Cho High-2013-Seoul Government-4811 ( September 19, 2014)

The inclusion of earnings and losses in the ELW and the OTC transactions in earnings and losses is consistent with the Corporate Tax Act.

The inclusion of earnings and losses in the ELW and the OTC transactions is consistent with the Corporate Tax Act, and if the corporate tax rate of each business year according to changes in the corporate tax rate (25~22%) is disregarded, there is only a difference in the year to which the total amount of profits and losses belongs, and the principal tax to be additionally paid is not a problem, but only a problem is a problem of reporting and paying additional

Article 4 of the Corporate Tax Act

2014Guhap74145 ( October 22, 2015)

MeOOOOOOOO securities

The director of the tax office

September 24, 2015

October 22, 2015

1. The defendant's imposition of corporate tax (including additional tax), OOO, OO, OO, or OO for 20O business year against the plaintiff, the imposition of corporate tax (including additional tax) for 20OO, OO, OO, OO,O, OO, or 20O.O. for 20O business year for 20O business year for 20O, OO, OO, OO, OO, or OO, the imposition of corporate tax (including additional tax), 20O business year for 20O business year for 20O business year for 20O business year for O, OO,O,O, or OO, and the imposition of corporate tax for 20O business year for 20O business year for O, OO, O,O, orO.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The plaintiff's status

The plaintiff is a foreign securities company that runs the securities business in the United States with the U.S. OOOO law as the governing law.O.O. branch office in Korea and runs business such as corporate purchase and merger consultation, derivatives and foreign exchange transactions, and securities consignment sale and purchase, and the present business office is currently in the OO of Seoul OO as the OO of Seoul OO.

(b) stock warranty securities and liquidity suppliers;

1) Stocks warrantyed (Equiined Want, ELW)

The term "ELW" (hereinafter referred to as "ELW") means ① the former Enforcement Decree of the Securities and Exchange Act ( July 29, 2008).

Article 2-3 (1) 6 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (repealed by Article 2 of the Addenda to the Enforcement Decree of the Financial Investment Services and Capital Markets Act (amended by Presidential Decree No. 20947) provides that securities issued in accordance with the standards prescribed by the Enforcement Rule of the Securities and Capital Markets Act (amended by Presidential Decree No. 20947), which indicate the right to trade of stock certificates or receive money (see Article 2 (23) of the former Securities and Capital Markets Listing Regulations (amended by Presidential Decree No. 400 of Jan. 28, 2009) or (2) of the former Enforcement Decree of the Financial Investment Services and Capital Markets Act (amended by Presidential Decree No. 23924 of Jun. 29, 2012), which are traded in the securities market or in the foreign securities market (excluding collective investment securities) or the securities depository receipts (limited to those prior to the change in the price or securities market) indicated in Article 125 (2) 6 (c) of the former Enforcement Decree of the Financial Investment Services and Capital Markets Act.

(ii) liquidity suppliers (Liquitable, LP);

Article 41-2(1) of the former Securities Market Listing Regulations (wholly amended by the Korea Exchange Regulations No. 891, Feb. 22, 2013) stipulates the requirements for new listing examination of ELW, and Article 41-2(1) of the same Act requires the issuer to enter into a liquidity supply contract including matters prescribed by the regulations with at least one company among liquidity suppliers. However, where an issuer, who is a liquidity supplier, directly provides liquidity, requests the issuer to submit a plan for the liquidity supply.

C. Status as the Plaintiff’s liquidity supplier and outline of transactions

1) The Plaintiff is a liquidity supplier of the ELW, and ① receives the ELW from investors after accepting the ELW from the issuer and buying and selling the ELW between investors, and ② sells the ELW and the content of the goods (basic assets, issue price, exercise price, maturity, etc.) to the ELW issuer and make transactions in which the ELW and the content of the goods (such as basic assets, issue price, exercise price, maturity, etc.) are identical and redeemed to the issuer at maturity.

