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

Cheong-gu Office

The Defendant’s rejection of correction of corporate tax of 200 won for the business year 2010, corporate tax of 000 won for the business year 2011, and corporate tax of 000 won for the business year 2012 shall be revoked.

A. The plaintiff is a company that runs the business of manufacturing 00 parts established in June 197, and has invested 25% or more of shares in the People's Republic of China (hereinafter referred to as "China"), and the current status of the subsidiary (the combination of the above companies is referred to as "the subsidiary of this case") is as follows:

Classification

Name of Company

Date of establishment

Apportionment Investment Rate

An abbreviationd name;

1

BB

000.00.00.00

00%

BB

2

MP

000.00.00.00

00%

MP

B. The Plaintiff filed a corporate tax return with the Defendant by applying a foreign tax credit to the dividends received from the instant subsidiaries located in China from around 2010 to around 2012 as shown in the separate sheet No. 1 (the Plaintiff only applied a foreign tax credit under Article 57 of the Corporate Tax Act because the financial resources of the dividends received from around 2010 to 2012 were accrued after 2008 at the time of the said declaration, and the said foreign tax credit was not applicable).

C. On March 31, 2014 and April 11, 2014, the Plaintiff: (a) applied 5% of the amount of dividends paid from the subsidiaries in 2010 to April 2012, 2014; (b) the amount of foreign tax additionally deemed as foreign tax credit in relation to the return of corporate tax for each business year from 2010 to 2012; and (c) filed a request for correction of the amount of tax to be applied in 200 won for the business year from 2010 to 200 won; and (b) the Defendant rejected the Plaintiff’s request on May 28, 2014 on the ground that the dividend income received from a foreign subsidiary cannot be deemed as foreign tax credit for the business year from 208 (hereinafter “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on August 22, 2014, but the said claim was dismissed on September 4, 2015.

[Grounds for Recognition] Unsatisfy, Gap evidence Nos. 1 through 16 (if any, numbered)

(2) Each entry and the purport of the whole pleading;

2. Whether the instant disposition is lawful

A. Summary of the parties' assertion

1) The plaintiff's assertion

A) Articles 3 and 4 of the Income Tax Act of the People's Republic of China amended on January 1, 2008 (hereinafter referred to as "China Corporate Income Tax Act") provide that the Plaintiff and non-residents shall impose income tax at 20% on the income acquired in the Chinese calendar. Article 27 of the Income Tax Act located below Chapter IV (tax benefits) may be exempted or reduced. Article 91 of the Chinese Corporate Income Tax Act provides that the tax rate shall be 10%. Accordingly, Article 27 of the Chinese Corporate Income Tax Act and Article 91 of the above Enforcement Ordinance provide that the tax amount shall be deemed as 10% of the total tax amount payable in the Chinese Tax Treaty for the purpose of the reduction of or exemption from dividends and the tax amount payable in accordance with Article 5 (1) (hereinafter referred to as "Protocol 2") of the Agreement on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Income between the Republic of Korea and the People's Republic of China shall be deemed as 10% of the total tax amount payable in the Chinese Tax Treaty.

B) The National Tax Service, through the book "Tax Guidance for Enterprises entering China" in 2008, expressed a public opinion that if a domestic corporation receives dividends from a Chinese subsidiary on January 1, 2008 as the source of earned surplus funds, the domestic corporation may apply the foreign tax credit. On August 23, 2011, the National Tax Service’s authoritative interpretation explicitly expressed public opinion that the tax amount is reduced or exempted pursuant to Article 27 of the Income Tax Act and Article 91 of the Enforcement Ordinance of the same Act, the disposition rejecting the Plaintiff’s request for correction, unlike the above public opinion, is in violation of the principle of trust protection.

