The time when the profit and loss accrued from the forfeiture of contract bond belongs to the business year in which the Supreme Court ruling of the related lawsuit becomes final.

The period of attribution of profit and loss following the forfeiture of contract bond belongs to the business year in which the ruling of the Supreme Court of the related lawsuit becomes final and conclusive, such as legal disputes, reduction of the amount according to the result of dispute, and circumstances

Article 28 of the Corporate Tax Act and Article 40 of the Corporate Tax Act

2015Guhap67960 Revocation of Disposition of Corporate Tax Imposition

○○ Co., Ltd.

○ Head of tax office

October 11, 2016

December 2, 2017

1. On February 5, 2013, the Defendant’s imposition of corporate tax of KRW 00,000,000,000 against the Plaintiff for the business year 2009 (including additional tax), which exceeds KRW 00,000,000,000, shall be revoked (including additional tax).

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 95% is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

Cheong-gu Office

The Defendant’s imposition of corporate tax of KRW 00,000,000 for the business year 2009 against the Plaintiff on February 5, 2013 exceeds KRW 0,000,000 (including each additional tax) and the imposition of KRW 0,000,000 for the business year 2010, respectively, shall be revoked (including each additional tax).

1. Details of the disposition;

가. 원고는 주택건설업 등을 영위하는 법인으로서, 00장운영업 등을 목적으로 설립된 AAA 주식회사(변경전 상호: ㅇㅇㅇ 주식회사, 이하 'AAA'라 한다), 주식회사 BBB(변경전 상호: 주식회사 BB, 이하 'BBB'이라 한다), 주식회사 CCC과 특수관계에 있다.

B. The Plaintiff reported and paid the corporate tax of KRW 0,00,000,000 for the business year of 2009 and corporate tax of KRW 4,218,571,122 for the business year of 2010 on the premise as follows:

(1) Loans to AA, BB, and CCC, a person with a special relationship, fall under the provisional payment unrelated to business, and thus, the recognized interest and amount equivalent thereto shall be included in the calculation of earnings and the amount equivalent to the interest paid shall be included

② The contract bond amount of KRW 00,000,000 (hereinafter “instant contract bond”) confiscated by the Plaintiff on December 30, 2009 due to the cancellation of the sales contract for the 000 construction works (hereinafter “outboard construction works”) shall be included in deductible expenses in the business year of 2009.

C. On February 5, 2013, the Defendant issued an additional rectification and notification of KRW 00,000,000 of the corporate tax for the business year 2009 (including the additional tax) and KRW 000,000,000 of the corporate tax for the business year 2010 (including the additional tax) (hereinafter “instant disposition”).

① The Plaintiff applied the weighted average loan interest rate to AA, BB, and CCC in calculating the interest rate, but the difference shall be included in the calculation of the difference by applying the overdraft loan interest rate, and the Plaintiff’s long-term construction account receivable to AA as a temporary payment outside of duty shall be deemed as an amount of temporary payment, and the recognized interest and the amount shall

② On December 13, 2012, the Supreme Court’s judgment on December 13, 2012, whether and amount of the instant contract bond.

Then, the amount is included in the calculation of losses in the business year 2012.

D. The Plaintiff, who was dissatisfied with the instant disposition, filed an appeal on May 3, 2013, but was dismissed on April 13, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence Nos. 1 through 4 (including paper numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

First, the Plaintiff established AA, a separate corporation, to promote risk diversification, and loaned land purchase funds, etc. in the process of receiving orders from the said corporation. This is inappropriate to deny the business relevance of the relevant loan solely on the ground that the Plaintiff has a special relationship with AA, and to exclude the interest from deductible expenses.

Second, unlike other companies that concluded a construction contract with AA, the Plaintiff was in a state of lending the land purchase fund, etc. to AA, so it was inevitable to postpone the collection of the construction cost until the sale of AA occurred. Therefore, it is unreasonable to regard the Plaintiff’s failure to recover the construction cost at the same time as the other companies, solely on the fact that the Plaintiff did not recover the construction cost at the same time as the other companies, as the act

Third, since AA, BB, and CCC have not borrowed money from any third party other than the Plaintiff, there is no room for applying the overdraft interest rate pursuant to Article 43(2)3 and the latter part of Article 43(4) of the former Enforcement Rule of the Corporate Tax Act.