2) The Plaintiff, upon issuance by an issuer which entered into a liquidity supply contract, sold the ELW to the securities market after acquiring all of them. Specifically, during the beginning of the first transaction day of the ELW, the Plaintiff supplied liquidity within a long-term transaction period by presenting the sale price offered and the purchase price offered again within the scope of the quantity sold.

(d) Accounting of the plaintiff who is a liquidity supplier.

1) Accounting for the business year to which the date of the first sale belongs;

From 2008, the Plaintiff was engaged in such transactions as acceptance of ELW and sale of over-the-counter derivatives. The Plaintiff acquired the ELW at the issue price and sold it to investors for the first time at the market price.

In the business year, the amount calculated by multiplying the amount obtained by subtracting the sale price from the acquisition price by the number of ELW sold was recognized as a loss and accounting was made.

(ii) accounting for the business year in which the due date of ELW arrives;

The plaintiff sells to the issuer for the business year to which the date of maturity falls.

외파생상품의 매도가격에서 권리행사차금을 뺀 금액'에 보유한 장외파생상품의 수를 곱한 금액만큼을 만기가 속한 사업연도의 이익으로, 'ELW의 인수가격에서 권리행사 차금을 뺀 금액'에 보유한 ELW의 수를 곱한 금액��만큼을 만기가 속한 사업연도의 손실로 각 회계 처리하였다.

E. The Defendant’s tax adjustment and the instant disposition

1) The Defendant, a liquidity supplier, performed the same role as the issuer of the ELW. The Plaintiff recognized the amount calculated according to the market price of the ELW only when the issuer issued the ELW and sold it to investors, and then purchased the ELW again after recognizing the amount as the debt, the difference between the market price and the market price when recognizing the debt at the time of new purchase of the ELW shall be treated as the transaction loss of the ELW, and the difference between the market price and the market price when recognizing the debt at the time of new purchase of the ELW shall be treated as the profits when deducting the amount of exercise of rights from the amount of the debt due to the sale of the ELW which was recognized until the maturity. However, the Plaintiff included the difference between the acquisition price and the market price at the time of initial sale to investors in the loss for the pertinent business year, on the ground that this is unreasonable.

B) The Plaintiff filed a petition with the Tax Tribunal for a trial seeking revocation of the above disposition. However, the Tax Tribunal calculated the number of days of non-payment for erroneous payment as O.O.O.O.O. on 200O.O. and corrected the amount of tax until O.O.O., and dismissed the remainder of the appeal. The Defendant corrected part of the additional payment for erroneous payment according to the above decision (hereinafter referred to as the “instant disposition”).

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

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The defendant's assertion

A) Principle of confirmation of rights and obligations

According to Article 40 of the Corporate Tax Act, the business year of accrual of earnings and losses for each business year of a corporation shall be the business year to which the date on which the relevant earnings and losses are determined belongs, and this shall also apply mutatis mutandis to a foreign corporation pursuant to Article 92(1) of the Corporate Tax Act. Since there is no possibility that the portion of the price at which the Plaintiff acquired ELW from the issuer is formed regardless of the market price, or that the profit and loss are considerably mature in the possibility of its realization, it cannot be said that the portion

B) Actual principle

(1) Although the Plaintiff is in the position of a liquidity supplier (LP), the Plaintiff has the same economic substance as the case where the issuer concurrently serves as a liquidity supplier. However, unlike the accounting accounts when the issuer concurrently serves as a liquidity supplier, the Plaintiff included the difference between the acquisition price and the market price in the first sale to investors as if the issuer incurred a large-scale loss by including the difference between the acquisition price and the market price in the deductible expenses for the pertinent business year. This is not only an inclusion of the acquisition price and the market price in the deductible expenses for the pertinent business year, but also an excessive inclusion of the profits and losses that have already existed or in excess of the profits and losses incurred during the pertinent business year. If the business year in which the ELW acquired and the maturity of the ELW differ, it is unreasonable to avoid taxation by strategic transactions in order to lower the income for a specific business year. Accordingly, as in the Plaintiff’s case, it is reasonable to deem that the issuer concurrently serves as a liquidity supplier, as in the case of the Plaintiff’s acquisition of the ELW and then sell it to investors.

