early 2011west 1047 ( September 4, 2014)

Interest expenses for △△ Financial Claims included in deductible expenses include interest expenses for loans excluded from the exclusion of income dividends.

The Plaintiff’s financial claim for △△△ is an agreement to return the principal and interest on credit for a certain period or at the end of the said period, and it seems possible to appropriate funds by making use of the loan. As such, it is included in the “interest on the loan” under the provisions of this case.

Gross income of dividends under Article 18-3 of the former Corporate Tax Act

2014Guhap73029 Disposition of revocation of imposition of corporate tax

AA

○ Head of tax office

June 18, 2015

July 16, 2015

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposing corporate tax on the Plaintiff on December 2, 2010 (including additional tax) of 2008 shall be revoked.

1. Details of the disposition;

A. The Plaintiff established pursuant to the Banking Act and operated banking business from March 15, 1954, and also from March 15, 1954, and raised funds by means of issuing △△ Financial Bonds, receiving deposits and installment savings.

B. When the Plaintiff filed a return on the tax base and the amount of corporate tax for the business year from 2005 to 2007, the Plaintiff excluded the dividend amount from gross income pursuant to Article 18-3 of the former Corporate Tax Act (amended by Act No. 8831 of Dec. 31, 2007; hereinafter the same). During calculating the amount of gross income, the Plaintiff did not include “interest on the △△△△△△△△ Financial Bonds” as “interest on the loan

C. In contrast, the Defendant: (a) deemed that interest on △△△ Financial Claim constitutes interest on the loan stipulated in Article 18-3(1)3 of the former Corporate Tax Act (hereinafter “instant provision”); and (b) partly revoked the amount of income dividends for the business year from 2005 to 2007 as indicated below; and (c) accordingly, on December 2, 2010, notified the Plaintiff of the correction and notification of corporate tax ○○○○○○○○ (including additional tax) for the business year 2008. In addition, on November 7, 2011, the Defendant found that there was an error in calculating the amount of cancellation of the gross income exclusion, and corrected it as listed below.

(e) Amount of cancellation from exclusion from gross income;

205 Business year

206 Business year

207 Business year

Total

December 2, 2010

Sector for Calculation

○○○○

○○○○

○○○○

○○○○

November 7, 2011

Sector for Calculation

○○○○

○○○○

○○○○

○○○○

D. The Plaintiff is dissatisfied with the disposition of imposition of the above corporate tax and filed an appeal with the Tax Tribunal on February 18, 2011.

In the decision of the Tax Tribunal on September 4, 2014, the remainder of the plaintiff's assertion, excluding the interest on the above "△△△ Financial Claim", was accepted, and corporate tax for the business year 2008 was reduced to ○○○○ (including additional tax) (hereinafter referred to as the "disposition in this case") was corrected (including the remaining part of the original disposition as above).

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 to 5 (including paper numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) The interest paid by a bank’s deposit is the sales cost of a general company and cannot be treated equally as a general company’s loan, and the Defendant also excluded the Plaintiff’s interest expenses on the deposit from the interest expenses deducted from the exclusion of the exclusion of the income dividends. However, △△ Financial Bonds issued by the Plaintiff are in fact identical to the deposit received by a commercial bank by a large number of unspecified persons as a means of raising funds from an unspecified number of persons in order to raise funds for the operation of the bank. As such, the interest on △△ Financial Bonds should be excluded from the interest expenses deducted from the exclusion of the exclusion of the income dividends

2) The majority of the shares of other corporations owned by the Plaintiff are directly acquired through investment in kind by the government and are irrelevant to the loan. The interest on the loan unrelated to the acquisition of shares of other corporations is excluded from the "interest on the loan" as provided in the provisions of this case. It accords with the legislative intent of the instant provision.

B. Relevant statutes

The entries in the attached Table-related statutes shall be as follows.

(c) Fact of recognition;

1) According to the Bank Accounting Understanding theory published by the Korea Federation of Banks on March 2011, which is an incorporated association, the liabilities in the Bank Accounting shall be classified into deposited liabilities, borrowed liabilities, and other liabilities, as follows: (a) the liabilities in the Bank Accounting are currently assumed by enterprises and expected to be leaked or used in the future as a result of over-the-counter transactions or incidents; and (b) the obligations in the Bank Accounting Understanding are classified as:

○ Prepaid Debt

-a certificate of deposit issued or a certificate of deposit received, managed and operated by unspecified persons, such as general public, companies and public institutions, on condition of consideration in payment of interest through a deposit account, shall be classified into deposit debts, and shall be classified into deposit deposits in Korean won, certificates of deposit, foreign currency deposit, deposit deposits in foreign currency, deposit received in foreign currency, deposit received in foreign currency, issued bill deposit, deposit received in bill management account, trust deposit, deposit received in cash, etc. in

