Gangnam-gu Seoul Central District Court 737 Gangnam-gu 36 floors

Representative Director Kim Il-chul

Attorney Noh Young-gu, Justice Noh Jeong-ho, Justice Park Jong-ho, Justice Park Jong-ho, Counsel for the plaintiff-appellant-appellant

A full-time supervisor of a litigation performer;

2. The costs of lawsuit are assessed against the defendant.

The following facts are not disputed between the parties, or may be acknowledged by comprehensively taking into account the respective descriptions in Gap evidence 1-1-6, Gap evidence 2-3, 5, 7, 19, 10, 11, and Eul evidence 1-6, and the whole purport of pleadings:

A. Status of the party

(1) On February 7, 2001, the Plaintiff is a domestic corporation established for the purpose of taking over, managing, operating, and disposing of the loans and any rights related thereto transferred from the K bank pursuant to an asset-backed securitization plan pursuant to the Asset-Backed Securitization Act (hereinafter referred to as the “asset-backed Securitization Act”) by investing 100% of this 100% of the capital gains X Korea Capital I and Ltd (hereinafter referred to as “lsF 3KC”) which is a corporation of the Republic of Korea.

( 2 ) XXXX XXX Fund II ( U . S . ) , L . P . ( 이하 ' LSF ' 라 한다 ) 는 미국 델라웨어주법에

따라 설립된 미국의 리미티드 파트너쉽 ( Limited Partnership ) 이고 , XXXX XXXX International Finance , Ltd ( 이하 ' LSIF ' 라 한다 ) 는 아일랜드 법률에 의하여 설립된 외국 법인이다 .

( 3 ) LSF 3KC , LSIF 등은 A 펀드에 의하여 설립되어 A 펀드가 지배력을 갖는 법인 들이고 , A 펀드는 국내 부실채권의 투자와 관련하여 XXXX XXXX XXXXXX Korea , LLC ( 이하 ' LSAK ' 라 한다 ) 와 XXXXXXXX코리아 주식회사 ( XXXXXX xxxxxx Korea , Inc , 이하 ' HAK ' 라 한다 ) 를 설립 , 운영하였는데 , LSAK는 A 펀드가 한국에 투자하는 부 실채권의 물색 및 투자결정을 주된 사업으로 수행하였고 , HAK는 A 펀드가 설립한 유 동화전문회사의 자산관리 및 수탁업무수행을 주된 사업으로 수행하였다 .

(b) Purchasing lsF’s insolvent loan-backed claims and transferring the status of transferee;

lsF entered into an asset acquisition agreement with KK Bank on December 1, 200, under which KK Bank intends to transfer its credit of 3,59.7 billion won on a lsF’s book value to LSF in the amount of KRW 2,22.7 billion. On January 2001, KK transferred the Plaintiff’s status of transferee under the above asset acquisition agreement.

(c) Issuance of asset-backed securities on the Plaintiff’s bad loans claims;

(1) On February 23, 2001, the Plaintiff issued asset-backed securities (ABS) with bond-backed securities (ABS) with the underlying asset of the foregoing bad loan-backed claims, etc. ① 1/7 of the issue value as shares of an amount equivalent to KRW 31.8 billion, ② 6/7 of the issue value as shares of USD 154, 705, 008 ($ 1,90.9 billion), 7-year maturity, 17% interest rate per annum.

(2) On February 23, 2001, LSF 3KC acquired the entire asset-backed securities of the above stock type and bond-backed securities, and on April 20, 2001, among them, sold the asset-backed securities of the bonds type (hereinafter “mortgage-backed securities”) to LSF.

(d) Borrowing of lsFs and paying interest on the Plaintiff lsFs;

(1) On April 23, 2001, LSIF borrowed US$108,293,000 from LL bank at maturity until October 20, 203, on condition of 8.5% per annum on August 20, 2003 (hereinafter “the loan transaction in this case”).

(2) The Plaintiff paid interest on bonds-backed securities to lsF as follows:

(unit: 00 million won)

(e) A report or revised report on the corporate tax related to consulting services rendered by the plaintiff;

(1) On December 8, 200, LSAK paid US dollars 1, 840, 840, and 80 to LST located in Hong Kong (hereinafter “SS”) for consulting service costs to U-dong specialized companies, and then requested HAK, an asset management company of U-dong specialized companies, to bear the above consulting service costs. HAK assessed the above consulting service costs to five special purpose companies, including the Plaintiff, and accordingly, paid the consulting service costs divided into 876, 744, 00, and 00,000,000,000,000,000,000,000,000,000,000,000,000,000,000,00,000,000,00,000,000,00,000,00,000,00,00,00.

(2) As seen below, the Plaintiff revealed that the above consulting service costs were processed expenses paid without the provision of actual services during the second tax investigation process. As above, the Plaintiff adjusted the tax amount of the combined hosting service costs of 876, 744, and 00 won in the calculation of losses and disposing of them as other income. On September 30, 2005, the Plaintiff held a temporary general meeting of members and held a non-deductible service cost of 876, 744, 000 won less 1,00 won from the non-deductible service costs of 876, 743,000 won, and approved the revised return of income deduction pursuant to Article 51-2 of the Corporate Tax Act, and applied for a revised return of income deduction to the Defendant on October 18, 2005 (hereinafter referred to as “the revised tax base”).

F. The Seoul Regional Tax Office’s tax investigation and the Defendant’s each disposition of this case

(1) Between February 4, 2003 and June 13, 2003, the Seoul Regional Tax Office conducted the Plaintiff’s tax investigation (hereinafter “the first tax investigation”) on the business year from February 7, 2001 to September 30, 2002 with respect to the Plaintiff, and thereafter, conducted a tax investigation on the Plaintiff and other special purpose companies (hereinafter “the second tax investigation”) for the period from July 7, 2005 to October 31, 2005.

(2) On October 14, 2005, the director of Seoul Regional Tax Office: ① deemed that the interest rate on the bond-backed securities paid by the Plaintiff to the Defendant, who is a foreign specially related person, is higher than the normal interest rate under Article 5 of the Adjustment of International Taxes Act (hereinafter “International Tax Act”); ② calculated the loan transaction of this case at a reasonable interest rate of 8.5% from among the interest paid to the original LSIF, the amount exceeding 8.5% from the above normal interest rate of 0.5% was excluded from deductible expenses; ② after denying the effect of the Plaintiff’s revised tax return of this case, the amount was adjusted to 0.3% from deductible expenses; ② the amount was adjusted to 0.3 billion won from the date of non-deductible; and ② the Defendant notified the Plaintiff of the results of the tax investigation for 0.5 billion won from February 7, 201 to 00.5 billion won; and ② The Defendant notified the Plaintiff of the results of the tax investigation for 30.5 billion won from the business year of the Plaintiff’s corporate tax.

(g) Request for a trial and dismissal;

On January 13, 2006, the Plaintiff, who was dissatisfied with the instant disposition, filed an appeal with the National Tax Tribunal on January 13, 2006, but was dismissed on October 9, 2007.

2. Whether each of the dispositions of this case is legitimate

A. Party’s assertion

(1) Whether the secondary tax investigation constitutes a duplicate investigation

(A) The plaintiff's assertion

The second tax investigation is a double-tax investigation conducted for the same tax item and taxable period as the first tax investigation. Since it does not constitute exceptional grounds for the second tax investigation under each subparagraph of Article 81-4(2) of the Framework Act on National Taxes, the part relating to the transfer price among the dispositions of this case based on the second tax investigation is unlawful without considering the legality of calculating the normal interest rate.