Fourth, while the Plaintiff paid the contract bond of this case to the non-party construction, the Plaintiff was finally confiscated in the business year 2009. However, since the Plaintiff was partially reduced through civil judgment, it is separate from whether this constitutes a ground for subsequent correction. On the other hand, the contract bond of this case should be reverted to losses in the business year 2009.

B. Relevant statutes

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

C. Determination

1) The nature of loans and accounts receivable extended to AA

A) Relevant legal principles

Pursuant to Article 28 (1) 4 (b) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter referred to as the "former Corporate Tax Act") and Article 53 (1) (main sentence) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter referred to as the "former Enforcement Decree of the Corporate Tax Act"), "provisional payment, etc. that is paid to "a related person without any relation to his/her business" includes not only pure meaning loans, but also those equivalent to the loan given in light of the nature of the credit, and also cases where the provisional payment is made upon receiving interest from the related person at an appropriate interest rate. The issue of whether the provisional payment is related to the business should be determined objectively based on the purpose of business, business contents, etc. of the relevant corporation.

On the other hand, delay of recovery of construction cost, etc. that a corporation should receive from a person with a special relationship without any justifiable reason brings the same effect as the provisional payment after the full recovery of construction cost, etc. was made within the time limit for performance of the contract, and thus, the amount equivalent to the unpaid construction cost, etc. falls under the "provisional payment, etc. which was made without connection with the business" under Article 28 (1) 4 (b) of the former Corporate Tax Act, and the interest paid for the loan corresponding thereto is not included in deductible expenses. In addition, if delay of recovery of construction cost, etc. is deemed to reduce tax burden unfairly because of the lack of economic rationality in light of sound social norms and practices, it shall be included in gross income by the wrongful calculation panel under Article 52 of the former Corporate Tax Act and Article 88 (1) 6 of the former Enforcement Decree of the Corporate Tax Act.

B) the facts of recognition

① AA is a company that was established on May 6, 2005 with a capital of 0 billion won for the purpose of establishing and operating 00 copies (hereinafter referred to as “the Chapter 00 copies”) in a 00-per 00-per 000 Eup.

② On August 10, 2005, AA purchased the instant Chapter 00 billion won borrowed from the Plaintiff. After that, AA made a temporary repayment of the loan to the Plaintiff after obtaining 22.3 billion won from one bank as collateral negotiable certificates of deposit purchased by the Plaintiff on August 18, 2005, AA borrowed 00 billion won from the Plaintiff again on September 5, 2007.

③ On the condition that part of the instant construction contract was awarded to AA, the Plaintiff agreed to lend funds whenever necessary.

④ On November 12, 2008, the Plaintiff collected KRW 000 million out of the loans extended to AA for the first time.

⑤ Although the Plaintiff failed to fully recover the outstanding amount of construction works from AA during the following period, the Plaintiff did not additionally include the overdue interest.

6. AA paid the construction cost to other construction enterprises than the Plaintiff as listed in the following table:

7. AA took out a loan of KRW 00 billion from a bank on October 20, 2009, and until that time, AA had no choice but to depend on the Plaintiff’s fund solely on the relationship with which the sale of the said corporation was conducted.

④ AA had a sales of KRW 0 billion for the first time in 2010, but still had been in a hostile state, and began to pay the Plaintiff a loan and the amount of the construction loan in full by getting out of the capital erosion in 2013.

① On January 4, 2006, the Plaintiff agreed to lend at least 00 billion won, including land purchase costs, in the process of receiving orders for a new apartment construction from 00 corporations, a company implementing an urban environment rearrangement project as an agent for the implementation of an urban environment rearrangement project. At the time, the Plaintiff agreed to set the rental interest rate at 10% per annum and set the provisional registration for land purchase at the same time.

