Cho Jae-2015- Middlebu Office-0908 (Law No. 15, 27 April 2015)

The reason why the interpretation of the statutes is different from the time of the initial report, decision, or revision does not constitute grounds for filing a subsequent request for correction.

The reason why the interpretation of the statutes is different from the time of the initial report, decision, or revision does not constitute grounds for filing a subsequent request for correction.

Request for correction, etc. under Article 45-2 of the Framework Act on National Taxes

2015Guhap6791 Revocation of Disposition of Rejecting Corporate Tax

KKK Ltd.

Head of △ District Office

April 28, 2016

May 17, 2016

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The defendant's rejection disposition against the plaintiff on December 1, 2014 as to the plaintiff's corporate tax of KRW 000,000,000 for corporate tax of KRW 200,000 for the year 209 and the rejection disposition against the plaintiff's request for correction as to the corporate tax of KRW 00,000 for the year 2010

1. Details of the disposition;

A. The Plaintiff is a legal entity that engages in the manufacture and sales business of industrial ○○○-ro ○○○○-si ○○○○○-si ○○○.

B. On June 16, 2009, the Plaintiff received USD 0,000 in U.S. dollars on June 16, 2009, and USD 0,000,000 in U.S. dollars on June 222, 2010 as to the said dividends, pursuant to Article 57 of the Corporate Tax Act and Article 23 of the Agreement between the Government of the Republic of Korea and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Korea-China Tax Treaty”), and filed a corporate tax for the business year 2009,2010 after deducting the foreign tax amount as follows:

Business year

Date of Regular Reporting

Direct Foreign Tax Amount

Tax Amount Deemed Tax Amount

209

March 31, 2010

Corporate Income Tax

00,000,000 won

-

2010

March 31, 2011

Corporate Income Tax

00,000,000 won

Corporate Income Tax

00,000,000 won

C. Meanwhile, Article 10(2)(a) of the Korea-China Tax Treaty provides that where a beneficial owner owns 25% or more of the capital of a company paying dividends, the maximum tax rate shall be 5% of the total amount of dividends. Articles 4(1) and 5(1) of the Protocol 2 of the Korea-China Tax Treaty provide that taxes paid in China for which tax credit is granted from Korean tax shall be deemed to include the amount of tax that should have been paid if there was no provision on tax incentives, such as tax reduction, etc., and Article 10(2) of the Korea-China Tax Treaty shall be deemed to be 10% of the total amount of dividends.

On October 6, 2010, the Plaintiff filed a request for correction of the amount of tax by deducting the difference between the amount equivalent to 5% of the amount of tax actually paid by the Plaintiff from the amount of corporate tax for the business year 2009, the amount of tax deemed to be paid to China pursuant to Article 57(3) of the Corporate Tax Act (hereinafter referred to as “the first request for correction”). On October 18, 2010, the K superintendent of the tax office corrected the amount of corporate tax for the business year 2009 and refunded KRW 00,000 to the Plaintiff after correcting the amount of tax for the business year 209, and then deducted the amount equivalent to 5% of the total amount of tax paid to the Plaintiff as the amount of corporate tax for the business year 2010 and 2011.

D. On July 19, 2012, the director of the regional tax office of ○○○ may not deduct dividends that the Plaintiff received from a Chinese subsidiary from a foreign subsidiary from the amount calculated according to the deemed tax rate of 10% under Article 5(1) of the Protocol 2 of the Korea-China Tax Treaty and the difference between the amount actually paid in China and the amount calculated according to the limited tax rate of 5%, which the Plaintiff is deemed to have been paid in China. On August 3, 2012, the director of the regional tax office of ○○○○ may not deduct the difference between the amount calculated according to the deemed tax rate of 10% under Article 5(1) of the Protocol 2 of the Korea-China Tax Treaty and the tax amount deemed to have been paid in China. As such, the Plaintiff

E. On August 21, 2012, the Plaintiff filed a revised return with the head of KK Tax Office to not deduct the corporate tax amount deemed to be paid for the business year 2009, 2010, and 2011. As for the corporate tax for the business year 2012 and 2013, the Plaintiff reported and paid the corporate tax without deducting the deemed paid foreign tax amount.

F. However, in the lawsuit at issue, whether WW Co., Ltd. is eligible to deduct the tax amount deemed to be paid abroad on the dividend income received from a Chinese subsidiary on December 3, 2013, the tax rate for dividend income under Article 10(2)(a) of the Korea-China Tax Treaty is limited to 5% on December 3, 2013, but in the case of dividend income under Article 5(1) of the Protocol 2 of the said Treaty, the said tax amount shall be deemed to include the tax that would have been paid if there was no relevant legal provision on the measures for tax incentives in both countries, and the said tax amount shall be deemed to be 10% on the dividend amount. Thus, the first instance judgment was sentenced to the effect that the tax amount of 5%, which is the difference between the deemed tax amount of 10% and the limited tax rate of 5%, is deemed to be the tax amount to be paid abroad, and the final appeal was dismissed on October 15, 2014.

G. Accordingly, on November 21, 2014, the Plaintiff filed a claim for correction of the amount of tax to be deducted from the amount of tax paid in foreign countries equivalent to 5% of each dividend income regarding the corporate tax for the business year from 2009 to 2013 (hereinafter “the second claim for correction”) (hereinafter “the second claim”), and the Defendant refused correction on the ground that the period for filing a request for correction was three years after the statutory due date of return for the business year from December 1, 2014 (hereinafter “instant disposition”). On December 4, 2014, the Plaintiff decided to deduct the amount of tax paid in foreign countries equivalent to 5% of the dividend income from the amount of tax paid in foreign countries for the business year from 209 to 2013, and to reduce the amount of tax for each business year from the amount of tax paid in foreign countries.