(2) In particular, although the Plaintiff’s acquisition of the ELW is bound to sell it to investors at the market price at a higher price regardless of its market price, it was accepted at a higher price regardless of its market price. The Plaintiff’s acquisition of the ELW from the issuer at a high price that is not feasible is a virtual loss, and thus, it should be denied under the principle of substantial taxation under Article 14(2) of the Framework Act on National Taxes.

(3) Even if the instant disposition is not justified in accordance with the substance over form principle under Article 14(2) of the Framework Act on National Taxes, the Plaintiff obtained the benefit of time value for one year prior to the date when the ELW disposition loss reverts to one year, and furthermore, the instant disposition is lawful in accordance with Article 14(3) of the Framework Act on National Taxes, as it unfairly obtained benefits from the reduction of corporate tax already reported through the media. In fact, the maximum corporate tax rate of 20O was 25% for the 20O business year, and 20O business year was reduced to 22% for the 200O business year, and 200O business year, from 2000 to 23,569 for the ELW market, and it did not lead to a sudden increase in the 200O business year to the average of 1,285 billion won per day.

2) Summary of the Plaintiff’s assertion

① There is no legal basis for adjusting the Plaintiff’s taxable income as to the instant disposition; ② The Plaintiff’s accounting of the ELW transaction and over-the-counter derivatives transaction conforms to the period of attribution of profits and losses under the Corporate Tax Act; ③ the ELW transaction and over-the-counter derivatives transaction are basically different from the characteristics of the product; ④ the scope of transaction partners and legal responsibilities are completely different; ④ the ELW transaction of a liquidity supplier’s ESW transaction and over-the-counter derivatives transaction and liquidity supplier’s e-counter derivatives transaction are completely different from their economic substance; thus, they cannot be acquired at the same time; ⑤ the Plaintiff is not in a position to choose these forms of transactions; thus, the instant disposition is unlawful.

B. Relevant statutes

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

C. Determination

1) Determination as to the principle of confirmation of rights and obligations

A) Definition of gross income and deductible expenses

(1) Article 14(1) of the Corporate Tax Act provides that “The income of a domestic corporation for each business year shall be the amount calculated by deducting the total amount of losses incurred during the pertinent business year from the total amount of earnings accrued during the pertinent business year,” and the above provision shall apply mutatis mutandis to the total amount of income generated in Korea by a foreign corporation for each business year, which has a domestic place of business, pursuant to Article 92(1) of the former Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013) (hereinafter referred to as “the foregoing provision shall also apply mutatis mutandis to Articles 15(1), 19(1), 22(1), main sentence of Article 40(2), and the main sentence of Article 41(1)1, and

(2) First of all, Article 15(1) of the Corporate Tax Act provides that "the amount of profit shall be the amount of profit generated by transactions which increase the net assets of the relevant corporation, except as otherwise provided for in this Act, such as capital or financing and financing," and Article 15(3) of the same Act provides that "necessary matters concerning the scope and classification of the amount of profit pursuant to paragraph (1) shall be prescribed by Presidential Decree," and Article 11(2) of the Enforcement Decree of the Corporate Tax Act provides that "transfer amount of asset" shall be included in the amount of profit in the calculation of the gross income. Accordingly, if the Plaintiff sells ELW, which is asset, to investors,