(B) Defendant’s assertion

1) The Seoul regional tax office has conducted a corporate tax investigation by setting the period of investigation of the second tax investigation against the Plaintiff as "from October 1, 2002 to September 30, 2004". As a result, the Plaintiff confirmed that lsF, a foreign related party, paid interest exceeding normal autonomy in relation to bond-backed securities during the investigation period. In order to verify whether such errors exist in the previous business year, the Seoul regional tax office conducted a limited review of data or submitted data to the Plaintiff within the scope of the previous business year, and did not request or submit all books, documents, etc. to submit to the Plaintiff as a whole for the business year subject to the first tax investigation. Thus, there was no fact that the Plaintiff conducted a re-investigation that is closed from Article 81-4 (2) of the Framework Act on National Taxes and Article 63-2 of the Enforcement Decree of the same Act (a duplicate investigation).

2) Even if a double investigation was conducted on the business year subject to the first tax investigation, it was confirmed that the interest paid on the bonds-type asset-backed securities in the business year subject to the second tax investigation exceeds autonomous autonomy. Since the Plaintiff paid the interest on the bonds-type asset-backed securities with the same content as the business year subject to the second tax investigation even in the business year subject to the second tax investigation, it falls under the case where Article 81-4(2)3 of the Framework Act on National Taxes was erroneous in relation to the two or more business years.

In addition, in the process of confirming the contents of e-mail related to the avoidance of the thin Capital Tax, exchanged between the employees of HAK, the director of the Seoul Regional Tax Office confirmed that the credit rating of LSIF was almost not considered in the loan transaction in this case, and that it was the only security for the amount recoverable from the bad loan claims, which are the underlying assets of asset asset of asset-backed securities issued by the Plaintiff. This fact constitutes a clear fact that the Plaintiff transferred income to LSIF and evaded tax by paying a high interest rate to LSIF even though it was possible for the Plaintiff to borrow funds at a low interest rate, and thus, Article 81-4 (2) 1 of the Framework Act on National Taxes constitutes a suspicion of tax evasion.

(2) If there is an obvious material to acknowledge the same, it shall be applicable to "if there is an obvious material."

Ultimately, re-audit of the business year subject to the first tax investigation does not violate the prohibition of duplicate investigation under Article 81-4(2) of the Framework Act on National Taxes.

3) Furthermore, in cases where a disposition of imposition is made based on a tax investigation that violates the principle of prohibition of duplicate investigation, the relevant disposition of imposition itself does not constitute an unlawful act.

(2) Whether the interest rate of the instant loan transaction can be viewed as a normal interest rate

(A) The plaintiff's assertion

Compared to the loan transaction interest rate of this case, which is the comparative transaction, is not the interest rate determined between the plaintiff and an independent company that is not a related party, because the underlying asset is a bad loan loan loan loan and it is virtually a high risk bond which is not similar to the non-performing loan, the risk premium is higher than any other credit when considering the default risk, maturity, liquidity risk, etc. In addition, since the interest rate of the loan transaction of this case, which is the comparative transaction, is not the interest rate determined between the plaintiff and the independent company that is not a related party, it cannot be the basis for determining the normal interest rate of bonds-backed securities. Furthermore, compared to the interest rate of bonds-backed securities, there are significant differences such as the risk and collateral ability of the claim, maturity, interest rate fluctuations due to the loan type, payment, etc., and the actual interest rate due to other loan conditions, and the risk acceptance tendency of the lender, even though such differences were not adjusted, it is difficult to be compared in calculating the normal interest rate of bonds-backed securities.

(B) Defendant’s assertion

The LL Bank finds the actual value of the underlying assets of the asset-backed securities issued by the Plaintiff as the only security, and lends the funds to LLF. The credit rating of LLF is no consideration. If LL Bank fails to collect the principal and interest of the loan from asset-backed securities, the LLF, even if it is unable to collect the loan from the asset-backed securities, the LLF bears no responsibility, and the collection of LLF depends only on the asset-backed securities issued by the Plaintiff. Thus, the LL Bank is formally lending the funds to LLF. However, it is nothing more than lending the funds to the Plaintiff, but it is nothing more than lending the funds to the Plaintiff, and the special purpose company established A fund, etc. was a lower interest rate of 8 to 10% per annum from a domestic bank, but it was possible to borrow funds at a low interest rate of 17 to 19% per annum from a foreign related party, and it can be determined by the comparable interest rate under Article 5(3) of the International Tax Act.

In addition, LTV (hereinafter “LTV”) on the entire asset-backed securities of the bond-backed securities is about 86%. LTV on the asset-backed securities of the instant loan is about 70%, and LTV on the entire asset-backed securities of the instant loan is about 60% ( = 86% x 70%). In applying the above normal interest rate, the difference in the LTV asserted by the Plaintiff was actually adjusted since the Defendant excluded the amount corresponding to 70%, which is the LTV on the asset-backed securities of the instant loan from deductible expenses. As seen earlier, the lending of LLF to LLF is no different from the lending to the Plaintiff actually. Accordingly, there is no need to consider the difference in maturity, the difference in other terms and conditions of the loan, and the degree of risk at large, etc. from the relevant loan.

(3) Whether the revised report of this case is lawful

(A) The plaintiff's assertion

1) Distribution of dividends under Article 51-2 of the Corporate Tax Act refers to a dividend resolution, and under the principle of strict interpretation in accordance with the principle of strict interpretation of a tax law, the validity of the resolution cannot be denied solely on the ground that the resolution was for tax avoidance.

2) For a special purpose company, only 90% or more of the distributable profits can be paid if dividends are distributed, and it is also possible to pay dividends in excess of the distributable profits. As such, the dividend that can be deducted from income does not necessarily have to be financed by the distributable profits.

3) Therefore, the instant revised return and the application for dividend deduction are lawful.

(B) Defendant’s assertion

1) Even if the expenditure of the above consulting service cost originally was based on the embezzlement of C, the representative director of LSAK, it is merely an internal situation of the Plaintiff, and thus, the Plaintiff cannot be exempt from liability for such an act.

2) According to Article 17 of the Asset-Backed Securitization Act, Articles 447, 449, and 583 of the Commercial Act, and Article 447 of the Asset-Backed Securitization Act, and Articles 449 and 583 of the Commercial Act, a company prior to the securitization set the amount to be distributed by its directors for each business year and stated the amount of dividends in the appropriation statement of retained earnings in each business year, and submit it to a regular general meeting of members along with other financial statements, etc. with the settlement statements for approval. The Plaintiff adopted a resolution of additional dividends at a temporary general meeting of members on September 30, 2005, for which several years have passed since the resolution of distribution for the business year was finalized by the approval of a regular general meeting of members. This is not merely a resolution of actual distribution, but it cannot be said to be a dividend

3) Even though it is allowed to distribute dividends in excess of the distributable profits pursuant to the provisions of Article 30(3) of the Asset-Backed Securitization Act, such excess dividends constitute a refund of capital, since it does not constitute an income from the beginning, it cannot be the object of income deduction.

4) Even if the amount of income for the business year increased as a result of the increase of processing costs such as the above consulting service costs in deductible expenses, since the portion of income generated from the non-deductible expenses was already outflow, it cannot be said that the dividend is made.

5) Therefore, the revised return of this case and the application for the public offering of dividend income under the premise that a legitimate dividend exists is unlawful.