2) The defendant's assertion

A) The source income tax to be paid by the Plaintiff to China is the amount of 5%, which is the limited tax rate under Article 10(2)(a) of the Korea-China Tax Treaty. Thus, to be paid to Korea pursuant to the instant provision, the Chinese law should have a provision that reduces the tax amount to be paid to Korea more than the limited tax rate of 5%. The latter part of the instant provision only sets the limit of deduction as 10%, and cannot be seen as a provision that considers deduction of 10%. Thus, the latter part of the instant provision sets the scope of tax deduction on the basis of the “limited tax rate”. In addition, the latter part of the instant provision should be interpreted in harmony with the specialist. The said provision is merely a provision related to the tax incentive measure under the Chinese domestic law, and the latter part of the said provision does not constitute a “tax reduction rate of 10%” in the instant case where the said provision is applied only to the case where the tax reduction or exemption is made under such Chinese domestic law, and it does not constitute a “tax reduction rate of 10%” under the instant tax treaty.

B) The tax guidance for companies entering China in 2008 or the interpretation of the National Tax Service’s right to retention cannot be deemed as having expressed public opinions to taxpayers. Since the Plaintiff is not an investment in China by trusting the above book or the interpretation of the right to retention, the principle of trust protection does not apply.

B. Relevant statutes

Attached Form 2 shall be as listed in attached Table 2.

C. Determination

(i)whether foreign tax credit is deemed to apply to the difference between the limited tax rate and the tax rate;

A) Article 57(3) of the Corporate Tax Act provides that "the amount equivalent to the tax amount reduced or exempted in corporate tax on the relevant foreign source income in the counterpart to a tax treaty by a domestic corporation having a foreign source income shall be deemed to be the amount equivalent to the foreign corporate tax amount subject to the tax credit or inclusion in deductible expenses pursuant to paragraph (1) within the scope prescribed by the relevant tax treaty." Article 23(1) of the Korea-China Tax Treaty provides that, in the case of a Korean resident, double taxation shall be avoided as follows. Subject to the provisions of the Korea-China Tax Act (it shall not affect the general principles of this paragraph) on the tax credit granted by the Korean resident with respect to the tax paid in any foreign country other than Korea, either directly or indirectly through the mutual aid of the source income in China or through the mutual aid, the Korean tax payable in China (excluding the tax payable for the profit paid by the dividend) pursuant to the Chinese law and this Agreement shall be allowed from the Korean tax payable for such income. However, the amount of the tax credit shall not exceed the amount equivalent to the Korean tax amount equivalent to the ratio of the total income paid in China's income.

Article 5

1.Paragraph 3 of Article 23 of the Agreement shall be deleted, replaced by:

for a year.

"The taxes to be paid by one Contracting Party referred to in paragraphs 1 (a) and 2 of this Article shall be deemed to include taxes which would have been paid if there had been no provisions relating to other tax incentives for the reduction or exemption of taxes or the promotion of economic development. For the purposes of this paragraph, in the cases of Articles 10(2), 11(2) and 12(2), the amount of taxes shall be deemed to have been 10 per cent of the total amount of dividends, interests, and royalties, respectively."

Posium Areacting State State in sub lagraph (a) 1

2(1)(1)(1)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2)(2

been payable but for the legal provisions concerning tax reduction, exemption or other

For the State, the economic devement for the State, the Forenomic devement of the Republic of Korea.

the purpose of this paragraph, the amount of tax shall be deemed to be 10 percent of

2. The Spons of the Parties: divends of the Republic of Korea, interest interest and royt case 2.

The Articles 10, 11 and 12 of the Articles of the Public Officials Act, and the 12, 200.

As such, the purpose of the foreign tax credit is to preserve the effects of tax benefits paid by capital revenue countries, it is premised on the other party's country, i.e., the source country, within the scope of the specified taxation right, to voluntarily reduce the scope of the taxation right stipulated by the tax incentives regulations.

