Otods Co., Ltd. (Attorney Lee Han-soo, Counsel for defendant-appellant)

Head of Suwon Tax Office

March 22, 2013

1. The Defendant’s imposition disposition of KRW 116,529,374 of corporate tax for the business year 2006 against the Plaintiff on December 1, 2010 exceeds KRW 142,845,780 in excess of KRW 116,529,374 of corporate tax for the business year 206, the amount exceeding KRW 106,44,555 of corporate tax for the business year 2007, the amount exceeding KRW 106,44,555 of the imposition disposition of KRW 179,324,00 of corporate tax for the business year 2008, the amount exceeding KRW 101,494,055 of the imposition disposition of KRW 140,896,710 of corporate tax for the business year 209, each revocation is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

The following facts do not conflict between the parties, or can be acknowledged in full view of the whole purport of the arguments in the statements in Gap evidence Nos. 1-1, 2, 2-2, 2-3, 4-1 through 4, and 5.

A. The Plaintiff, a corporation established on January 19, 1990 and engaged in the manufacture and sale of electronic and electrical equipment, establishes and operates a research institute affiliated with a company (hereinafter referred to as the “research institute of this case”) in Yangsan-si, Yangsan-si, Yangcheon-si, Yangcheon-si from March 16, 2006.

B. In filing a corporate tax return for the business year of 2006 to 2009, the Plaintiff reported the total amount of KRW 924,33,504, the total amount of KRW 924,333,504 in the year of interim settlement retirement allowances paid to researchers employed at the instant research institute, as labor expenses eligible for tax credit under Article 10 of the Restriction of Special Taxation Act, and received tax credit from the Defendant. The interim settlement retirement allowances paid by the Plaintiff out of the retirement allowances paid by the Plaintiff to the researchers employed at the instant research institute was paid in the business year of 2006 to 214,930,680, and the business year of 2008 to 265,35,787, and the business year of 268,604,

C. The director of Busan Regional Tax Office conducted a tax investigation on the Plaintiff and notified the Defendant of the rectification of the interim retirement allowance, deeming that it is not a personnel expense subject to tax credit.

D. Accordingly, on December 1, 2010, the Defendant corrected and notified the Plaintiff of KRW 142,845,780 of the corporate tax for the business year 2006, KRW 161,531,610 of the corporate tax for the business year 2007, KRW 179,324,100 of the corporate tax for the business year 2008, and KRW 140,896,710 of the corporate tax for the business year 2009.

E. On February 24, 2011, the Plaintiff dissatisfied with the instant disposition, filed an appeal on February 24, 201, and the Tax Tribunal dismissed the appeal on February 16, 2012.

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The personnel expenses of the researchers recognized as eligible for tax credit under the Restriction of Special Taxation Act include both interim settlement retirement allowances paid to the researchers. Therefore, the instant disposition made on a different premise is unlawful.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Article 10(1) of the Restriction of Special Taxation Act (amended by Act No. 9272, Dec. 26, 2008; Act No. 9921, Jan. 1, 2010); Article 9(2)6 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 21307, Feb. 4, 2009); Article 8(1)6 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 23590, Feb. 2, 2012); Article 8(1)6 of the same Act (amended by Presidential Decree No. 2006, Feb. 2, 2007; Presidential Decree No. 2008 of the same Act (amended by Presidential Decree No. 21307, Apr. 1, 2010; Presidential Decree No. 22009, Feb. 1, 2009) provides that human resources development expenses shall be deducted from corporate tax for each taxable year.

2) We examine the following circumstances, i.e., (i) the retirement allowance system under the Labor Standards Act where a worker continues to work and retires for a period of not less than one year; (ii) the employer has accumulated a part of wages for the provision of labor to the employee; and (iii) the employer has paid it in lump sum when the employee retires with the basic financial resources. The nature of the system is in essence the nature of the post-paid wage (see Supreme Court Decision 2004Da8333, Mar. 30, 2007). (ii) the labor expenses refer to all the expenses paid to the employee for remuneration for labor regardless of their title (see Supreme Court Decision 97Nu14194, Jun. 25, 199); (iii) the basic rules of the National Tax Service’s general rules of the Restriction of Special Taxation Act provide that “the amount corresponding to retirement income under Article 22 of the Income Tax Act shall not be included in the personnel expenses prescribed under the Enforcement Decree; (iv) the basic rules of the National Tax Service’s general rules of the National Tax Service provide that the Enforcement Rule shall not apply to the interim retirement allowance of Article 2529.

3) In light of the purport of the entire arguments, the Plaintiff’s interim settlement retirement allowances paid to researchers of the research institute of this case, based on the return to this case, Gap evidence Nos. 3-1, 2, and 3, it is recognized that the Plaintiff additionally imposed corporate tax of 26,316,406, corporate tax of 2006, corporate tax of 55,087,055, corporate tax of 2007, corporate tax of 77,830,045, corporate tax of 208, corporate tax of 77,830,045, and corporate tax of 67,151,083 for the business year of 209.

Therefore, the portion exceeding 116,529,374 won (=142,845,780 won - 26,316,406 won), among the disposition of imposition of corporate tax of KRW 142,845,780 for the business year of 2006, the portion exceeding 106,44,555 won (=161,531,610-5,610-5,087,055 won), among the disposition of imposition of KRW 179,494,05 won for the business year of 2008 (179,324,100 won - 7,777,830,845 won), and the portion exceeding the amount of corporate tax of KRW 161,531,610 for the business year of 207 (2009,50,716,767,710,747,7107,797,7

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.

[Attachment Form 5]

Judges Park Gyeong-young (Presiding Judge)