○ Borrowing Debt

- The economic substance, notwithstanding its form such as name, provides collateral or borrows funds upon the expiration of a certain period of time on credit or upon the expiration of the said period, shall be categorized as loan liabilities. The form of loan shall be classified into foreign currency consignment, won loan, foreign currency loan, foreign currency loan, foreign currency loan, call money, repurchase agreement, repurchase agreement bond sales, bills of exchange, credit card sales, borrowed bond sales, borrowed securities, issued financial bonds, etc.

-bonds issued by banks for the long-term financing of borrowed liabilities are subject to debentures under the Commercial Act, and normally banks shall appropriate them as financial bonds. Generally, financial bonds are compared with other borrowed liabilities due to the characteristics of the issuance of standardized bonds from many and unspecified persons to raise funds, and the terms and conditions and methods of issuance are prescribed by the Banking Act.

○ Other liabilities

-The other debt account is made to another account that is difficult to be classified as an independent subject in light of the importance of the subject or amount, and a transitional account that appears in the settlement of accounts, and the foreign currency portion is to be denominated separately.

○ Issuing Financial Bonds

-a debt arising from the issuance of securities indicating that a stock company is a fixed debt and borrowing a large amount of funds from many persons for a long time;

- be divided into par value, discount, and discount issuance according to the issue price, which shall be divided into issuance by private placement and public offering according to the method of issuance, and shall be divided into redemption upon maturity and installment repayment according to the method of redemption;

- The account shall be the account in which the bank disposes of the obligations arising out of the issued bonds if it issues bonds, and the obligations arising out of the issuance of the bonds shall be entered on its behalf and in redemption at the same time. The outstanding balance shall always be expressed on its behalf.

2) The Plaintiff classified the liabilities on the balance sheet in the business year 2005 to 2007 into deposited liabilities, borrowed liabilities, and other liabilities (or deposits received, borrowed funds, bonds, and other liabilities). The borrowed liabilities on the balance sheet in question include bonds, and the Plaintiff classified △△ financial obligations into bond items.

[Ground of recognition] Facts without dispute, Gap evidence No. 3-1 to 3, purport of the whole pleadings

D. Determination

1) Criteria for interpreting "interest on loans" of this case

The concept and scope of ‘loan' and ‘interest' stipulated in the provision of this case are not expressly defined in the former Corporate Tax Act or the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008; hereinafter the same shall apply). Therefore, the meaning of this case is to be interpreted in consideration of the legislative intent of the provision of this case and the scope of ‘loan' and ‘interest'.

A) Legislative intent of Article 18-3 of the former Corporate Tax Act and the provision of this case

The legislative intent of Article 18-3 of the former Corporate Tax Act, which provides for exclusion of dividend income from deductible expenses, is to prevent double taxation from being raised because corporate tax is imposed and corporate tax is imposed on corporate shareholders at the shareholders' level of receiving dividend income. In addition, the provision of this case sets forth the scope of interest of loans excluded from exclusion from gross income in order to prevent the occurrence of a company's literacy expansion, non-productive asset holding, insolvency of financial structure, etc. by excessively holding the stocks or equity shares of another domestic corporation through the loan of the domestic corporation following the exclusion of dividend income from gross income.

B) Scope of "loan" in the relevant provisions

Article 18-3 (3) of the former Corporate Tax Act and Article 17-3 (2) of the Enforcement Decree of the same Act provide that the loans and the interest on such loans shall not be included in deductible expenses under Article 55 of the former Enforcement Decree of the Corporate Tax Act. Article 55 of the former Enforcement Decree of the Corporate Tax Act provides that the order of application where the provisions of each subparagraph of Article 28 (1) of the former Corporate Tax Act are applied simultaneously with respect to the exclusion of the paid interest from deductible expenses. In addition, Article 28 (1) 2 of the former Corporate Tax Act provides that the interest, discount amount, or profits from bonds and securities under Article 16 (1) 1, 2, 6, and 9 of the Income Tax Act provides that the interest, discount amount, or profits from bonds and securities issued by a domestic corporation shall not be included in deductible expenses in calculating the income amount of the domestic corporation for each business year (amended by Act No. 825, Dec. 31, 2007).

In full view of these provisions, it is difficult to view that the term "loan" under the provisions of this case is limited to the term of a loan for consumption under the Civil Act, or that the term "interest" is limited to the ordinary interest arising from a loan for consumption.

