Whether a transaction involved in the transaction between a foreign national company in the form of relay trade is the borrowing of a loan.

The case holding that the amount paid by a domestic corporation in international commodity transactions between a multi-national enterprise that has no permanent establishment in the Republic of Korea at the discount from a affiliated bank of a multi-national enterprise for export shall be deemed as the domestic source interest income.

Article 93 of the Corporate Tax Act

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The imposition of corporate tax (including additional tax) for the business year of 2001, which the Defendant notified to the Plaintiff on February 1, 2006, of KRW 198,274,165, and corporate tax (including additional tax) for the business year of 2002, shall be at least 86,228,476.

1. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation is as follows: (a) the reasoning for this case is as stated in Article 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act, except for the following changes and additions from among the judgment of the court of first instance; and (b) therefore, the reasoning for this Court’s explanation is as follows.

○ To change the '179-day interest' from 2 pages to '179-day interest' until the due date of the bill of exchange.

Pursuant to the bill of exchange corresponding to ○○ Switzerland’s sales claim (the amount stated in the margin of the above table; hereinafter referred to as “the amount stated in the margin of the above table”) of 13 parallels below the 3rd parallels, the sum of which is deducted from the discount of the bill of exchange corresponding to ○○ Switzerland’s sales claim (the amount stated in the margin of the above table

○ 7 parallels below the 3th parallels 2006 to November 23, 2006 '1 November 20, 2006'

【No. 18, No. 6 of A’ for 3 pages n n n n n n n n n n n n n n n n n

"O's four - four - three - four - four - four - four - four - "spaper", "O's five - ten 10 - one - two 10 - one - two - two - two - two - two - two - two - two - a bill of exchange," "the discounted amount paid at a discount upon presenting a bill of exchange," and "the discount charge of this case, which is deducted from the discount received at a discount upon presenting the bill of exchange."

In full view of the defendant's arguments shown in the argument of the case, "O'5 3 to 2," the defendant's statement of No. 3-1 (the statement of collection of additional tax on interest income from the amount of discount from overseas sales claims) is changed to "the comprehensive statement of the defendant's claims shown in the argument of the case."

○ The discount amount paid at the 1st day below 5 per page shall be modified to “the discount amount of this case deducted”.

○ 6 3 to 4 dump amount of chip chip chip is changed to chip fee for chip

○ 6th 7th 7th eth eth eth eth eth eth eth eth e.

○ 6th 9th 9th d. ‘The reduction of the price due to the advance payment of the foreign prize' is changed to ‘the reduction due to the transfer of rights on the bill'.

○○ 7 1-6 Myeon 1-6 Myeon - Plaintiff cannot be deemed to have paid the amount equivalent to interest by deducting the interest from the ○○○ Bank at the time of receiving a discount on the bill of exchange, and thus, the Plaintiff’s assertion on this point is also without merit. The Plaintiff’s assertion on this point is also without merit. The Plaintiff’s assertion that the Plaintiff received a discount from the ○○ Bank and did not pay the amount equivalent to the interest as a result of its use as a payment for the transfer of rights on the bill of exchange (see Supreme Court Decision 92Nu1810, January 26, 1993).

2. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance is just in its conclusion, and it is so dismissed and it is so decided as per Disposition.

[Seoul Administrative Court 2007Guhap7451, 2007.08.22]

1. The plaintiff's claim is dismissed.

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

The disposition of imposition of corporate tax (including additional tax) for the business year 2001, which the Defendant notified to the Plaintiff on February 1, 2006 and corporate tax (including additional tax) for the business year 198,274,165 and corporate tax (including additional tax) for the business year 2002 shall be revoked (the statement in the amount of the briefs on June 4, 2007 and the written complaint on June 4, 2007 shall be deemed to be a clerical error due to a change in the corporate tax amount for the business year 2001 and the business year 202).

1. Details of the disposition;

A. During the business year 2001 and 2002, the Plaintiff, as a general trading company engaged in the trade business, purchased gasoline, for instance, thale and thale from ○ International S.A. (hereinafter referred to as “○○○○○”) which is a foreign corporation with no permanent establishment in Korea over 14 occasions as follows, and sold it to ○○○ Inc., Enigy Divis, ○○ International S.I.D. (hereinafter referred to as “○○○○”).

B. The Plaintiff purchased a bill of exchange with ○○○○○○○○○ on a 180-day settlement basis, and sold it to ○○○○○○○○ on a 190-day settlement basis (the same type of credit transaction to be collected through a bank by issuing a bill of exchange attached to shipping documents after the exporter loaded the bill of exchange and sent it to ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW 179-day settlement order.”