(b) Related statutes;

It is as shown in the attached Table related Acts and subordinate statutes.

(c) Facts of recognition;

The following facts may be acknowledged, comprehensively taking into account each of the above evidence and evidence No. 4, 5, 6, 7, 12, evidence No. 13-1, 2, 3, evidence No. 14-2, evidence No. 15, 16, evidence No. 17-1, 2, A, 18, 19, 20, evidence No. 21-1, 2, A, 22, 27, 28, 29, evidence No. 7, and 8, evidence No. 21-1, 22, A, 27, 29, A, and 8:

(1) As to whether a double investigation constitutes a secondary investigation

(a) the first tax investigation;

The Seoul Regional Tax Office notified the Plaintiff and other companies subject to investigation of the first tax investigation into 20 companies related to A including LASK, HAK, and the Plaintiff. During the first tax investigation, the Seoul Regional Tax Office requested the Plaintiff and other companies subject to investigation to prepare data such as the organization of the parent companies and domestic and foreign related companies, investment flow, financial statements and audit report, transfer price-related documents applied at the time of transaction with foreign related parties (including the basis for calculation of the arm's length price), asset appraisal-related documents, asset acquisition and sale contract documents, documents submitted to the financial supervisory organization (including the application for registration of asset securitization plan, the application for registration of asset transfer, and each related agency documents), asset-backed securities issuance flow and issuance details, the documents related to the asset management entrustment contract, the principal and dividend payment, the issuance cost, and the documents on the basis of par value interest rate of LSF (including the creditors' list, each related company and third party interest payment, and the details of the loan and the list of the funds transferred to the Plaintiff at the time of the first tax investigation.

(b) the second tax investigation;

1 ) 서울지방국세청장은 2005 . 4 . 12 . A 펀드 계열 국내 회사들이 위치한 서울 강 남구 XX동 XXX XXXXXXXX XX층에 세무조사공무원들을 보내어 A 펀드가 국내 투 자를 위하여 설립한 법인들에 대한 대대적인 특별세무조사에 착수하고 그때부터 2005 . 10 . 31 . 까지 세무조사를 벌였다 .

2) At the time of commencement of the second tax investigation, the director of the Seoul Regional Tax Office selected as a corporation subject to the tax investigation as HAK, LSAK, and some special purpose companies (except the Plaintiff) and notified them of the tax investigation. In fact, not only the above corporations notified as a result of the investigation, but also the corporations that published the Plaintiff, not the Plaintiff, but also the general account books and documents related to the domestic special purpose companies of AA fund affiliates, which published the Plaintiff.

3) After that, on June 30, 2005, the director of the Seoul Regional Tax Office officially conducted the tax investigation stipulated as "the consolidated investigation into corporate tax items", "the period for investigation" from October 1, 2002 to September 30, 2004, and "the period for investigation" from July 7, 2005 to August 25, 2005 (which shall be extended from October 31, 2005) and demanded the Plaintiff to prepare data on the tax investigation, such as corporate tax return, accounting books, evidentiary documents related to acquisition of securitized assets, documents related to asset-backed securities, documents related to issuance and verification, documents related to securitization, and documents related to collection and transfer, from October 30 to 30, 2005, and from July 27, 2005 to August 31, 2005, respectively.

4 ) 제2차 세무조사 과정에서 HAK가 제출한 자료 중에는 HAK의 경리팀장 D이 2002 . 11 . 15 . 자금관리담당 E 등 2명에게 보낸 ' 유동화전문회사 주식의 담보제공상황 을 파악하고 담보가 어디까지 알려져 있는지 , 그리고 지급이 완료된 차입금이 있으면 최초 차입약정서를 고쳐서 주식담보가 없었던 것으로 처리할 수 없는지 알려주기 바 람 ' 이라는 내용의 이메일과 이에 E이 D에게 보낸 ' XXXX를 제외한 나머지의 경우 전 체의 국내자금 차입시 주식이 담보로 제공되어 있고 유동화전문회사의 경우에는 유동 화계획에 등록되어 있는 것으로 알고 있음 ' 이라는 내용의 이메일이 포함되어 있었다 .

5) On August 30, 2005, a tax investigation official belonging to the Seoul Regional Tax Office visited and investigated the team leader B at the time of the instant loan transaction. The team leader stated to the effect that "the possibility of recovery of non-performing loans held by a domestic special purpose company was examined by individually checking and examining the possibility of loans," while discussing the issue related to the loans held by a domestic special purpose company established by a "A Fund" with a director of HAK's accounting team F director. At the time, there was no direct loan condition with lsF at the time, nor there was no discussion about the direct loan terms and conditions with lsF at the time, or lsF's credit rating.

(2) Concerning the normal interest rate

(A) Detailed plans for redemption of principal and interest payment of asset-backed securities pursuant to the Plaintiff’s asset-backed securitization plan are as follows:

1) The Plaintiff shall pay to the underwriter of asset-backed securities each month an amount less than the amount calculated by subtracting operating expenses from the amount recovered from the underlying assets of asset-backed securities in the relevant month, and ② an amount calculated by adding interest on asset-backed securities and an amount equivalent to 6% of the cost of asset purchase recovered in the previous month.

2) Provided, That only interest on bonds-backed securities out of the amount payable shall be paid within one year after issuance of bonds-backed securities.

3) The remainder remaining after the redemption of bonds-backed securities in the above manner is used for the payment and redemption of dividends on the stock-backed securities.

(B) The contractual terms and conditions for redemption of principal and interest payment in the instant loan transaction are as follows.

1) Interest shall be paid on the 20th day of each month, and lsF may early repay the principal and outstanding interest to LL Bank even before the maturity, but shall bear a fee equivalent to one percent of the early repayment amount.

2) In the event of delay in the repayment of principal and interest payment, 13.5% of the interest for arrears shall be counted, and in particular, where the final refund is overdue, interest for the principal and the total amount of interest shall be counted.

3) lsF shall set up a separate operating account, a custody account, and a reservation account, and the Plaintiff must maintain the separate operating account until the loan is repaid in full.

4) HAK shall ensure that all the amounts recovered from the underlying assets of the issuance of asset-backed securities are deposited in the Plaintiff’s future account, and if there is a dividend to be reverted to lsF 3KK, the Plaintiff’s shareholder, if any, out of the recovered amount, the dividend shall be paid, and lsF shall pay lsF so that the principal and interest of the asset-backed securities can be used for redemption of the bonds-backed securities through the LL bank in accordance with the redemption order of the bond-backed securities.

5) If a payment agent for bond-backed securities receives a payment from the bond-backed securities, the LL Bank, as an agent, shall deposit the first three-month interest amount of the loan in the reserved account of LSIF, deposit it in the depository account as much as the amount available as the second payment date, and deposit the remainder in the operating account if any. lsF has the right to freely use the amount deposited in the principal’s operating account.

6) Until the full repayment of the loan is made, the amount deposited in the lsF’s custody account shall be used compulsorily for the repayment of the loan.

(3) As to the instant revised declaration and application for dividend income deduction

(A) The Plaintiff paid LSAK KRW 876, 744, and 00 on June 30, 2001 under the pretext of the station expenses for consulting and included the amount in the deductible expenses for the business year on March 3, 2001.