C) the application of banking accounting standards;

Article 20 of the former Framework Act on National Taxes (amended by Act No. 9911 of Jan. 1, 2010) provides that when investigating and determining the tax base of national taxes, corporate accounting standards or practices that the person liable for tax payment applies continuously and are generally fair and reasonable: Provided, That the same shall not apply to cases where there are special provisions in the tax-related Acts, and Article 43 of the former Corporate Tax Act provides that when the relevant corporation applies corporate accounting standards which are generally fair and reasonable in terms of the business year of accrual of earnings and losses and the acquisition and evaluation of assets and liabilities of a domestic corporation or continuously applies such business year, the relevant corporation shall comply with corporate accounting standards or practices except as otherwise provided in this Act and the Restriction of Special Taxation Act, and Article 79 of the former Enforcement Decree of the Corporate Tax Act provides that "the standards or practices of corporate accounting under Article 43 of the former Enforcement Decree shall include corporate accounting standards falling under any of the following subparagraphs (including practices that are not contrary to the relevant accounting standards and are generally recognized as fair and reasonable):

In this regard, it is reasonable to consider the Bank Accounting Standards in interpreting the provisions of this case since the Plaintiff’s provisions do not explicitly stipulate the meaning of “loan” under Article 37(3) and (4) of the former Banking Act and Article 35-10 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 20653, Feb. 29, 2008); and Article 32(1) of the former Regulation on Supervision of Banking (amended by Presidential Decree No. 2009-34, Jun. 24, 2009) of the former Regulation on Supervision of Banking (amended by Presidential Decree No. 20653, Jun. 24, 2009).

On the other hand, according to the theory of bank accounting settlement, the financial company's liabilities are divided into deposit liabilities, loan liabilities and other liabilities, and when a certificate of deposit is issued or a certain amount of interest is received and managed by an unspecified number of unspecified customers, such as individuals, companies and public institutions, on condition of payment of interest through a deposit account, it is classified as deposit liabilities.

Considering the legislative intent of the provision of this case and the scope of ‘loan' and ‘interest' as seen above, it can be the basis for interpreting ‘loan' as referred to in the provision of this case. Therefore, if the economic substance regardless of form such as the name, etc., agrees to return the principal and interest and borrows funds, it is reasonable to view the interest on the loan as the interest on the loan of this case.

2) Whether interest on △△ financial bonds falls under the interest on loans of this case

In accordance with the interpretation criteria set forth in the above paragraph (1), △△ Financial Claim issued by the Plaintiff appears to fall under the “issued Financial Claim” under the division of the bank account settlement theory. The issuing financial claim is a debt incurred by issuing securities indicating that the corporation is a fixed debt and borrowing a large amount of funds from many people, and the bank account settlement theory explains it as one of the bonds included in the borrowed debt, and the bonds are bonds issued by the bank for the long-term stable financing of the loan. In full view of these circumstances, △△ Financial Claim is a bond issued by the bank for the long-term stable financing of the loan. In full view of these circumstances, it is deemed that the economic substance of the loan is the repayment of the principal and interest at the end of the period or at the end of the period, and it is deemed possible to utilize the loan by utilizing it

Therefore, the defendant's disposition of this case is legitimate in view of the interest on △△ Financial Claim as the interest on the loan of this case, and the other plaintiff's assertion is without merit.

3) The determination as to the assertion that interest on △△ Financial Bonds unrelated to the acquisition of stocks of other corporations in the legislative intent of the instant provision should be excluded from "interest on loans" as provided in the instant provision.

Article 18-3 (1) 3 of the former Corporate Tax Act (amended by Act No. 7317 of Dec. 31, 2004) provides that interest on loans related to investment in another domestic corporation shall be deducted from the amount of exclusion from gross income. Upon the amendment of the above provision, the part related to investment in another domestic corporation under Article 18-3 (1) 3 of the amended Corporate Tax Act (amended by Act No. 7317 of Dec. 31, 2004; hereinafter referred to as the "amended Corporate Tax Act") is deleted. Article 3 of the amended Corporate Tax Act provides that "Article 18-3 (1) 1 (proviso) 3 of the amended Corporate Tax Act provides that "from the portion of the first dividend income received after this Act enters into force, the provisions of Article 18-3 (1) 1 (proviso) of the amended Corporate Tax Act provides that "from the portion of the first dividend income received after this Act enters into force, the principle of no taxation without the law or the requirements for tax exemption or exemption, and interpretation of tax laws shall not be interpreted reasonably interpreted.

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.