Goods

Point of departure

Purpose Clause

Date of Discount

Sales ($$)

Amount of discount ($)

Difference ($)

Difference (won)

1

Non-carbonate

△△△ Country

○ ○ Country

January 4, 2001

7,007,910

6,738,051.06

269,858.94

346,876,681

2

The rise

○ ○ Country

Designation of Buyer

January 7, 2001

8,004,780

7,676,216.61

328,563.39

392,238,975

3

The rise

○ ○ Country

Designation of Buyer

January 13, 2001

7,013,712

6,725,827.88

287,884.12

341,718,450

4

The rise

○ ○ Country

Dognae State

January 12, 2001

11,558,770

11,084,676.74

474,093.26

605,227,456

5

The rise

○ ○ Country

Bitchland

November 8, 2001

4,838,297.48

4,770,556.32

67,741.16

87,575,772

6

The rise

△ Country

△-gu Office

November 13, 2001

5,002,117

4,925,494.77

76,622.23

98,405,930

7

The rise

○ ○ Country

△鹬

January 4, 2002

11,008,741.50

10,814,796.16

193,945.32

255,464,802

8

Maize

○ ○ Country

Bitchland

January 4, 2002

5,128,500

5,038,149.19

90,350.81

19,010,087

9

Ethiopients

지지지지鹬

△鹬

January 16, 2002

4,724,280

4,646,028.30

78,251.70

103,026,188

10

Rael

○ ○ Country

△鹬

January 16, 2002

6,129,000

6,027,480.90

101,519.10

133,660,047

11

-

-

-

1,252,650

3,607,711.37

60,763.63

80,001,395

12

-

-

-

1,789,500

13

-

-

-

626,325

14

-

-

-

January 14, 2002

8,989,200

8,833,714.36

155,485.64

203,903,868

Consolidateds

88,703.66

2,185,079.32

2,767,109,652

C. ○○ Commissioner of the National Tax Service conducted a tax investigation on the Plaintiff, and notified the Defendant of the portions discounted by the Plaintiff from ○○ Finance (the amount indicated in the margin column above) as above as interest income from a foreign corporation’s domestic source income, which does not have a permanent establishment in Korea. On February 1, 2006, the Defendant imposed and collected corporate tax (including additional tax; hereinafter the same shall apply) 208,004,80 won for interest income for the business year 2001 and corporate tax (including additional tax; hereinafter the same shall apply) 9,451,850 won for interest income for the business year 202 (hereinafter “the initial disposition”).

D. On April 28, 2006, the Plaintiff filed an appeal with the National Tax Tribunal on the initial disposition of this case. On November 23, 2006, the National Tax Tribunal decided to exclude the amount stated in the No. 5 and 8 from the interest income subject to withholding tax for the reason that it is reasonable to recognize the transaction as a normal trade since the goods were sent to domestic enterprises. Accordingly, the Defendant corrected the corporate tax withheld from the interest income for the business year 2001 to KRW 198,274,165, and the corporate tax withheld from the interest income for the business year 2002 to KRW 86,228,476 (hereinafter “the disposition of this case”).

[Reasons for Recognition] Unsatisfy, Gap evidence Nos. 1-1, 1-2, 2, 3-1, and Eul evidence No. 1-1 through 1-4, and 2

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) The instant transaction is a typical relay trading business. In other words, the price conditions for the instant transaction are matters to be determined according to the situation of the parties, each transaction was a transaction with the Plaintiff and unrelated parties, and the absence of customs clearance in Korea pursuant to the relevant laws and regulations, such as the Foreign Trade Act, constitutes the essence of the “China Trade” and thus, it cannot be said that there is any defect in the goods were not cleared in Korea, and it is contradictory to remedy some transactions only by domestic customs clearance.

Article 52 of the Corporate Tax Act and Articles 87 through 90 of the Enforcement Decree of the Corporate Tax Act require special relationship between the Plaintiff and the ○○-related enterprise, which is a party to the transaction, to apply the principle of substantial taxation. In addition, the terms and conditions of ○○○-related enterprise have already been premised on the effect of raising funds, and any transaction method has to be chosen in order to realize internal intent for raising funds. Furthermore, in the case of each of the instant transactions, the Plaintiff has risks and benefits, and the Plaintiff has to enter into an agreement with the issuing bank for insurance and exchange, and thus, the Plaintiff cannot be deemed as identical to the economic substance of the Plaintiff’s payment of interest income. In other words, the Plaintiff’s payment of interest income cannot be deemed as part of the amount of 6 U.S. Commercial Act’s payment of interest income under Article 16 of the Income Tax Act.

It is as shown in the attached Form.

C. Determination

"The plaintiff asserts as above on the premise that the defendant denied the plaintiff's intermediate trade act and ② the plaintiff's act of paying interest to the issuing bank of the letter of credit was deemed to have caused interest income of a foreign corporation." However, the essence of the disposition of this case is that the defendant considers the discounted amount paid by ○○○○○ upon presenting a bill of exchange, which is the person liable for payment, as the interest income of a foreign corporation, and imposes a withholding tax on the plaintiff.