(B) Although SS did not provide any consulting service during the second tax investigation, it was confirmed that the funds of the specialized company such as the Plaintiff were disbursed as consulting service expenses. Accordingly, as a result of a self-inspection and a request for an investigation on the above issues to G legal companies located in the United States, C, the representative director of LSAK, made a conclusion that C, the representative director of LSAK, embezzled USD 12,158,337 from A fund-related companies on 17 occasions from around 198 to around 2005, for 17 occasions without the presence of other officers and employees of LSAK or HAK, and returned the entire amount of the funds received from the Plaintiff on May 26, 2006.

(C) On October 18, 2005, the Plaintiff submitted a revised return of this case and an application for dividend income deduction related to the consulting service costs to the Defendant on October 18, 2005. On October 15, 2005, the Plaintiff received the notice of each disposition of this case around 57.

D. Determination

(1) Determination as to whether the second tax audit violates the principle of prohibition of duplicate tax audits

(A) Whether it constitutes a duplicate tax investigation

1) The term "tax investigation" means an act of a tax official to ask questions to taxpayers, etc. according to the needs of his duties by exercising his/her right of inquiry, inspection or question as stipulated in each tax law, and to investigate or order submission of related books, books, and other things, and the purpose of legislation of the prohibition of duplicate tax investigation stipulated in Article 81-4 of the Framework Act on National Taxes, Article 63-2 of the Enforcement Decree of the same Act, and Article 13 of the Regulations on the Handling of Investigation Affairs is to prevent the abuse of tax investigation by a tax authority as well as the freedom of taxpayer's business, privacy, and arbitrary tax investigation by a tax authority.

Therefore, in full view of the relevant provisions, a duplicate tax-free investigation is not allowed unless it falls under the exceptional cases prescribed in each subparagraph of Article 81-4(2) of the Framework Act on National Taxes and each subparagraph of Article 63-2 of the Enforcement Decree of the same Act, and where the fact of duplicate tax investigation is confirmed after commencement of the tax investigation, the tax authority shall take necessary measures, such as withdrawal of investigation and receipt of the investigation team report (Article 13(1) of the Regulations on the Handling of Investigation Affairs), and it is reasonable to view that the tax authority may not re-examine the part of the investigation under the name of the whole investigation (Article 13(3)

However, on the part of the data, disguised processing data, and data derived from criminal investigation that can be processed only by simple fact-finding without a tax investigation, and on the part of the taxpayer's transaction partner or transaction partner who is conducted in the course of a tax investigation, on the part of the taxpayer's transaction partner or transaction partner, on-site investigation for the treatment of civil petitions, etc., or on-site confirmation affairs for the treatment of tax evasion reporting materials, taxation data, etc., do not constitute an investigation to be prohibited under the principle of prohibition of duplicate tax investigation (proviso of Article 13(1) and Article 2 subparag. 2 of the Regulations on Handling without Investigation).

2) As seen earlier, the Seoul Regional Tax Office: (a) conducted the first tax investigation for about four months from February 4, 2003 to June 13, 2003; (b) requested all companies related to A including the Plaintiff to submit the overall data; (c) particularly with respect to lsF, the detailed statement of the amount invested in the asset-backed securities issued by the Plaintiff and the receipt interest rate, loan specification, and interest rate are likely to be appropriate in terms of the transfer price of the asset-backed securities; and (b) on April 12, 2005, the Seoul Regional Tax Office, upon commencement of the second tax investigation for corporations of A fund affiliated with 20 to 20 years; (d) provided 20 years from the date of the second tax investigation to the date of the second tax investigation to the date of the second tax investigation; and (e) provided 20 years from the date of the second tax investigation to the date of the second tax investigation to the date of the second tax investigation to the date of the second tax investigation to the date of the second tax investigation.

(B) Whether it constitutes exceptional grounds for permission

1) Whether there were errors in connection with the two or more business years under Article 81-4(2)3 of the Framework Act on National Taxes falls under “where there are errors”

In this context, the principle of prohibition of double-tax investigation in order to prevent arbitrary abuse by the tax authorities and to promote legal stability can be penalized if the error related to the same two or more business years occurred repeatedly in each business year. Thus, if the return of the tax base and tax amount was determined to be appropriate as a result of the second tax investigation conducted in each business year, even if the error was discovered as a result of the second tax investigation conducted in the subsequent business year, it would be more consistent with the legislative purpose of the second tax investigation that the determination or correction of the tax amount in this portion should not be made, and further, it is reasonable to interpret that the "in case of a mistake related to two or more business years" means a case where the error that occurred in relation to the two or more business years constitutes an indivisible error, and that the tax adjustment in one business year affects the tax adjustment in other business years.

Therefore, even if the head of Seoul Regional Tax Office found that there was error in the calculation of the interest rate in the second tax investigation against the plaintiff from October 1, 2002 to September 30, 2004, which is the investigation period, the second tax investigation cannot be conducted for the period from February 7, 2001 to September 30, 202, as long as the tax adjustment due to mistake in the calculation of the interest rate can be separated for each business year, so long as the tax adjustment due to mistake in the above calculation of the interest rate can not be divided for each business year, the second tax investigation cannot be conducted for the period from February 7, 2001 to September 30, 202.

2) Clearly recognizable the suspicion of tax evasion under Article 81-4(2)1 of the Framework Act on National Taxes

In the case of data, whether it constitutes "if any"

In light of the fact that there is clear evidence to acknowledge a suspicion of tax evasion, "in the case where there is clear evidence to acknowledge a suspicion of tax evasion" means the case where there is a prior existence of obvious evidence to justify a double tax investigation (see Supreme Court Decision 2004Du12070, Jun. 2, 2006). The written answer with B asserted by the defendant is related to the loan conditions such as LL Bank's loan of funds to LLIF from the LL bank, its process, interest rate, etc. In addition, the above written answer is merely a statement of the person in charge of tax evasion. In light of the fact that the above written answer was prepared around August 30, 2005, when the second tax investigation was in progress, and the tax investigation was conducted around August 30, 2005, and there is no evidence to acknowledge that the second written evidence of tax evasion does not fall under the case where the second evidence of subparagraph 8 is insufficient.

(C) Whether a disposition based on a tax investigation that violates the principle of prohibition of duplicate investigation is legitimate or not

In light of the fact that the principle of prohibition of duplicate investigation aims to ensure taxpayers' rights in the procedural aspect through the taxpayer's freedom of business and the prevention of privacy infringement and the prior control over arbitrary tax investigation, taxation conducted based on a tax investigation contrary to the principle of prohibition of duplicate investigation is illegal (see Supreme Court Decision 2004Du12070, Jun. 2, 2006).

(D) Sub-decisions

Therefore, the plaintiff's assertion that the second tax investigation constitutes a duplicate tax investigation which is prohibited under Article 81-4 (2) of the Framework Act on National Taxes and Article 63-2 of the Enforcement Decree of the same Act is reasonable within the scope of business year of "whether the items and period of the first tax investigation overlap from February 7, 2001 to September 30, 2002".

