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

On March 11, 2014, the part that exceeds KRW 333,677,133 of the disposition rejecting the request for correction of corporate tax of KRW 742,714,243 against the Plaintiff for the business year 2010 shall be revoked.

A. On July 1, 2010, the Plaintiff merged a corporation operating the business of manufacturing and selling semiconductors and displate organic chemicals, and completed the merger registration on the same day after combining a Aa limited liability company (hereinafter “merged corporation”).

B. The research and human resources development expenses (hereinafter “research and human resources development expenses”) incurred from 2006 to 2010 business years (the business year of the plaintiff is from January 1 to December 31 of each year) of the research institute that the plaintiff acquired from the merged corporation (hereinafter “the research institute of this case”) are as listed below (However, the Plaintiff’s research expenses for the 2010 business year are the amount excluding the research expenses incurred from the research institute of this case).

C. The Plaintiff filed an application for tax credit of KRW 77,908,149 pursuant to Article 10(1)3 (b) of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010; hereinafter the same) with respect to KRW 2,094,305,093 paid as research expenses at the time of filing a corporate tax return for the business year 2010. D. The Plaintiff filed a claim for tax credit of KRW 77,908,149 with respect to the research expenses incurred by the instant succession research institute on January 7, 2014, on the ground that the Plaintiff omitted the application for tax credit for the research expenses incurred by the instant succession research institute, Article 10(1)3 (a) of the former Restriction of Special Taxation Act, Article 9(3) of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; hereinafter the same).).).

E. On March 11, 2014, the Defendant calculated the amount of tax credits of KRW 2,161,646,213 as the research expenses incurred after the registration of the merger at the instant succession research institute (=2,161,646,213 research expenses incurred after the merger at the instant succession research institute) - (2,161,646,213 of the research expenses incurred after the merger at the instant succession research institute (2,161,045,185,561 x 12/12) x 0.4), and 333,67,131 of the expenses claimed by the Plaintiff are not subject to the tax credits, and determined that the amount of tax credits was not subject to the corporate tax credits, and rejected the Plaintiff’s claim for correction of KRW 515,108,50 of the corporate tax credits and additional dues on KRW 742,714,243 of the remainder.

F. The Plaintiff filed an appeal with the Director of the Tax Tribunal on the refusal disposition of correction against KRW 409,037,112 (hereinafter “instant disposition”), which the Defendant acknowledged as not eligible for tax credit among the Defendant’s refusal disposition of correction, against the Plaintiff’s 333,67,131 won. However, the said claim was dismissed on January 15, 2015.

[Ground of recognition] The evidence Nos. 1, 2, 3, Eul No. 1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Article 10(2) of the former Restriction of Special Taxation Act and Article 9(3),4, and (5) of the former Enforcement Decree of the Restriction of Special Taxation Act provide for the method of calculating the amount of tax credit for research expenses. The purpose of this provision is to promote research and development by calculating a certain rate of increase in research expenses for the business year between corporations, whether to merge, and an increase in research expenses without relation to the time when the research expenses increase compared to the average amount of tax credit for research expenses in the past.

Article 9 (3) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that the annual average of research expenses for the immediately preceding four years shall also be converted into the number of months corresponding thereto in cases where the business year is not one year. Article 9 (4) of the same Enforcement Decree of the same Act provides that the research expenses incurred by the merged corporation prior to the merger shall be deemed to have occurred in the merger law, while the research expenses incurred by the merged corporation prior to the merger shall be calculated according to the ratio occupied by the corporation's sales or asset value when calculating the annual average of the research expenses incurred for the immediately preceding four years, among the calculation formula under paragraph (3) of the same Article.

However, when a merger took place during an intermediate business year, the annual average of research expenses incurred prior to the merger of an extinguished corporation is calculated by dividing the aggregate of research expenses incurred for the immediately preceding four years by 4 pursuant to Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act, and then converting the annual average of research expenses incurred for the immediately preceding four years into 12 months of the relevant taxable year. On the other hand, when calculating the tax credit amount of the merged corporation for the research expenses incurred after the merger of the extinguished corporation, the amount of research expenses incurred for the immediately preceding 4 years is deemed 16 months including before and after the merger of the merged corporation. 166 months, the period of research expenses incurred at the former 46 months after the merger would be calculated as 12 months, while the annual average of research expenses incurred for the immediately preceding 4 years would be calculated as 16 months from the date of the merger 26 months from the former Enforcement Decree of the Restriction of Special Taxation Act, 16 months from the annual average of research expenses incurred for the immediately preceding 2 years to 36 months from the merger.

2) If Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act cannot be interpreted as above, the merger and the amount of tax credit varies depending on the time of the merger. Thus, Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act violates the principle of tax equality, and is illegal and invalid by deviating from the discretionary limit of the former Restriction of Special Taxation Act, and the Defendant’s disposition of this case is unlawful as it is based on the invalid Enforcement Decree (hereinafter “instant assertion”).