However, as stipulated in Article 10(2)(a) of the Korea-China Tax Treaty, the limited tax rate refers to the maximum tax rate that can be imposed on the residents or corporations of the Contracting State pursuant to the tax treaty (Article 2 subparag. 12 of the Adjustment of International Taxes Act), and as regards dividend income received by the residents of one Contracting State from the corporations, etc. of the other Contracting State, it functions to prevent double taxation through the adjustment of the taxation right between the source country and the resident country by operating the limited tax rate within the tax rate that can be imposed in the other Contracting State. The above limited tax rate is set at the source country's taxation right of the source country in relation to dividend income. As such, in this case, when China, which is the source country, reduces the scope of the taxation right determined in the above limited tax rate, the difference is deemed as foreign tax credit, and the treaty itself, which provides for the limited tax rate, cannot be deemed as China's tax reduction or exemption provisions (in this case, the Plaintiff did not receive benefits under the Chinese domestic law, but merely received the above limited tax rate of 5% as seen earlier).

In other words, "other tax incentives for the reduction, exemption, or promotion of economic development" under the provisions of this case refers to the Chinese domestic law rate that reduces more than the limited tax rate, and therefore, Article 10 (2) (a) of the Korea-China Tax Treaty, which provides for the Chinese Corporate Income Tax Act and its enforcement ordinances or the limited tax rates outside the scope of the limited tax rate, does not constitute this itself.

B) Next, prior to January 1, 2008, China exempted foreign-capital invested enterprises in China from the total amount of taxes on dividend income to foreign-capital invested enterprises under Article 19(1) of the former Income Tax Act (hereinafter referred to as the "Foreign-capital Investment Enterprises Act") and applied the 25% single tax rate under the Income Tax Act by uniformly regulating foreign-capital invested enterprises from January 1, 2008 (Article 4 of the Chinese Income Tax Act). However, in the case where a non-resident enterprise does not have a place of business (organization and place) in China, or where a non-resident enterprise does not have a real relation with its place of business, the withholding tax rate for the income from sources in China was set at 20% (Article 4 and Article 3(3) of the Chinese Income Tax Act), and the limited tax rate of 10% was set at 10% lower than that of the Chinese Income Tax Act (Article 25(1) of the Chinese Income Tax Act).

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1) Article 10(2) of the Korea-China Tax Treaty provides that the company paying dividends may impose taxes on dividends in accordance with the laws of the Contracting State, which is a resident, provided that if the recipient is the beneficial owner of the dividends, the tax so imposed shall not exceed the following: Provided, That if the beneficiary is the company (other than partnership) which directly owns not less than 25% of the capital of the company paying the dividends, the company's total amount of dividends shall be 5%, and in all other cases, 10% of the total amount of dividends.

The latter part of the instant provision needs to be applied at the time of exemption from taxation (20% ? 0%) on dividends related to non-resident enterprises prior to the amendment of the Chinese Income Tax Act. If there is no tax in China on dividends regardless of the equity investment ratio, in the absence of the said provision, a large number of equity investments may be eligible for a foreign tax credit of 5%, whereas a company which has less equity investments may be eligible for a foreign tax credit of 10%, on the other hand, a company which has more than 10% equity investments may be eligible for a foreign tax credit of 10%, so that it would rather be more unfavorable to a company which has more than 10% equity investments, regardless of the equity investment ratio, and thus, the said provision is applied so that it would be able to receive a foreign tax credit of 10% regardless of

However, since the 10% reduction rate (20% ? 10%) applies to dividends of non-resident enterprises after the enforcement of the Chinese Corporate Income Tax Act on January 1, 2008, if the above provision applies, the company which has less equity investment is taxed from China to 10% and is subject to the 10% direct foreign tax credit. However, a company which has a large amount of equity investment is subject to the 5% direct foreign tax credit and the 5% foreign tax credit to be taxed at 5% under the limited tax rate under the tax treaty and the 5% foreign tax credit to be considered as 5% more favorable than one company. The purpose of the differential limited tax rate on dividends is to allocate a larger tax amount to the resident country in which a large amount of equity investment is applied, and thus, it is difficult to view that the effect of the tax reduction and exemption of the capital importing country is not related to the foreign tax credit system to substantially belong to the foreign investors. Accordingly, it is difficult to view that the latter part of the provision of this case to be uniformly paid 10% without any differential tax reduction or exemption.