(2) Whether the interest rate of the instant loan transaction can be viewed as a normal interest rate

(A) The arm's length price ( normal interest rate) calculation method and selection criteria

1) Method of computation

Article 2 subparag. 10 of the National Tax Act provides that a resident, a domestic corporation, or a domestic business place shall apply or be deemed to apply to an ordinary transaction with a person other than a foreign related party (Article 2 subparag. 10 of the National Tax Act); Article 5(1) of the International Tax Act provides that the arm's length price shall be the price calculated by "the most reasonable method among the following methods; however, subparagraph 4 provides that the arm's length price shall be the price calculated by "the most reasonable method" under subparagraphs 1 through 3; subparagraph 2 provides that the comparable third party's resale price method under subparagraph 3; subparagraph 3 provides that the cost plus method under subparagraph 4; and Article 4 of the Enforcement Decree of the same Act provides that the method under subparagraph 1 of the same Article provides that the arm's length price shall be calculated by "other reasonable method under Presidential Decree" under subparagraph 4 of the same Article, and that the method under subparagraph 3 of the same Article provides that the method under subparagraph 4 of the Enforcement Decree of the same Article shall be applied only in cases where the method under subparagraph 4 or 4 of the same Article is applied:

2) Selection criteria

The arm's length price is to be calculated at the price calculated by "the most reasonable method". In selecting the arm's length price computation method above, as provided by Article 5 (1) of the Enforcement Decree of the International Trade Act, the arm's length price is to be calculated by taking into account the following factors: ① high possibility of comparison exists (Article 5 (1) 1); ② high possibility of securing and using the used data (Article 2); ③ high level of correspondence for economic conditions, business exchange circumstances, etc. set up for comparison (Article 3); ④ high degree of impact on the arm's length price calculated by defective data or established house (Article 4). In order to increase the possibility of comparison, the arm's length price calculation method should be determined by the most reasonable method, taking into account the following factors: (a) high possibility of comparison (Article 5 (1) 1); (b) high possibility of considerable difference between the comparable third party transaction and the relevant international transaction; and (c) high possibility of considerable difference between them.

On the other hand, Article 5(2) of the Enforcement Decree of the International Tax Act, by assessing the difference between a comparable third party transaction and the relevant international transaction, requires an analysis of the function of business activities that may affect price or profit, contractual terms, risks accompanying trades, kinds and features of goods or services, market conditions, changes in market conditions, economic conditions, etc. In addition, Article 6(7) of the Enforcement Decree of the International Tax Act, newly established on August 24, 2006, lists the amount of debt, maturity of debt, guarantee of debt, and debtor's credit.

(B) The legality of the selection of the comparable transaction in the instant case

In selecting the normal interest rate on bond-backed securities, the Seoul Regional Tax Office adopted the method of non-intersent third party pricing (in international trades between the resident and the foreign related party, the method of viewing the transaction price between the independent business operator who does not have special relation as the arm's length price) and selected the loan transaction of this case as the comparable transaction.

However, as seen earlier, ① the transaction of issuing bonds-backed securities is based on non-performing bonds, and is a high risk transaction other than basic non-performing loan bonds, whereas the loan transaction in this case is provided in addition to the collection of basic non-performing loan bonds as collateral, and thus, it was provided by lsF as a party to the loan transaction, and its credit was provided by lsF as a party to the loan transaction. Of the acquisition fund of bonds-backed securities, the amount of 30% directly contributed by lsF and the risk of default is removed by acting as a collateral for the loan transaction in this case.

The issue of the loan-backed securities of this case is relatively low. ② The collateral value ratio (LTV) of the loan-backed securities is 86%, and the loan-backed securities ratio is about 60% ( = 86% x 70%). The bond-backed securities are much higher than the loan transaction of this case. ③ The maturity of the loan-backed securities is 7 years, but the maturity of the loan-backed securities is 2.5 years, and there is a high risk premium due to the change in economic conditions. ④ It is difficult for the Plaintiff to calculate the loan-backed securities at the time of the loan-backed securities transactions, and there is a little possibility that the loan-backed securities will be issued at the time of the loan-backed securities transactions in this case, and there is no possibility that the Plaintiff would have more profits from the loan-backed securities at the time of the loan-backed securities transactions in this case, but it seems that there is no possibility that the loan-backed securities would be issued at the time of the loan-backed securities transactions in this case.

(C) Sub-decisions

Therefore, among the dispositions of this case, the portion exceeding 8.5% of the interest paid by the Plaintiff with respect to bond-backed securities, which was selected as the comparative transaction, and the interest rate of 8.5% as the normal interest rate, among the interest paid by the Plaintiff with respect to bond-backed securities, is unlawful and the portion of imposing corporate tax is unlawful.

(3) The legality of the instant revised return and dividend income deduction

(A) Embezzlements and the Plaintiff’s tax liability

As the consulting service cost that lsK paid to SS is revealed as processing expenses, it shall be deemed that the portion already added to deductible expenses is subject to tax adjustment, such as non-deductible expenses, and the additional corporate tax liability based thereon shall be subject to the Plaintiff. However, as long as the Plaintiff did not invite for embezzlement of C, it shall not be subject to the liability that does not correct errors or errors in accounting or makes it impossible to distribute increased profits as modified.

(B) Whether the resolution on additional dividend in a provisional general meeting is made against the dividend as provided in Article 51-2 of the Corporate Tax Act

1) Article 51-2 (1) of the Corporate Tax Act provides that "where a special purpose company, etc., such as the Plaintiff distributes dividends not less than 90/100 of distributable profits as prescribed by the Presidential Decree, the amount shall be deducted from the gains earned during the pertinent business year," and Article 86-2 (1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19328, Feb. 9, 2006; hereinafter referred to as the "former Enforcement Decree of Corporate Tax Act") provides that "for the purpose of the main sentence of Article 51-2 (1) of the former Enforcement Decree of the Corporate Tax Act" means the net income (referring to the amount excluding profits and losses from the valuation of securities; hereinafter the same shall not apply) calculated by deducting carried-over profits or carried-over losses from the profits earned during the pertinent business year, the amount calculated by subtracting earned surplus reserve accumulated pursuant to Article 458 of the Commercial Act.

The purpose of the income deduction system for dividends of a special purpose company is to exempt corporate tax and to impose corporate tax at the stage of partner by deducting the entire amount distributed from the acquisition amount of a special purpose company when the dividends are distributed in excess of 90% of the ridge from the acquisition amount of the special purpose company, considering that the special purpose company did not have any entity as a company on the documents established for the purpose of asset-backed securitization, such as rights and real estate, and unlike general corporations, it functions as a Do government. The purpose is to facilitate the financing of non-performing loans by financial institutions, etc. and to enhance the soundness of financial structure by facilitating the liquidation of non-performing loans by financial institutions, etc.

2) However, in cases where dividends are distributed 90% or more of the distributable profits, the business year in which income deduction is made refers to the business year in which the profits subject to dividend rather than the dividend year accrue, and in cases where the amount of distributable profits increases by revising the accounting by mistake in the accounting, etc., it constitutes a case where dividends are distributed within the scope of the increased profits, and where dividends are additionally distributed by a resolution of the board of directors or the temporary general meeting of shareholders within the scope of the increased profits. In such a case, an application for provisional income deduction should be made by the method of filing a revised return pursuant to Article 45 of the Framework Act on National Taxes and filing a request for correction pursuant to Article 45-2, and the existence of dividend income deduction does not affect the recognition of dividend income deduction.

3) With respect to the instant case, as seen earlier, the Plaintiff revealed that the said consulting service cost was a processing cost that was paid without actual provision of the service during the second tax investigation process, and conducted an investigation on this case, and thereby, C, the representative director of LSAK, who was the representative director of LSAK, embezzled the amount equivalent to the said consulting service cost.