(3) As to the following deductible expenses, Article 19(1) of the Corporate Tax Act provides that deductible expenses shall be the amount of losses incurred from transactions which reduce the net assets of the corporation except as otherwise provided for in this Act, such as refund of capital or financing, disposal of surplus funds, and disposal of losses incurred from transactions which reduce the net assets of the corporation. Article 19(4) provides that "the necessary matters concerning the scope and classification of losses under the provisions of paragraph (1) shall be prescribed by Presidential Decree." Article 19(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 24575, Jun. 11, 2013) provides that "the book value at the time of transfer of transferred assets shall be included in deductible expenses." In addition, as to the book value, the main sentence of Article 22(1) of the Corporate Tax Act provides that the acquisition value of assets shall not be included in deductible expenses for the purpose of calculating the income amount of each business year, and Article 42(1)2 of the former Enforcement Decree of the Corporate Tax Act provides that the acquisition value before its purchase value shall be included in deductible expenses.

B) The time of accrual of earnings and losses

Article 40(1) of the Corporate Tax Act provides that "the business year to which gains and losses of a domestic corporation accrue shall be the business year which includes the date on which the gains and losses are finalized." Meanwhile, Article 40(2) of the Corporate Tax Act provides that "the matters necessary for the scope, etc. of the business year to which the gains and losses accrue under paragraph (1) of the same Article shall be determined by the Presidential Decree." Article 68(1)3 and 1 of the Enforcement Decree of the Corporate Tax Act provides that "the business year to which the gains and losses accrue due to the transfer of assets excluding products, products, or other products shall be the date on which the proceeds are settled". In light of these provisions, it is reasonable to include all the transferred amount and the amount of the payment included in the calculation of losses due to the first sale of ELW to investors in the gross income and losses of the business year which includes the date on which the purchase price for the concerned EL is paid.

However, as recognized earlier, the Plaintiff, while selling ELW to investors, recognized the amount of loss calculated by subtracting the sale price from the acquisition price of ELW as the loss for the business year to which the time of sale belongs, and included the sale price of ELW in the business year to which the time of sale belongs as the gross income and the acquisition price as the deductible expenses. Unless there seems to be any difference between the business year to which the time of sale belongs and the business year to which the date of liquidation belongs, such inclusion in gross income and deductible expenses is consistent with the Corporate Tax Act.

2) Determination as to substance over form principle

A) Article 14(1) of the Framework Act on National Taxes provides that “If the ownership of income, profit, property, act or transaction subject to taxation is merely nominal and there is another person to whom such ownership belongs, the person to whom such ownership belongs shall be liable for tax payment.” Article 14(2) provides that “The provisions on the calculation of tax base in tax-related Acts shall apply according to substance regardless of the name or form of income, profit, property, act or transaction,” and Paragraph (3) of the same Article provides that “in cases where it is deemed to receive benefits of this Act or other tax-related Acts unfairly through indirect methods via a third party or through two or more acts or transactions, it shall be deemed that the party directly made such transaction or has engaged in such one act or transaction, and thus, this Act or other tax-related Acts shall apply to such a person.” The principle of substantial taxation declared by the above provision is not the principle of equality under the Constitution to realize the principle of no taxation without the law, which is the fundamental principle of no taxation without the law, but the principle of no taxation without the law should be applied to the form and appearance of taxation without the law.

B) Comprehensively taking into account the following circumstances in light of the significance and purpose of the substance over form principle as seen above, and the relationship between the no taxation without law and the principle of no taxation, the Plaintiff’s issuance price and not sales to investors, and the Plaintiff’s transfer of the ELW issued by the issuer to the issuer at the same time as the issued price, and the Plaintiff’s transfer of the ELW to investors after selling the same OTCW to the issuer and selling it to investors, and then including the difference between the acquisition price and the sale price for the pertinent business year. It does not constitute an unreasonable form or appearance that differs from the substance of the taxation requirement for the purpose of avoiding the tax burden. Therefore, the instant disposition, which adjusted the Plaintiff’s taxable income in the same way as the Plaintiff’s transfer of the taxable income, is unlawful.

