Daejeon High Court-2017Nu12450 ( December 21, 2017)

Cho Jae-2015- Daejeon-2625 (Law No. 29, 2016)

The agreement of this case does not constitute other income of domestic source in money that has received compensation for the damages of the principal of the payment itself due to the cancellation of the contract for sales of corporate bonds.

The agreement amount of this case is a penalty or compensation paid in the Republic of Korea under Article 132 (10) of the former Enforcement Decree of the Corporate Tax Act, and does not constitute a "money being compensated in excess of the damages to the original payment itself."

Article 132 of the Enforcement Decree of the Corporate Tax Act

Supreme Court-2018-Du-33470 ( October 30, 2018)

M***(State)

o Head of the tax office

2018.05.30

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 93 Subparag. 11(b) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides that “income prescribed by Presidential Decree as penalty or compensation paid in the Republic of Korea, which is one of the domestic source income of a foreign corporation,” and Article 132(10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010; hereinafter the same) provides that “The amount of damages paid due to breach or termination of a contract on property rights, regardless of the title thereof, shall be the value of the money or other goods received in excess of the compensation per se for payment under the original contract.”

2. On the grounds indicated in its reasoning, the lower court determined that each of the instant dispositions based on the different premise was unlawful on the ground that the instant agreement is merely merely compensation for losses or for recovery level caused by the Plaintiff’s cause attributable to the Plaintiff, and that it cannot be deemed that it constitutes “money received in excess of compensation for payment per se under the previous contract terms and conditions” under Article 132(10) of the former Enforcement Decree of the Corporate Tax Act by delegation under Article 93 subparag. 11(b) of the former Corporate Tax Act.

3. Examining the record in accordance with the aforementioned provision and related legal principles, the lower court’s aforementioned determination is justifiable. In so doing, it did not err by misapprehending the legal doctrine on the scope of domestic source income under Article 93 subparag. 11(b) of the former Corporate Tax Act.

4. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.