In addition, it was clear that the above consulting service expenses were accounted for accounting and tax adjustment, and the approval was made at the provisional principal meeting of shareholders on the additional dividend proposal and revised appropriation of retained earnings. Accordingly, the amount equivalent to the above consulting service expenses, which were initially disposed of as deductible expenses and losses, increase in distributable profits and income for the business year as much as the amount equivalent to the above consulting service expenses, which were disposed of as the initial expenses and losses. The plaintiff adopted a resolution on additional distribution of 876, 743, and 00 won, excluding 1,000 won out of the increased profits or income of 876, 744, and 00 won, and filed an application for an income deduction, the above additional dividend resolution shall be deemed to constitute a dividend provided for in Article 51-2 of the Tax Act, regardless of the purpose of tax avoidance.

(C) Whether dividend income deduction must necessarily be made as a source of dividend income

1) As seen earlier, Article 51-2(1) of the Corporate Tax Act and Article 86-2(1) of the former Enforcement Decree of the Corporate Tax Act provide that dividends may be paid only within the scope of distributable profits. Article 86-2(6) of the former Enforcement Decree of the Corporate Tax Act provides that “Where the amount equivalent to dividends deducted under Article 51-2(1) of the Act exceeds the amount of income for the pertinent business year, the relevant excess amount shall be deemed nonexistent. However, Article 30(3) of the Asset-backed Securitization Act provides that “A company specializing in asset-backed securitization may, notwithstanding Article 462 of the same Act as applied mutatis mutandis pursuant to Article 583 of the Commercial Act, make dividends in excess of profits (referring to the amount that deducts liabilities, capital and reserves from assets on the balance sheet) as prescribed by the due date. In full view of the relevant provisions, a special purpose company may make a valid dividend even if its dividends exceed distributable profits, it can only receive dividend income deduction within the scope of income for the business year.

2) As to the instant case, the Plaintiff re-contributed the accounting and tax adjustment of the said consulting service costs, and approved the dividend proposal and the revised statement of appropriation of retained earnings at the provisional shareholders’ meeting to increase the annual income and the annual income for both the instant consulting service costs, and applied for dividend income deduction within the scope of the increased income, the Plaintiff’s application for additional dividend and income deduction is lawful.

(D) Whether it is possible to distribute dividends in the event of disposal of income as a outflow from the company.

In this regard, if a corporation embezzled the assets of the corporation by deceiving the corporation, it cannot be subject to a disposition of acquisition as it was out of the company as long as the corporation has concealed the embezzlement act or has not renounced the right to claim compensation for damages (see Supreme Court Decision 2002Du9254, Apr. 9, 2004). Although the plaintiff disposed of the above consulting service costs as other income (in the absence of the aforementioned consulting service costs as reserves, the plaintiff did not withhold the aforementioned consulting service costs in the absence of deductible expenses and did not dispose of other income (out of the country), the plaintiff did not have the right to claim compensation for damages or a claim for return of unjust enrichment against the above consulting service costs and did not waive it, or did not ratified the above embezzlement act, and further collected the amount equivalent to the above consulting service costs from lsK on May 26, 2006, the plaintiff's application for the deduction of dividend income from the initial non-deductible expense is lawful.

(e) Sub-decisions

Therefore, the part of the disposition of this case where the revised return of this case and the application for dividend income deduction of this case are excluded from deductible expenses of KRW 876, 744, and 00 on the premise of illegality, and the portion of the corporate tax imposed is unlawful.

(4) Sub-decisions

Therefore, among the dispositions of this case, each of the dispositions of this case is unlawful due to the substantive defects arising from the business year 1,068, 113, 650 won, corporate tax 113, 707, 620 won, corporate tax on September 9, 2001, 302 business year 3, 272, 013, 050 won, procedural defects in violation of the principle of prohibition of duplicate tax audits, and errors in calculating normal interest rates, which are erroneous in denying the effectiveness of the revised return of this case and dividend income deduction (for the business year of March 2001, 1, 359, 694, 090 won, 00 won, and 050 won, respectively, and the imposition disposition of taxes of this case should be revoked due to the substantive defect in the interest rate of each business year of September 1, 2003, and all of them should be revoked.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.

Judges Lord Do-

Judgment Notarial Award

Asset-Backed Securitization Act

Article 1 (Purpose)

The purpose of this Act is to contribute to the sound development of the national economy by establishing a system of asset-backed securitization in order to enhance the soundness of the financial structure of financial institutions and corporations through facilitating their financing activities and in order to secure the basis of housing financing through stable supply of long-term housing loans, and by protecting the investors who invest in asset-backed securities.

Article 2 (Definitions)

The definitions of terms used in this Act shall be as follows:

1. The term "asset-backed securitization" means the activities falling under one of the following items:

(a) A series of acts by a special purpose company (including foreign corporations specializing in asset-backed securitization business) to issue asset-backed securities on the basis of the transfer of securitization assets from an originator, and to pay the principal and interest or dividends of asset-backed securities with earnings or borrowings, etc. accruing from the management, operation, and disposal of the relevant securitization assets;

(d) A series of transactions in which a special purpose company or trust business entity pays dividends or profits from the principal and interest of asset-backed securities issued by it by transferring or trusting asset-backed securities issued based on another special purpose company or trust business entity and issuing asset-backed securities on the basis of such transfer or trust, and making profits or deposits, etc. from the management, operation or disposal of the securitization assets or asset-backed securities originally transferred or entrusted

2. The term "asset" means any of the following persons who are in possession of securitization assets:

(r) A person corresponding to items (a) through (q), as prescribed by the Presidential Decree;

3. The term "asset-backed assets" means claims, immovables, and other property rights that are the objects of asset-backed securitization;

4. The term "asset-backed securities" means subscription certificates, bonds, beneficiary certificates, and other securities or certificates issued in accordance with an asset-backed securitization plan mentioned in Article 3 with securitization assets as underlying assets;

5. The term "special purpose company" means a company that is established pursuant to Articles 17 and 20 and carries on the business of asset-backed securitization;

Article 17 (Form of Company)

(1) A special purpose company shall be a limited company.

(2) Part III, Chapter V of the Commercial Act shall apply to a special purpose company unless otherwise provided in this Act.

Article 20 (Restriction on Concurrent Engagement, etc.)

(1) A special purpose company may not carry on any business other than those pursuant to Article 22.

(2) A special purpose company shall not establish business offices other than its head office and shall not employ employees.

Article 30 (Exceptions to Transfer, etc. of Equity Holdings)

(3) Notwithstanding Article 462 of the Commercial Act, which is applied mutatis mutandis pursuant to Article 583 of the same Act, a special purpose company may make distributions in excess of its profits (referring to the amount obtained by deducting liabilities, capital and reserves from assets on the balance sheet) as determined by its regular management.

Enforcement Decree of the Asset-Backed Securitization Act

Article 2 ( originator)

The term “persons prescribed by the Presidential Decree” in subparagraph 2 (r) of Article 2 of the Asset-Backed Securitization Act (hereinafter referred to as the “Act”) means persons falling under any of the following subparagraphs:

1. The Korea Deposit Insurance Corporation and financial institutions for resolution under the Depositor Protection Act;

Commercial Code,

Article 47 (Preparation of Financial Statements)

Directors shall prepare the following documents and accompanying statements at each period for the closing of accounts and obtain approval from the board of directors:

1. Balance sheet;

2. Income statement;

3. An appropriation statement for appropriation of retained earnings or losses.

Article 49 (Approval and Public Notice of Financial Statements, etc.)

(1) Directors shall submit the documents set forth in subparagraphs of Article 447 to and demand approval from the ordinary general meeting.