[Ground of recognition] Facts without dispute, Gap's entries in Gap's 3, 5 through 8, 13 through 17, 23, 28, 29, Eul's evidence 18 (including paper numbers), and the purport of the whole pleadings

C) Determination

According to the circumstances and facts of the above disposition, AA started purchasing land only with the Plaintiff’s funds, a contractor, while almost not possessing funds or rights necessary for the project of Chapter 00, and continued to depend on the Plaintiff’s funds for about 8 years until it moves out of capital erosion. The Plaintiff merely borrowed funds at a low interest rate of 5% during the above period, and neglected to pay an indefinite interest rate of about 40 billion won as of the end of 2010, and even compared with the case where the Plaintiff did not have a special relationship at an interest rate of 10% per annum, it is very exceptional in view of the fact that the Plaintiff’s act of financing funds from another corporation (00 houses) as an agent for the urban environment rearrangement project of this case, and the Plaintiff did not have to enter into the above contract with the company as an agent for the implementation of the relevant urban environment rearrangement project, and the Plaintiff’s act of financing funds for the loan of this case was in fact related to the Plaintiff’s business and family members’ success in the business of 00,000 square meters.

(ii) the weighted average interest rate on borrowings;

A) Facts of recognition

① On November 1, 2002, CCC entered into an agreement for loans similar to AA on December 16, 2006 with each other, and around that time, purchased 00 business sites by borrowing funds from the Plaintiff from the Plaintiff, but the latter did not have any business progress.

② On October 20, 2009, the Defendant applied the interest rate on overdraft loans only for loans and amounts receivable incurred prior to the borrowing of funds from AA 00 bank.

③ The Plaintiff’s loan amount of KRW 28,004,714 (payment on March 6, 2009) and KRW 000,000,000 (payment on October 20, 2009) out of the loan amount of the Plaintiff’s business year 2009 (payment on October 28, 2007) are the amount loaned prior to February 28, 2007.

[Ground of recognition] Facts without dispute, Gap evidence 4-1, 2, Gap evidence 23, Eul evidence 18-2 and 3, the purport of the whole pleadings

B) Determination

According to the main sentence of Article 89(3) of the former Enforcement Decree of the Corporate Tax Act, in applying the provision that is unfair calculation method, where the relevant corporation selects "the average loan interest rate" at the market price, the tax authority shall be bound by the choice. However, in cases falling under Article 43(2)3 and the latter part of Article 43(4) of the former Enforcement Rule of the Corporate Tax Act, in other words, where the average loan interest rate of the corporation that lent the funds (calculated to exclude loans from related parties) and the average loan interest rate (excluding loans from related parties) of the corporation that borrowed funds is higher than the average loan interest rate (excluding loans from related

However, according to the facts of recognition under paragraphs (1)(b) and (2)(A) above, there is no fact that AA borrowed funds from a third party other than the Plaintiff who is a person with a special relationship before October 20, 209. Thus, it is impossible to compute the weighted average loan interest rate of a borrowing corporation (AAA) in accordance with the provisions of the above Enforcement Rule, unless loans with a special relationship are borrowed from a person with a special relationship. Therefore, it is impossible to compare the relevant weighted average loan interest rate with the weighted average loan interest rate or loan interest rate of a lending corporation (Plaintiff). Therefore, the Defendant’s application of the overdraft loan interest rate to the Plaintiff based

However, Article 18(2) of the Addenda to the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 2007. 28, Feb. 28, 2007) provides that the provision of Article 89(3) of the former Enforcement Decree of the Corporate Tax Act, which permits the computation of the market price based on the weighted average loan interest rate, shall apply from the first loan or loan loan after February 28, 2007, so the interest rate on the overdraft loan still has no choice but to apply the overdraft loan interest rate for the loans or the construction amount incurred before February 28, 2007.On the other hand, there is no ground to view that Article 89(3) of the former Enforcement Decree of the Corporate Tax Act shall apply retroactively to

If the above two criteria are applied to the facts of recognition as seen earlier, the following conclusions are derived:

Items

Grounds

Applicable Rate

1

BB, CCC Loans

The occurrence of transfer on February 28, 2007

Interest rate for overdraft Loan

2

AA loans of KRW 28,004,714 repaid on March 6, 2009 and KRW 835,574,853 repaid on October 20, 209

The occurrence of transfer on February 28, 2007

Interest rate for overdraft Loan

3

The remainder of the AA loans

On or after February 28, 2007

The weighted average loan interest rate

4

AA Outstanding Amount of Works

On or after February 28, 2007

The weighted average loan interest rate

3) The time when the contract bond of this case is reverted as deductible expenses

