Cho High Court Decision 201Do0589 ( October 17, 2012)

Among the business management services performed by the applicant corporation, the proposal that the overseas provision service is not subject to taxation because it was provided by the English corporation is without merit.

Since the claimant corporation provided the main service in the form of one business management service by systematically combining the main service with the domestic service provided in Korea, the price for the main service belongs to the claimant corporation.

Article 93 of the Corporate Tax Act

2012 disposition of revocation of imposition of value-added tax, etc.

AAAA Project Venetains

The Director of Gangnam District Office

May 3, 2013

June 21, 2013

1. The plaintiff's claim is dismissed.

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

The Defendant’s imposition of value-added tax of 000 won for the second period of October 1, 2010 on the Plaintiff (including KRW 000), for the first period of value-added tax of 2003 on July 26, 2010 (including additional tax of 000 won), for the first period of 2005 on July 26, 2010, and for the second period of value-added tax of 000 won (including additional tax of 000 won) for the second period of 2005 on October 1, 2010, and for each imposition of corporate tax of 000 won for the business year of 2003 (including additional tax of 00 won) for the second period of 205 on October 1, 2010.

1. Details of the disposition;

A. 1) Canadian corporate BB Inc. (hereinafter referred to as "AAABC.") was established on December 23, 199 in order to promote the BB BB BB infrastructure construction project (hereinafter referred to as "BB infrastructure construction project") connecting the Canadian corporate Canadian with AAA, the name was changed to AAAAC Inc, and the hereinafter referred to as "AB infrastructure construction project was first selected on July 2, 2001 for the BB infrastructure construction project (hereinafter referred to as "BB infrastructure construction project"), and the AAAC Development Co., Ltd. (hereinafter referred to as "ACC development"), which is wholly owned by the AAC in order to promote the BB infrastructure construction project (hereinafter referred to as "BB infrastructure construction project") connecting the Canadian metropolitan City and 51:49 on December 23, 199, and the AAAB infrastructure construction project was first designated on July 2, 2001.

B. On June 13, 2003, the CCC Development was designated as the concessionaire of the BBG construction project by the Government of the Republic of Korea, and the Government of the Republic of Korea and the Government of the Republic of Korea concluded the concession agreement for the 2 BBG infrastructure construction project (hereinafter referred to as the “Convention”). The main contents of the phased work the CCC should carry out in accordance with the instant agreement are as follows.

(Major Contents Omitted)

C.1) On June 13, 2003, which was the date of the conclusion of the instant agreement, the CCC entered into a contract with the Plaintiff, a U.K. corporation, and On-the-counter service contract (hereinafter referred to as the “instant domestic provision service contract”), On-the-counter service provider agreement (hereinafter referred to as the “instant domestic provision service contract”), and the Plaintiff entered into a contract to provide CCC development in accordance with the instant foreign service contract and domestic provision service contract (hereinafter referred to as the “domestic provision service of this case”). The main contents are as follows.

(The main content omitted)

2) On November 14, 2003, the Plaintiff established a branch office in Korea (hereinafter referred to as the “Plaintiff branch”).

D. The Plaintiff: (a) divided the instant overseas and domestic provision services as indicated below: (b) the Plaintiff reported and paid the value-added tax and corporate tax in consideration of the Plaintiff’s business income at the location of the Plaintiff branch with respect to the payment for which the Plaintiff provided the instant overseas provision services; (c) while the Plaintiff, a legal entity of the United Kingdom, did not report the value-added tax and corporate tax, deeming that the Plaintiff provided overseas and received the payment for the said overseas provision

(Remarked>

E. From June 22, 2010 to July 26, 2010, the director of the Seoul Regional Tax Office: (a) conducted a tax-free investigation on the Plaintiff’s branch; and (b) notified the Defendant that the service cost constituted domestic source income; (c) determined that the service cost constituted domestic source income; and (d) notified the Defendant of the imposition of corporate tax and value-added tax.

2) Accordingly, on July 26, 2010, the defendant corrected and notified the plaintiff, respectively (hereinafter collectively referred to as "the imposition disposition of the value-added tax of this case"), of the value-added tax of 000 won on July 26, 2005 (including additional tax of 000 won), and of 000 won on October 1, 2010 of the value-added tax of 2003 (including additional tax of 00 won), and of 000 won on February 2005 (including additional tax of 00 won), and on October 1, 2005, of the corporate tax of 000 (including additional tax of 00 won), and of 00 won on October 203, 2010 (including additional tax of 00 won), each of the disposition of imposition of the corporate tax of 00 won on corporate tax of 200 (including additional tax of 00 won), and each of the disposition of imposition of the tax of this case.

F. On October 27, 2010, the Plaintiff dissatisfied with the instant disposition of value-added tax, and filed an appeal with each Tax Tribunal on January 6, 201, but was dismissed on April 17, 2012.

[Ground of recognition] The non-satched facts, Gap evidence 1 through 6 (including each number, hereinafter the same shall apply), Eul evidence 1, 2, and 3, and the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

The plaintiff asserts that each disposition of this case is unlawful on the following grounds.