(2) Directors shall submit documents under Article 447-2 at an ordinary general meeting to report on its contents.

(3) If directors obtain the approval of the general meeting in respect of documents under paragraph (1), they shall give public notice of the balance sheet without delay.

Article 583 (Provisions Applying Mutatis Mutandis)

(1) Articles 449 (1) and (2), 450, 452, 453, 453-2, 457-2, 458 through 460, 462, 462-3 and 466 shall apply mutatis mutandis to the accounting of a limited liability company.

Basic Act

Article 45 (Revised Reports)

(1) A person who has filed a tax base return within the statutory due date of return (including those falling under subparagraphs 1 through 8 of Article 73 (1) of the Income Tax Act) may file a tax base return before the head of the competent tax office determines or revises and notifies the tax base and amount of the national tax pursuant to the provisions of each tax-related Act in any of the following cases:

1. Where the tax base and tax amount entered in the tax base return is short of those to be returned under the tax-related Acts; and

Article 81-4 (Prohibition of Abuse of Tax Investigation Authority)

(1) Any tax official shall conduct tax investigation within the minimum limit necessary for proper and fair taxation and shall not abuse the right of tax investigation for any other purpose.

(2) No tax official shall conduct reinvestigation on the same items of taxation and the same taxable period unless it falls under any of the following cases:

1. Where obvious evidence exists that prove a suspicion of tax evasion;

2. Where it is necessary to investigate a trading partner;

3. Where mistakes relating to two or more business years exist;

4. Where an investigation is conducted following the decision on necessary disposition pursuant to Article 65 (1) 3 (including cases applied mutatis mutandis in Articles 66 (6) and 81);

5. Other cases similar to subparagraphs 1 through 4, which are prescribed by Presidential Decree.

Enforcement Decree of the Framework Act

Article 63-2 (Prohibition of Overlapping Investigation)

"Other cases similar to subparagraphs 1 through 4 and prescribed by Presidential Decree" in Article 81-4 (2) 5 of the Act means any of the following cases:

1. Where a general investigation is undertaken against a person suspected of disturbing the economic order through speculative investment in real estate, hoarding and hoarding, undertaking transactions without authentic documentation, etc., leading to evasion of taxes;

2. Re-audit for the handling of all kinds of assessment data, or confirmation investigation for determination of the national tax refund and other matters under Article 81 of the Act;

5 and Article 81-9 of the Act, Regulations on the Management of light investigation conducted without recourse to the on-site investigation for tax disposition (National Tax Service Directives)

Article 2 (Definitions)

The definitions of terms used in this Regulation shall be as follows:

1. The term "tax investigation" means that an investigating official under the provisions of each tax-related Act question a taxpayer or a person who is deemed to have a transaction with the taxpayer or the taxpayer, and conducts an inspection and investigation under the investigation plan, and is classified into a general tax investigation and a tax offense investigation.

2. The term "on-site verification" means an act of confirming facts through a local business trip against a taxpayer or a person, etc. who is deemed to have a transaction with the taxpayer in accordance with the on-site verification plan to deal with the following business affairs, such as tax administration, simple processing of taxation data, collection of evidential materials for tax investigation, etc.:

(a) Affairs that can be processed only by simple fact-finding verification, without undergoing a tax investigation, among the materials suspected of being used for the data, disguised or fictitious materials, and the materials derived from the criminal investigation;

(b) On-site collection and verification for the processing of data on suspicion of abnormal transactions, such as verification of high-amount sales data on credit cards and disguised member shops;

(c) Confirmation of whether a taxpayer's customer or trading partner conducted in the course of tax investigation is true.

(d) Affairs related to the confirmation of local business trips for the treatment of civil petitions, etc., or one-time verification for the treatment of information on tax evasion, taxation data, etc.;

(e) Checking the current status of business places or bookkeeping of business operators;

Article 13 (Prohibition of Overlapping Investigation and Devices for Prevention)

(1) In conducting a tax investigation, a public official who conducts a tax investigation shall not conduct a re-investigation into the same item of tax and the same taxable period, except in any of the following cases and cases similar thereto, as prescribed by Article 81-4 (2) of the Framework Act on National Taxes and Article 63-2 of the Enforcement Decree of the same Act, and shall immediately take necessary measures, such as withdrawal of the investigation and withdrawal of the investigation team where the duplicate investigation is confirmed after the commencement of the investigation: Provided, That on-site verification as defined in subparagraph 2 of Article 2 shall not be deemed an investigation, and in cases falling under subparagraph 2, it shall be limited to a partial investigation into the details of transactions with the relevant counterpart to the investigation:

1. Where obvious evidence exists that prove a suspicion of tax evasion;

2. Where it is necessary to investigate a trading partner;

3. Where mistakes relating to two or more business years exist;

4. If a general investigation is undertaken against a person suspected of disturbing the economic order through speculative investment in real estate, hoarding and hoarding, undertaking transactions without authentic documentation, etc., leading to evasion of taxes.

5. Where a reinvestigation for the handling of all kinds of assessment data, or a local confirmation is made for determination of the national tax refund;

6. Where re-revision is made without recourse to on-site investigation for tax disposition.

7. Where it is decided to conduct a reinvestigation as a result of various appeals;

(3) Where a partial investigation is conducted for a taxpayer who has conducted a partial investigation, it shall be deemed that an investigation on the part subject to the partial investigation was conducted.

Corporate Tax Act

Article 51-2 (Income Deduction for Special-Purpose Companies, etc.)

(1) Where any of the following domestic corporations distributes not less than 90/100 of distributable profits prescribed by Presidential Decree, such amount shall be deducted from the amount of income for the relevant business year:

1. A special purpose company under the Asset-Backed Securitization Act;

Article 122 (Question and Investigation)

A public official engaged in corporate tax-related affairs may, if necessary for the performance of his/her duties, inquire of any of the following persons, investigate the relevant books, documents and other items or order the submission thereof:

1. A taxpayer or a person deemed to have a tax liability;

2. A withholding agent;

3. Persons liable to submit payment statements and persons liable to submit a list of total tax invoices by seller;

4. Persons responsible for management or administration under the provisions of Article 109 (2) 3;

5. Any person who is deemed to have a transaction with a person under subparagraph 1;

6. Trade associations organized by persons liable to pay taxes and corresponding organizations.

7. Corporations that have issued donation receipts.

Enforcement Decree of the former Corporate Tax Act (amended by Presidential Decree No. 19328, Feb. 9, 2006)

Article 86-2 (Income Deduction for Specialized Companies, etc.)

(1) The term "interest available for dividends prescribed by the Presidential Decree" in the main sentence of Article 51-2 (1) of the Act means the amount calculated by subtracting the earned surplus reserve accumulated pursuant to Article 458 of the Commercial Act from the net income per books (referring to the amount excluding profits and losses accruing from the appraisal of securities, but the same shall not apply to investment companies provided for in the Indirect Investment Asset Management Business Act) after deducting corporate tax expenses on the financial statements prepared in accordance with the corporate accounting standards.

(6) Where the amount equivalent to the dividend deducted pursuant to the provisions of Article 51-2 (1) of the Act exceeds the income amount for the concerned business year, such excess amount shall be deemed nonexistent.