A) Relevant legal principles

Article 40(1) of the former Corporate Tax Act provides that "the fiscal year of accrual of earnings and losses of a domestic corporation for each fiscal year shall be the fiscal year which includes the date on which the concerned gross income and losses are determined." In order to be determined as the gross income, the right which is the cause of the income must be considerably mature in the realization of the real estate, and the mere establishment of a complex without this degree cannot be said to have been determined as the gross income. In this context, whether the right which is the cause of the income is considerably mature in the realization of the real estate cannot be uniformly stated, and the determination shall be made by comprehensively taking into account the specific nature and content of each individual right and the various circumstances of the law and fact-finding (see Supreme Court Decision 2009Du1157, Sept. 29, 201). Such legal principle also applies to deductible expenses, which are not set forth in the principle of response to

B) the facts of recognition

① On May 3, 2007, the Plaintiff purchased a land within a housing site development zone (hereinafter referred to as “instant land”) located in Incheon, 000 from Nonparty Corporation (hereinafter referred to as “instant sales contract”) and paid KRW 00,000,000 as the contract deposit.

② After that, there was a dispute between the Plaintiff and the Nonparty Corporation on the construction exhaustion, such as FF, which connects the land to the instant land. At the end of several months, the Plaintiff notified the Nonparty Corporation that the instant sales contract would be terminated on April 29, 2009, and requested the return of the instant contract deposit. However, the Nonparty Corporation refused to comply with the request and notified the Plaintiff that it would cancel the instant sales contract on the ground that the payment was unpaid on December 30, 2009.

③ Accordingly, on February 5, 2010, the Plaintiff filed a lawsuit claiming the return of the contract bond against the non-party construction project on the premise that the cancellation of the contract and the obligation to open the FF would be included in the content of the instant sales contract, by mistake in motive for the FF opening, deception, etc.

④ The first instance court and the second instance court (Seoul Southern District Court 2010Kahap0000, Seoul High Court 201Na0000) decided the amount of the deposit to be confiscated as KRW 00,000 on the grounds that the Plaintiff’s assertion constituted grounds for cancellation of the contract or cancellation of the contract. However, in light of the Nonparty’s prior publicity and attitude on the part of the construction company regarding FF opening, etc., the contract deposit of this case constitutes “in cases where the estimated amount of damages under Article 398(2) of the Civil Act is unreasonably excessive.”

⑤ The conclusion of each court on the amount of the contract bond to be confiscated was maintained in the Supreme Court (Supreme Court Decision 2012Da0000). The above Supreme Court Decision became final and conclusive on December 13, 2012 (hereinafter “the Supreme Court Decision”).

[Ground of recognition] Facts without dispute, Gap evidence No. 9, Eul evidence No. 16 (including virtual number), the purport of the whole pleadings

C) Determination

According to the above facts, the plaintiff and the non-party Corporation have a legal dispute over the confiscation of the contract bond of this case and the amount thereof for about four years. However, in the related civil procedure, the amount of the contract bond to be confiscated is limited to KRW 7.4 billion and the amount of the contract bond to be confiscated is reduced to the extent of KRW 7.4 billion, and therefore, it cannot be determined in advance that the plaintiff had no possibility of winning the contract in the above case. Thus, if the above circumstances are the same, it is difficult to view that it is considerably mature and finalized until the decision of the Supreme Court of this case becomes final and conclusive.

Therefore, it is reasonable to view that the instant contract bond is reverted to deductible expenses only when the Supreme Court ruling was made in 2012.

(iv)the calculation of a reasonable amount of tax;

If the reasonable tax amount for the business year 2009 is calculated again by applying the criteria of the foregoing paragraph (2), it shall be KRW 00,000,000 (including additional tax amount of KRW 0,000,000) (see, e.g., calculation details of the reasonable tax amount among the documents attached to the documents referred to in reference by the Defendant on December 2, 2016).

3. Conclusion

Then, the plaintiff's claim of this case is justified within the scope of the above recognition and the remainder.

The claim is dismissed as it is without merit. It is so decided as per Disposition.