In other words, in the decision of the National Tax Tribunal, there are some expressions that can mislead the plaintiff as if the interest income is subject to interest. However, considering the defendant's argument shown in the argument of this case, the defendant takes the discounted amount paid by the plaintiff at a discount of bill of exchange which is a kind of credit from ○○ Bank, and considering the plaintiff's motive for the transaction of this case and the characteristics of transaction, it seems that ○○ Financial Co., Ltd. (including ○○○, a related company, ○○, ○○, etc.), a foreign corporation, is considered as interest income of ○○ Financial Co., Ltd. (hereinafter "the discounted amount"), and thus, it seems that 'the discounted amount' is considered as being a quid pro quo for the use of money, and it is not possible to deny the legal form of 'the plaintiff's intermediate trade', 's interest income from the issuing bank of the letter of credit of this case. Thus, it is no more possible to view that the plaintiff's price of the bill of exchange of this case can be considered as a pure discount.

In full view of the purport of the argument in the evidence Nos. 5-1 through 5-6, and Nos. 3 through 6, the plaintiff's transaction of this case was conducted with a view to borrowing funds to solve holding holding company problems through asset and debt increase. ② The transaction of this case was conducted by suggesting the purchaser at ○○○ Company as an factoring of the purchase price, the sales price, the sales bond discount, the loan, interest, etc. ③ The plaintiff purchased from ○○○○○○○○○○, and sold the transaction price for the above purchase and sale to ○○○○○○○○○○ prior to the plaintiff's intervention. ④ Since the plaintiff's purchase of shipping documents from ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ KRW.

Therefore, the disposition of this case is legitimate, and the plaintiff's claim seeking its revocation is dismissed as it is without merit. It is so decided as per Disposition.

Related Acts and subordinate statutes

Article 14 of the Framework Act on National Taxes

(2) The provisions pertaining to the calculation of tax base in tax-related Acts shall, notwithstanding the titles or forms of income, profit, property, act or transaction, be applied according to the substance.

Article 2 of the Corporate Tax Act

(1) The following corporations shall be liable to pay corporate tax on income under this Act:

1. Domestic corporations;

2. A foreign corporation which has income from sources in Korea.

Article 4 of the Corporate Tax Act

(2) The provisions concerning the calculation of the amount of taxable income subject to corporate tax shall apply according to the substance, notwithstanding the name or form of such income, profits, etc.

Article 93 of the Corporate Tax Act (Domestic Source Income)

Domestic source income of a foreign corporation shall be classified as follows:

1. Income as provided for in the following items, interest income referred to in Article 16 (1) of the Income Tax Act (excluding income referred to in subparagraph 8 of the same paragraph), interest on other loans and profits on trust: Provided, That interest on loans borrowed directly by an overseas business place of a resident or domestic corporation for such overseas business place shall be excluded:

○ Special Cases concerning withholding or collection for foreign corporations Article 98 of the Corporate Tax Act

(1) Notwithstanding the provisions of Article 97, a person who pays a foreign corporation the income (including the amount paid to a foreign corporation having no domestic place of business) which is domestic source income under the provisions of subparagraphs 1, 2, 4 through 7, and 9 through 11 of Article 93 and which is not in fact related to or does not belong to the domestic place of business (including the amount paid to the foreign corporation having no domestic place of business) shall withhold the following amount as corporate tax on the income for each business year of the concerned corporation and pay it at the district tax office having jurisdiction over the place of tax payment under the conditions as prescribed by the Presidential Decree by the 10th of the month following the month in which the date of withholding falls: Provided, That among the income under the provisions of subparagraph 5 of Article 93, the income on which it

○ Interest income under Article 16 of the former Income Tax Act (amended by Act No. 7006 of Dec. 30, 2003)

(1) Interest income shall be the following income generated during the relevant year:

1. Interest and discount amount of bonds or securities issued by the State or the local government;

2. Interest and discount amount of bonds or securities issued by a domestic corporation;

3. Interest and discount amount of deposits (including installment savings, installments, deposits, and postal transfers; hereinafter the same shall apply) received in Korea;

4. Profits accruing from the credit fraternity or credit installments as prescribed by the Mutual Savings Banks Act;

5. Profits accruing from any trust (excluding any securities investment trust other than the public bonds and debentures) received from a domestic corporation;

6. Interest and discount amount of any bonds or securities issued by a domestic branch or business office of a foreign corporation;

7. Interest and discount amount of bonds or securities issued by a foreign corporation;

8. Interest of deposits and profits of trust received abroad;

9. Profit with repurchase agreement of bonds or securities as prescribed by the Presidential Decree;

10. Profit margins on a savings insurance as prescribed by the Presidential Decree;

11. Excess repayment from the workplace mutual-aid association as prescribed by the Presidential Decree;

12. Profits accruing from a non-business loan;

13. Incomes similar to those under subparagraphs 1 through 12, which have the gender of the price following the use of money.