transfer of the instant shares cannot be recognized in the business year 2010, even according to the IFR as the FF agreed to set up the CCC stocks as collateral for BB and did not obtain the right to freely dispose of the CCC stocks. However, the business report and consolidated financial statements of the EE, which are published through the Hong Kong Stock Exchange and subject to IFRS, reflect both the acquisition of the instant shares, the issuance of convertible bonds and promissory notes, and the conversion of the instant converted shares.

B. Realizing income from the transfer, etc. of the instant shares

In light of the facts acknowledged earlier and the following circumstances acknowledged by the aforementioned evidence, it is reasonable to view that the income accrued from the transfer of the instant shares, the conversion of convertible bonds, and the transfer of convertible stocks (hereinafter “transfer, etc.”) was realized.

1) The instant underwriting agreement and the instant self-financing agreement were concluded with a difference of 7 months in a separate contract, and the content of the prior terms (i) of the instant underwriting agreement does not include the content that CCC lends funds to EE, and EE publicly announced that “The instant underwriting agreement and the instant self-financing agreement were concluded prior to the completion of the instant underwriting agreement,” under the premise that the instant underwriting agreement and the instant self-financing agreement were separate contracts. Therefore, the determination of realizing income arising from the transfer, etc. of the instant shares as a result of the instant underwriting agreement ought to be made separately from the collection of loans and loans to EE.

2) BB acquired convertible bonds and promissory notes as the price for the transfer of the instant shares. After converting the said convertible bonds, the instant convertible shares were disposed of to a third party in the Hong Kong stock market and received the payment for the said shares. Thus, income was realized following the transfer, etc. of the instant shares. Thus, it cannot be viewed otherwise even if (i) the instant convertible bonds, the price for the transfer of the instant shares, and the price for the disposal of the instant convertible shares, were to be deposited in the E account under the self-financial communication contract, and (ii)

3) Even if the Plaintiff’s assertion, deeming a series of transactions from the transfer of the instant shares to the lending of funds to EE as one transaction, and the Plaintiff’s purchase price for the transfer of the instant shares is deemed as the loan claims, insofar as the exercise of the instant loan claims is not legally hindered, the right is finalized, and thus, should be included in the gross income for the business year 2010 of BB, and even if the possibility of recovery of the claim is lost due to the debtor’s insolvency, it can only be treated as a bad debt when the cause for recovery has occurred, and the Plaintiff’s assertion or the evidence submitted by the Plaintiff cannot be said to have occurred.

C. Sub-decision

Ultimately, the instant disposition, which was made based on the distributable retained earnings recorded in the financial statements of this case prepared in accordance with the generally accepted accounting principles in the resident state of BB, is lawful.

6. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.