1) On June 13, 2003, the Plaintiff entered into a contract for the supply of services with CCC development, which is a project implementer for the construction of BB B B B B B B B B B B B B, and with the services required in the phase prior to the commencement of the construction, and with the services provided overseas and domestically. The contract for the provision of the overseas service of this case is divided into a service contract for the provision overseas and domestic. The contract for the provision of the overseas service of this case provides that the employees who actually provide the services (Staff) shall be decided upon consultation between CCC Development and the Plaintiff’s principal office (Article 3(5) of the attached Table 2 of the contract for the provision overseas service of this case). Accordingly, the Plaintiff designated the staff to provide the overseas service of this case overseas after consultation with CCC development each month. Since the provision of the overseas service of this case requires high level of professional knowledge and experience, it is possible for the Plaintiff to provide the service efficiently only through the use of the human and material resources of the Plaintiff’s main office and branch, and accordingly, the Plaintiff directly formed the provision of the service of the domestic service to CC.

2) Under the principle of no taxation without law, the interpretation of tax laws and regulations must be strict and should not be extensively interpreted or analogical interpretation. However, Article 10(2)1 of the Value-Added Tax Act provides that the place where the service is supplied shall be referred to as “the place where the service is supplied or the goods, facilities or rights are used.” Thus, the determination of whether the right to impose taxation on the supply of the service under the Value-Added Tax Act exists should be made on the place where the service is supplied in accordance with such standard. Accordingly, the disposition imposing the value-added tax in this case, which the Defendant arbitrarily reconverts the place where the service is supplied to the Plaintiff, rather than the Plaintiff’s head office, the actual place where the service is supplied to the Plaintiff.

3) Article 14(1) of the Corporate Tax Act provides that "income acquired by a resident of a Contracting State in relation to professional services or other activities of an independent nature shall be taxed only in a Contracting State, as long as he does not own a fixed facility that he has regularly available in the other Contracting State for the purpose of carrying out his activities, and only in the other Contracting State." Article 91(1) of the Corporate Tax Act provides that "if the State owns such fixed facilities, only income which can be reverted to such fixed facilities among his income, may be taxed in the other Contracting State." Article 91(1) of the Corporate Tax Act provides that "the tax base of corporate tax on income for each business year of a foreign corporation with a domestic place of business of the Republic of Korea shall be the total amount of domestic source income of the foreign corporation, as one of the domestic source income of the foreign corporation under Article 93 subparagraph 6 of the same Act, the plaintiff directly carried out the "foreign service" and received the amount calculated by multiplying the actual operating hours of the employees who carried out the service in a foreign country by the cost for the domestic service.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) AAA Group is its main business, and AAA Inc., a subsidiary of the AAA Group, is a corporation whose main business is the investment in social and indirect facilities and the provision of projects, and both AA and the Plaintiff are related companies within the AA Group.

2) AAA Inc. from December 1999 to March 2003, at the CCC Development Office (Seoul Seocho-gu 000, 2000) as a general manager, OO(OO) was composed of four responsible organizations and marketing representatives, such as commercial and legal projects, and project proposals, and construction. In other words, AAA Inc., for the development of the CCC, a team composed of four responsible organizations and marketing representatives, including consulting and structural and other construction projects, technical and other construction-related planning, construction-related planning, and preparation-related plans, were provided, and the team leader and the head of the PO (OO) were assigned from each domestic entity and the other foreign entity (the head of the PO and the other domestic entity) were provided with necessary services. On the other hand, AAA Inc., for the development of the CCC, 2000, 200O was provided to the Ministry of Land, Infrastructure and Transport (the present Ministry of Land, Infrastructure and Transport). On the other hand, 2O and PO (the other domestic entity).

(3) On July 1, 2005, the construction work for BBG was commenced and completed on October 22, 2009, and the plaintiff entered into a contract on June 30, 2005, which was before the date of the commencement of the construction work for BBG, on behalf of the CCC Development and the contract on the selection and management of the construction works in substitution for the contract for the provision of the overseas and the domestic construction works in the country." 4) The plaintiff asserted that the head office and branch office of the plaintiff separately constituted the dedicated team for the provision of the overseas and the domestic construction of this case, and that the plaintiff was one of the members of the dedicated team for the provision of the overseas construction of this case, the White Dodddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddddd

[Grounds for Recognition] The non-satched facts, Gap evidence 5, Eul evidence 6, and Eul evidence 5, and the purport of the whole pleadings

D. Determination

1) On the basis of the following circumstances, i.e., management of domestic and overseas plants such as construction and provision of new overseas services, and (ii) management of domestic and overseas services, including construction and provision of new domestic and overseas services, for the period of 0 years: (iii) management of domestic and overseas services; (iv) management of domestic and overseas services; and (iv) management of domestic and overseas services, including construction-related planning and accounting; and (v) management of domestic and overseas services, for the first time after the selection of experts in each sector, to ensure that the domestic and overseas services were conducted without any problems; and (v) management of domestic and overseas services, including construction and provision of new and overseas services; (v) management of the first time after the construction and provision of new and overseas services; (v) management of the first time to be conducted by the Plaintiff; (v) management of domestic and overseas services; (v) management of the first time to be conducted by the Plaintiff; (v) management of domestic and overseas services; and (v) management of the first time to be conducted by the Plaintiff.

3. Conclusion

Then, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.