(1) In full view of the following circumstances, although the Plaintiff is a liquidity supplier (LP) who does not issue the ELW (hereinafter referred to as a "third party") as claimed by the Defendant, it is reasonable to conclude that the ELW issuer has almost the same economic substance as the exercise of the right due to the exercise of the right to pay the ELW where the issuer concurrently holds the role of the liquidity supplier (hereinafter referred to as " issuer")." (A) the economic substance of the issuer as the issuer is in the position of the issuer, the Plaintiff acquires the ELW sales proceeds acquired by selling the ELW to investors, and if the maturity evaluation price of the underlying asset exceeds the exercise price, the ELW holder bears the risk of incurring loss due to the exercise of the right to pay the amount equivalent to the exercise of the right.

(B) As seen earlier, the Plaintiff, as a third party LP, took over all ELW issued by the issuer in connection with the relevant contract, and sold the same OTC derivatives (such as basic assets, issue price, exercise price, and maturity) to the issuer. As such, due to these forms of transactions, the issuer, while selling ELW to the Plaintiff, pays to the Plaintiff an amount equivalent to the purchase price of OTC derivatives, the issuer did not enjoy economic benefits of the amount equivalent to the ELW sale price, and even if the appraisal price of underlying assets at maturity is higher than the exercise price, even if the Plaintiff is liable to pay the purchase price of OTC derivatives purchased from the Plaintiff by exercising the right higher than the exercise price of the ELW. On the other hand, the Plaintiff was obligated to receive losses equivalent to the exercise price of OTC derivatives due to the exercise price of rights from the Plaintiff, and the Plaintiff was obligated to receive economic losses equivalent to the purchase price of OTC derivatives from the exercise price of rights from the issuer, and the Plaintiff was entitled to receive economic losses equivalent to the ELW price.

(C) Ultimately, the economic benefits acquired by the ELW issuer and the economic risks borne by the ELW issuer are transferred to the Plaintiff, and the Plaintiff has the same economic substance as that of the issuer.

(2) However, in full view of the following circumstances, in order for the Plaintiff, a third-party LP, to have almost the same economic substance as that of the issuer, it cannot be deemed that the Plaintiff’s act of accepting the ELW at the issue price from the issuer and selling it to the issuer with the same contents of the ELW, was conducted for the purpose of avoiding tax burden, or that the Plaintiff took an unreasonable form or appearance that is distinguishable from the substance of the taxation requirement.

(A) According to Article 28-2(1) and (4) of the former Securities and Exchange Act (repealed by Article 2 of the Addenda to the Financial Investment Services and Capital Markets Act, Act No. 8635 of Aug. 3, 2007), when a foreign securities company intends to establish a branch or other business office in order to conduct the securities business in Korea, it shall obtain permission from the Financial Services Commission for each type of business, and 6) As such, the permitted branch or other business office is deemed a securities company. Thus, the Plaintiff’s business office is not a securities company, but the securities company is deemed a securities company under the former Securities and Exchange Act. Therefore, it is problematic whether the Plaintiff’s business office considered as a securities company is possible to issue ELW. However, the Ministry of Justice issued domestic branch office of a foreign securities company on December 22, 2005, and is not the legal entity to which the legal effect of the legal act with a third party belongs. Ultimately, the Plaintiff did not choose to issue securities such as ELW under the name of the securities company.

(B) Therefore, in order for the Plaintiff to have almost the same economic substance as the issuer, the Plaintiff’s acquisition of the ELW from the issuer and sales of the OTC derivatives identical with the ELW to the issuer, thereby practically taking the risk of profit and loss arising from the fluctuation in the price of underlying assets. In other words, if OTC derivatives transactions are not accompanied, the possibility of profit and loss arising from the fluctuation in the price of underlying assets remains in the issuer. The Plaintiff sells ELW to investors in the position of the liquidity supplier and then purchases it again to obtain profit and loss arising from the fluctuation in the ELW, only the economic substance, which is not substantially different from the economic substance of ordinary investors, can be seen as having only the economic substance that is not significantly different from the economic substance of ordinary investors.