다) 또한, 이 사건 조항의 후문은 문언상 '이 항의 목적상(For the purpose of this paragraph)'이라고 규정하고 있으므로 전문과 후문을 별개로 해석할 수 없고, ㉮ 전문에서 규정하는 중국 국내법상 조세감면규정이 존재하고, ㉯ 그러한 중국 국내법에 의하여 세액감면이 이루어진 경우에 비로소 적용할 수 있다고 보아야 한다. 전문과 후문을 함께 해석하여야만 후문의 '세액'의 의미가 명확해진다. 즉, 위 ㉮, ㉯의 요건이 충족될 경우에 감면의 범위가 문제될 것인데, 후문은 이러한 감면의 범위로 '세액'을 10%로 간주하겠다는 의미로 해석된다. 이 사건 조항 후문의 적용범위와 관련하여 그 모두에 '이 항의 목적상'이라고 한정함으로써 후문에 따른 세액공제가 전문과 동일한 목적으로 적용되어야 하며 전문의 가장 기본적 전제가 되는 경제발전 촉진을 위한 조세유인조치의 존재가 후문에도 그대로 적용된다고 해석하는 것이 타당하다.

On the other hand, according to the Convention between the Government of the Republic of Korea and the Government of the Republic of the Philippines for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as the “Korea- Philippines Tax Treaty”), the limited tax rate in relation to dividend income is divided into 10% and 25% (Article 10(2)), and in relation to the avoidance of double taxation, the dividend income is considered to have been paid at 20% (Article 23(3)).

Article 23 Prevention of Heavy Taxation ( November 09, 1986)

1. Korea's tax deduction for Korean taxes payable by countries other than Korea;

Subject to the laws of the Philippines, the Republic of Korea shall pay for income accruing from the Philippines.

tax shall be deducted from Korean tax payable on such income, but this deduction shall not apply.

With respect to all income on which Korean tax is imposed on income derived from sources in the Philippines:

of Korea’s tax rate may not exceed that of Korea’s tax

--------------------------

(ii)Article 10: Distribution

2.However, such dividends may be taxed under the laws of the Contracting State in the Contracting State in which the corporation paying the dividends is a resident. However, if the addressee is the beneficial owner of the dividends, the tax so levied shall not exceed:

(a) 10% of the total amount of dividends, in cases of a corporation (excluding partnership) in which the beneficial owner directly owns at least 25 percent of the capital of the corporation paying dividends;

(b)in other cases 25 per cent of the total amount of dividends;

This paragraph does not affect the taxation of a juridical person on the profits for which such dividends are paid.

3.For the purposes of the tax credit under paragraph 1 of this Article, dividends to which the provisions of paragraphs 2(a) and 3 of Article 10 apply.

20% in the case of interest to which the provisions of paragraph 3 of Article 11 apply, 15% in the case of interest to which

In the case of a fee to which the provisions of paragraph (2) apply, 25 percent and paragraph (3) of Article 12 shall not apply.

In the case of usage fees to be used, the taxes of the Philippines at the rate of 15 percent shall be deemed to have been paid at all times.

shall be eligible.

3. For the purposes of the credit referred to in paragraph 1 hereof, the Philippine tax

shall always be considered as having been paid at the rate of 20 percent in the case of dividends to which the provisions of paragraphs 2 (a) and 3 of Article 10

apply; 15 percent in the case of interest to which the provisions of paragraph 3 of

Article 11 apply; 25 percent in the case of royalties to which the provisions of

12 lag of the public notice of Articles 129 and 15 of the Local Public Notice of Goods Act to 12 lag of the case

provisions of paragraph 3 of Article 12 apply.

3) The phrase “for the purpose of tax credit under paragraph (1) of this Article,” which is similar to the latter part of the provisions of this case, is not corresponding to the former part of the provisions of this case, but refers to only the provision of general foreign tax credit. Therefore, with respect to the provisions of the Korea-Luxembourg Tax Treaty, it may be interpreted in a way that allows the foreign tax credit to the tax rate which is set in advance under the treaty regardless of the source country’s tax incentives. However, as the latter part of the provisions of this case are differently stipulated in Article 23(3) of the Korea-Luxembourg Tax Treaty, the latter part of the provisions of this case cannot be interpreted as the provision of deemed tax credit as prescribed in the Korea-Luxembourg Tax Treaty.