3) Even if Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act cannot be interpreted as above, since only the portion incurred after the merger among the research expenses incurred in the business year 2010 was succeeded to the Plaintiff, the proviso to Article 9(4) of the former Enforcement Decree of the Restriction of Special Taxation Act shall be applied or analogically applied, and when calculating the annual average of the research expenses incurred in the business year immediately preceding the four years of the merged corporation, the said amount shall be converted according to 6/12, which is the ratio occupied by the period during which the research expenses incurred after the merger occurred in the business year of the extinguished corporation. Therefore, the instant disposition that did not convert the annual average of the research expenses incurred in the business year immediately preceding the four years of the extinguished corporation into the said ratio

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Article 10(1)3 (a) of the former Restriction of Special Taxation Act provides that where research expenses incurred for the pertinent taxable year exceed the annual average of the research expenses incurred for four years retroactively from the commencement date of the pertinent taxable year, an amount equivalent to 40/100 of such excess amount shall be the amount of tax credit. Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that the annual average of the research expenses incurred for four years retroactively from the commencement date of the pertinent taxable year shall be calculated in accordance with the formula of "total research expenses incurred for four years retroactively from the commencement date of the pertinent taxable year x the number of months in the pertinent taxable year x 12". Article 10(4) of the same Act provides that where a merged corporation succeeds to part of the business of an extinguished corporation, the research expenses incurred prior to the merger shall be deemed to have occurred from the merged corporation in calculating the annual average of the research expenses incurred for four years retroactively from the commencement date of the relevant taxable year. However, where the merged corporation succeeds to part of the business of the merged corporation, the total amount of the total asset value of the succeeded business.

2) Determination as to the assertion

In light of the principle of no taxation without the law, the interpretation of tax laws and regulations is to be interpreted in accordance with the law, barring any special circumstances, and it is not permitted to expand or analogically interpret the tax laws and regulations without any reasonable reason. In particular, it conforms to the principle of fair taxation to strictly interpret the provision that is obviously preferential in terms of the requirements for reduction and exemption (see, e.g., Supreme Court Decision 2003Du7392, May 28, 2004). In light of the above legal principle, it is intended to promote research and development by inducing taxpayers to ease their tax burden in accordance with Article 10(1)3 (a) of the former Restriction of Special Taxation Act. Therefore, Article 10(1)3 (a) of the former Restriction of Special Taxation Act and Article 9(3), (4), and (5) of the former Enforcement Decree of the Restriction of Special Taxation Act, which provide for the method of calculating the amount of tax credit pursuant thereto, should be strictly interpreted.

Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the number of months of the relevant taxable year" means the number of months of the person who intends to obtain a tax credit. In addition, Article 9(4) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that when a merger takes place, research expenses incurred before the merger shall be included in the calculation of annual average amount of research expenses incurred during the immediately preceding four years, but where part of the business is succeeded from the merged corporation, it shall be calculated according to the ratio of the total business to the whole business, and Article 9(5) provides that a merger shall be calculated based on the monthly calendar when calculating the number of months. In full view of the above provisions, where a merger takes place in the middle of the business year and calculates the increase in research expenses incurred by the research institute succeeded by the merged corporation, it shall not be deemed that "the number of months of the relevant taxable year" under Article 9(3) of

As seen earlier, the Plaintiff’s business year 2010 from January 1, 2010 to December 31, 2010. As such, the Plaintiff’s number of months applicable to the formula under Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act is 12 months. Therefore, the Plaintiff’s assertion 1 has no merit.

3) Judgment on the argument

According to Article 9 (3) of the former Enforcement Decree of the Restriction of Special Taxation Act, when a merger takes place in the middle of the business year, the total amount of tax credits for each research expense is smaller than the total amount of tax credits for the same amount of research expenses when the merged corporation and the merged corporation did not have each merger, and the total amount of tax credits for two corporations are less than the total amount of tax credits for the same amount of research expenses when the merger takes place at the end of the

However, if a merger took place during the middle of the business year, only the merged corporation may obtain tax credits on the basis of the amount calculated by converting the annual average of research expenses for the immediately preceding four years from the date of the business year to the date of the registration of the merger pursuant to Article 9(3) of the former Enforcement Decree of the Restriction of Special Taxation Act. This is because the number of months of the taxable year of the extinguished corporation becomes the number until the date of the registration of the merger pursuant to Article 2(1) of the Restriction of Special Taxation Act and Article 8(1) of the Corporate Tax Act, while the number of months of the merged corporation’s taxable year becomes the end of the business year. In other words, the fact that the Plaintiff’s business year 2010 to December 31, 2010 is 12 months from January 1, 2010 to December 31, 2010 is that the total annual average of research expenses for the immediately preceding four years is obviously 12 months from the date of the registration of the merger, and thus, it cannot be deemed that the merger differs from the former Enforcement Decree.

4) Judgment on the assertion

In light of the aforementioned legal principles, Article 9(3) and (4) of the former Enforcement Decree of the Restriction of Special Taxation Act ought to be strictly interpreted as a provision giving preferential treatment. However, the proviso of Article 9(4) of the former Enforcement Decree of the Restriction of Special Taxation Act applies to cases where the merged corporation succeeds to part of the business of the extinguished corporation, and it is apparent that the proviso of Article 9(4) of the former Enforcement Decree of the Restriction of Special Taxation Act applies to cases where the Plaintiff

3. Conclusion

Therefore, in calculating the amount of tax credit for research expenses incurred by the pertinent successor office after the Plaintiff’s merger, the instant disposition that calculated the annual average amount of research expenses incurred during the immediately preceding 4 years on the basis of 12 months, which is the 2010-month number of months in the month of the Plaintiff’s 2010 taxable year is lawful. Therefore, the Plaintiff’s claim of this case is dismissed