(C) The Defendant pointed out that the issuer’s transaction with the Plaintiff may not enjoy any economic benefits, but it is a result of issuing ELW and is a non-reasonable form of transaction. However, even from the issuer’s standpoint, the issuer may not enjoy the benefits arising from the decline in the price of underlying assets, rather than enjoying a fixed fee due to the decline in the price of underlying assets, and thus, it would result in the failure of the issuer to incur losses due to the decline in the price of underlying assets. Therefore, it is unreasonable to conduct such a form of transaction.

(D) Comprehensively taking account of the following circumstances: (a) the Plaintiff’s acquisition of the issued price which is not the market price does not constitute either for tax avoidance or unreasonable transaction; (b) comprehensively taking account of the overall purport of the arguments as indicated in the evidence No. 7-1 through No. 3, the Korea Exchange regulates the issued price of the ELW by November 2014; and (c) did not approve listing if the issue price of the ELW falls short of the lowest limit set by the Korea Exchange. In light of the circumstances that the Korea Exchange affected the determination of the issue price, the Korea Exchange did not have a structure that can arbitrarily determine the issue price of the EL supplier or issuer, such as the Plaintiff. In addition, (i) Article 13-2 subparag. 3 of the former Enforcement Rule of the Korea Securities Market Listing Regulations (wholly amended by the Korea Exchange Regulation No. 917, May 13, 2013) stipulates documents that can prove the market price of the ELW as one of the documents attached to the new application for the ELW, and thus, the Plaintiff could not have accepted the value of the EL price.

(3) There are other indirect facts that may obstruct the recognition of the purpose of tax avoidance.

(A) Even according to the Defendant’s taxation logic itself, if the difference in corporate tax rate for each business year is disregarded, the total business year is deemed to have been combined and the year to which the profit and loss belongs and the corporate tax base is reverted accordingly, so the principal tax to be additionally paid for the entire business year is not a problem, and only the penalty tax for failure to report is a matter of ex post facto.

(B) As alleged by the Defendant, if the Plaintiff intended to avoid tax burden by recognizing large-scale losses as early as a result of the Plaintiff’s occurrence of a large number of losses in the business year in which the maturity comes, the Plaintiff should have concentrated on the business year in which the Plaintiff acquired the ELW and the business year in which the maturity comes. However, considering the fact that the portion of the transaction in the same ELW between the business year in which the maturity comes and the business year in which the date of acquisition falls is similar to that of the transaction in the same ELW, or rather than that of the business year, it cannot be deemed that the Plaintiff intended to avoid tax avoidance through the ELW transaction and the eL derivatives transaction.

(C) As alleged by the Defendant, even though the difference between the corporate tax rate of 20O business year and 20O business year was partly incurred, it is deemed that the following circumstances were merely the result of the exceptional and contingency circumstances, such as changes in the corporate tax rate, and it is difficult to deem that the Plaintiff had an intention to avoid the burden of tax by using the same. According to the statements in subparagraph 8-1 through 4, subparagraph 9-1, and subparagraph 9-2, there is a press report on the reduction in the corporate tax rate of 200O business year. However, the fact that there was a media report on the reduction in the corporate tax rate of 200O business year is recognized. However, as alleged by the Defendant, the Plaintiff continued to sell the O-the-counter derivatives business in accordance with the amended Corporate Tax Act (Act No. 9267) which was amended on December 26, 2008, and that there was no other evidence that the Plaintiff would have avoided the corporate tax rate of 2000O business year after the due date.

3) Sub-decisions

Ultimately, the instant disposition should be revoked as it is unlawful because there is no legitimate ground for disposition.

3. Conclusion

Then, the plaintiff's claim of this case is justified and it is so decided as per Disposition.

partnership.