-----------------

(3) In addition, unlike the provisions of this case, the tax treaty of the Republic of Korea, Vietnamese Tax Treaty, the Korea-China Tax Treaty, and the Korea-China Tax Treaty, etc. is also the same. In addition, unlike the examples of the OECD Model Tax Treaty, the provisions of the tax treaty on deemed tax credit in each country differ from the text and contents of the tax treaty. Therefore, the provisions of the Korea-China Tax Treaty and the provisions of this case should be judged individually in accordance with the contents of the text, and it cannot be a logical interpretation of the tax treaty to view that only the latter part can be applied independently under the circumstances where Chinese law was changed in 208 and it becomes impossible to make a mutual aid under the proviso of the provisions of this case.

D) As seen earlier, Article 10(2) of the Korea-China Tax Treaty discriminates between 5% of the total dividend amount and 10% of the total dividend amount in all other cases where a beneficial owner owns 25% or more of the capital of a company paying dividends. However, the purport of applying the lower limited tax rate on dividends among corporations is to avoid double taxation and facilitate international investment, and it is irrelevant to the taxation incentives for the economic development of a less-developed country. In the case of foreign tax credit deemed to be foreign tax credit, the scope of the tax authority prescribed by the source country should be reduced by itself by providing the tax reduction and exemption rules on the tax incentives within the scope of the prescribed taxing authority. Thus, the concept of the tax reduction and exemption of the source country cannot be presented for the portion exceeding the limited tax rate from the beginning. Thus, it is difficult to view it as a tax incentive for the economic development of the dividend rate under such tax treaty.

E) Therefore, even if the Plaintiff paid the tax amount to China to which the limited tax rate of 5% under Article 10(2)(a) of the Korea-China Tax Treaty is applied, the tax amount equivalent to 5%, which is the difference between 10% and 10% of the latter part of the instant provision, cannot be deemed as the tax amount subject to tax credit under Article 57(3) of the Corporate Tax Act. Therefore, the instant disposition that was made without deeming the tax amount equivalent to 5%

2) Whether the principle of trust protection is applied or not

The principle of protecting trust may apply to a tax authority’s act where a taxpayer’s expression of opinion is merely a general theoretical expression of opinion (see, e.g., Supreme Court Decisions 2000Du5203, Apr. 24, 2001; 2007Du1947, Apr. 29, 2010; 2007Du19454, Apr. 29, 201). However, where a tax authority’s expression of opinion is merely a general theoretical expression of opinion, the principle of protecting trust is not applicable (see, e.g., Supreme Court Decisions 200Du5203, Apr. 24, 2001; 2007Du1947, 2007Du19454, Apr. 29, 2010).

In light of the above legal principles, the book "tax guidance for companies entering China" was published by the National Tax Service around September 2008, as a whole, in light of the overall purport of arguments as stated in Gap evidence Nos. 17 and 20, and the book "tax guidance for companies entering China" was explained about the change of the foreign tax credit system due to the implementation of the Chinese Income Tax Act, and the book "Korean parent companies holding 25% or more of the Chinese subsidiary's shares are subject to the limited tax rate of 5% under the Korea-China Tax Treaty, and it is withheld within China, and the difference between 10% of the deemed tax rate of 10% and 5% of the actual withholding tax rate of 10% under the above provision of this case, and it is not recognized that the above tax credit of 20% is subject to the foreign tax credit of 5% under the revised Chinese Income Tax Law No. 285, Aug. 30, 2008.

Even if the Plaintiff’s explanation and authoritative interpretation are the Defendant’s public opinion, there is no evidence supporting the circumstances that the Plaintiff committed any act with trust in the book and authoritative interpretation, etc. (the Plaintiff established each of the subsidiaries prior to the aforementioned book and authoritative interpretation). In light of the fact that there is no evidence supporting the Plaintiff’s reliance on the book and authoritative interpretation, it is difficult to deem the instant disposition to violate the principle of trust protection.

Therefore, the plaintiff's assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.