(1) A corporation which intends to be subjected to Article 51-2 (1) of the Act shall submit an application for income deduction as prescribed by the Ordinance of the Ministry of Finance and Economy, along with its tax base return under Article 60 of the

International Tax Adjustment Act

Article 2 (Definitions)

8. The term "special relationship" means a relationship falling under any of the following items, and the detailed standards therefor shall be determined by the Presidential Decree:

(a) A relationship in which one of the parties to a transaction pays directly or indirectly 50% or more of the voting shares of the other party;

(b) A relationship between both parties, in cases where a third party owns directly or indirectly 50% or more of their respective voting shares, respectively;

(c) A relationship in which a party to a transaction has common interests through an investment in capital, a transaction of goods or services, a grant of loan, etc. and either party to a transaction has a power to substantially make a decision on the other party's business policy;

(d) A relationship between both parties to a transaction, in cases where the parties to the transaction have common interests through an investment in capital, a transaction of goods or service, a grant of loan, etc. and a third party has power to substantially determine the business policies of both parties;

10. The term "ordinary price" means a price applied or deemed to be applied to an ordinary transaction with a resident, domestic corporation, or domestic place of business, other than a foreign related party;

Article 3 (Relationship with other Acts)

(1) This Act shall take precedence over other Acts providing for the national taxes and local taxes.

(2) The provisions of Article 41 of the Income Tax Act and Article 52 of the Corporate Tax Act shall not apply to international trades: Provided, That the same shall not apply to the donation of assets as prescribed by the Presidential Decree.

Article 4 (Tax Adjustment by Arm's Length Price)

(1) With respect to an international trade in which one of the parties to the trade is a foreign related party, the tax authorities may determine or rectify the tax base and tax amount of the resident (including a domestic corporation and a domestic place of business; hereafter the same shall apply in this Chapter) on the basis of the arm's length price, if the

Article 5 (Methods of Calculating Arm's Length Price)

(1) The arm's length price shall be the price calculated by the most reasonable method from among the following methods: Provided, That the arm's length price shall be limited to cases where the arm's length price cannot be computed by the methods under subparagraphs 1 through 3:

1. Comparable third party's price method:

In international trades between a resident and a foreign related party, the method of viewing as the arm’s length price the transaction price between an independent businessman having no special relation with the relevant trade.

2. Method with a resale price:

In case where a resident and a foreign related party trade assets again sell such assets to an unrelated party, after the purchaser of such assets, to such an unrelated party, the method of deeming the price calculated by deducting, from the selling price, the amount which can be viewed as the ordinary profit of the purchaser, as the arm’s length price.

3. Cost plus method:

In international trades between a resident and a foreign related party, a method of viewing the price calculated by adding the amount which can be seen as the ordinary profit of the seller of assets or the service provider to the cost incurred in the course of manufacturing and selling assets or providing services as the arm's length price

4. Other reasonable methods as prescribed by the Presidential Decree.

(2) Detailed matters concerning the arm's length price computation method under paragraph (1) shall be prescribed by Presidential Decree.

Enforcement Decree of the International Tax Adjustment Act

Article 4 (Methods of Calculating Arm's Length Price)

The term "other reasonable methods as prescribed by the Presidential Decree" in Article 5 (1) 4 of the Act means the following methods:

1. Profit sharing method:

In international trade between a resident (including domestic corporations and domestic business places; hereafter the same shall apply in this Chapter) and a foreign related party, the net trade profits created by both parties to the international trade shall be distributed according to the degree of relative contribution between the parties to the trade determined by the allocation criteria set forth in the following items (including where the proper basic income of each transaction party is preferentially distributed by type of transaction; hereinafter the same shall apply) and the transaction price calculated on the basis of the profit so allocated shall be deemed the arm's length price. In such cases, the degree of relative contribution shall be measured by the degree of contribution generally made in transactions between an independent business operator who has no special relationship in a similar situation:

(a) Expenses paid or payable for the purchase, manufacture, sale of assets, or the provision of services;

(b) Capital expenditure required to develop assets or to provide services, total amount of assets used, or the degree of risk assumed;

(c) Level of importance of skills performed at each phase of transactions; and

(d) Other measurable rational allocation criteria.

2. Method of net trade profit ratio:

The method of viewing as the arm’s length price the transaction price calculated on the basis of the net trade profit ratio set forth in the following items, realized in the trades similar to the relevant trades, from among the trades between the resident and the unrelated parties, in an international trade between the unrelated parties: Provided, That in case where the trades similar to the relevant trades are not conducted with the unrelated parties, the following ratio may be applied to the trades between the unrelated third parties whose conditions and conditions are similar to

(a) Net trade profit ratio to the sales;

(b) Net trade profit ratio to the assets;

(c) Net trade profit ratio to sales cost and sales expenses;

(d) Other net trade profit ratio deemed reasonable.

3. Ratio of gross sales profit to sales expenses:

In the case of international trade between a resident and a foreign related party, the method of deeming the amount of gross sales profit calculated by using the ratio of the ratio of the sales cost of gross sales profit realized in the trades similar to the relevant trade among the trades between the unrelated parties, as the arm's length price: Provided, That where the trades similar to the relevant trade have not been carried out with the unrelated parties, the ratio of the total sales cost of the trades similar to the conditions of the relevant trade among the trades between unrelated third parties may be used.

4. Other methods deemed reasonable in view of the substance and practice of trades.

Article 5 (Selection of Arm's Length Price Computation Method)

(1) In computing an arm's length price under Article 5 (1) of the Act, the most reasonable method shall be selected in consideration of the following criteria:

1. Possibility for comparison shall be high between the international trades among the related parties and the trades among the unrelated parties. In this case, "high possibility for comparison" means the cases falling under any of the following items:

(a) Where a difference in the compared circumstances has no serious effect upon the compared price or net profit of the trade;

(b) Even if a difference in the compared circumstances has a serious effect upon the compared price or net profit, a reasonable adjustment which can remove a difference due to the toward the same Decree is possible;

2. It shall have high possibility of using the data to be used;

3. The level of correspondence to the reality shall be high for an assumption on the economic conditions or business environment, etc. established in order to compare the international trades among the related parties with the trades among the unrelated parties;

4. The defects in the data to be used or in the established household shall have a small impact on the normal price.

(2) In assessing whether or not a high comparability exists pursuant to paragraph (1) 1, such factors as the function of business activities that may affect the price or profit, contractual terms, risks accompanying the trades, kinds and features of the goods or services, changes in market conditions, economic conditions, etc. shall be analyzed.

(4) In applying the arm's length price computation method under any subparagraph of Article 4, subparagraph 4 of the same Article shall apply only where the methods under subparagraphs 1 through 3 of the same Article are not applicable.

(5) Where a trade between unrelated parties shall not be treated as a normal trade because it is fabricated at will by the parties involved, the tax authorities may not select such trade as a comparable trade.

Article 6 (Supplementation, etc. of Arm's Length Price Computation Method)

(1) Each subparagraph of Article 4 may be used to supplement the arm’s length price computation method under Article 5 (1) 1 through 3 of the Act.

(2) In computing an arm's length price under Article 5 of the Act, when a difference occurs in the price, profit or net trade profit applied due to a difference in functions performed, risks assumed, terms of transaction, etc. between the relevant trade and unrelated parties, the relevant difference in the price, profit or net trade profit shall be reasonably adjusted.

(7) The normal interest rate for money transactions applicable to international trades between a resident and a foreign specially related person shall be the interest rate applicable or deemed as applicable to ordinary monetary transactions between unrelated persons, taking the following matters into consideration:

1. Amount of debts;

2. Maturity of debt;

3. Whether the obligation is guaranteed;

4. Termination of credit rating of the debtor.