H. On January 6, 2015, the Plaintiff filed a request with the Tax Tribunal to revoke the instant disposition, but the Tax Tribunal rendered a decision to dismiss the Plaintiff’s claim on April 27, 2015.

Facts that there is no dispute over recognition, Gap's 1 through 9, Eul's 1 (including both family identification cards and family identification cards) and the purport of the whole pleadings.

2. Determination on the legitimacy of the instant disposition

A. Summary of the plaintiff's assertion

1) For the purpose of Article 45-2(2)1 of the Framework Act on National Taxes, the term “judgment on a lawsuit related to the pertinent disposition” includes a judgment on a separate lawsuit that equally applies to the interpretation of the statutes or the interpretation of the legal principles that are at issue in the pertinent disposition even though it is not a lawsuit regarding the pertinent disposition. As such, the Supreme Court’s judgment explicitly stated that it is possible to deduct the dividend income paid by China’s subsidiaries from the amount of foreign tax paid to China, the grounds for filing a subsequent request for correction under Article 45-2(2)1 or 5 of the Framework Act on National Taxes occurred, and the Plaintiff filed a second request for correction within two months from October 15, 2014, which is the date of the Supreme Court’s ruling, within the deadline for filing the second

2) The tax authority, ○○ Regional Tax Office, stated a revised return to stipulate a direct amount of tax and notified the instant report to the effect that the Plaintiff would be lawful, and the Plaintiff would not pay corporate tax for the business year 2009, 2010. If the instant notice was not made, the Plaintiff would have reported and paid corporate tax after deducting the deemed foreign tax amount, and thus, the Plaintiff would not have any need to refund corporate tax through the secondary request for correction. Therefore, the instant disposition was unlawful against the principle of trust protection.

3) In addition, the Plaintiff’s filing of a revised return of corporate tax for the business year 2009, 2010 according to the instant notification was made clear through the Supreme Court’s precedents. In particular, in the case of corporate tax for the business year 2009, the Defendant would have refunded the amount equivalent to the amount of the paid foreign tax deemed to be paid by himself according to the first request for correction, but the Plaintiff again made the revised return according to the instant notification. Thus, the instant disposition was unlawful on the ground that the Defendant’s filing period of the request for correction was expired.

4) The instant disposition is unlawful against the principle of tax equality, since it does not comply with the instructions of the administrative agency, protects only the parties dissatisfied with conditions, and renders unfavorable treatment to taxpayers who complied with the instructions of the administrative agency.

B. Relevant statutes

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

C. Whether grounds for filing a subsequent request for correction exist

Since a subsequent request for correction is made on the grounds of post-declaration that had not existed at the time of the initial return or tax assessment, the grounds such as whether a transaction or act, which is the basis of the calculation of the tax base and the amount of tax, exists after the statutory due date of return of the relevant national tax expires, or the legal effect thereof vary, etc. may be included in the latter reasons prescribed in Article 45-2(2)5 of the Framework Act on National Taxes and Article 25-2 subparag. 4 of the Enforcement Decree of the Framework Act on National Taxes, but the grounds that the statutory interpretation of the statutes differs from the time of initial report, determination or correction are not included therein (see Supreme Court Decision 2012Du28254, Nov. 27,

In light of the above legal principles, even though the tax authority's interpretation that the deduction of the amount of tax would not be permitted on the dividend income received from China's subsidiaries, unlike the taxation authority's interpretation that the deduction of the amount of tax would not be permitted, it can be decided that the deduction of the amount of tax would be possible in the lawsuit filed by WWW. However, such circumstance is merely an issue of whether the interpretation of the relevant laws and regulations has changed after the Plaintiff's revised corporate tax return and payment, and it cannot be viewed as a ground for the subsequent request for correction, and no other evidence exists to deem that there exists a ground for the subsequent request for correction under each subparagraph of Article 45-2 (2) of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 201

Therefore, the Plaintiff’s secondary request for correction constitutes an ordinary request for correction as stipulated under Article 45-2(1) of the former Framework Act on National Taxes, and the secondary request for correction filed on November 21, 201, which was filed on March 31, 2010 and after three years from March 31, 201, respectively, the statutory due date of return of corporate tax for the business year 2009 and the statutory due date of return of corporate tax for the business year 2010, respectively, is unlawful, as it is an application for correction filed on November 21, 2014.

Therefore, the disposition of this case which deemed that the second request for correction was based on the deadline for filing a request for correction is legitimate, and this part of the plaintiff's assertion against this is without merit.

D. Whether the principle of protection of trust is violated

In general, in administrative legal relations, in order to apply the principle of the protection of trust to the act of an administrative agency, first, the administrative agency must express a public opinion that is the subject of trust to the individual, second, there is no reason attributable to the individual's trust that the individual's statement of opinion is justifiable, third, the individual must act in a similar manner as a result of the individual's trust in the name of the administrative agency's statement of opinion; fourth, the administrative agency's disposition that is opposite to the name of the opinion of the administrative agency, thereby causing an infringement on the individual's interest; fifth, if an administrative disposition is taken according to the previous opinion of the administrative agency, it is not likely to seriously undermine the public interest or legitimate interest of a third party (see, e.g., Supreme Court Decision 2004Du13592, Feb. 2

Even if the Plaintiff trusted the instant notice as legitimate and made a revised return and payment of corporate tax for the business year 2009, 2010, the Plaintiff cannot be deemed as a statement of view that the instant notice would allow the filing of a request for correction with the lapse of the deadline for filing a request for correction concerning corporate tax for the business year 2009, 2010, and there is no other evidence to deem that there was a public statement of opinion to that effect, and thus, the instant disposition cannot be deemed as violating the principle of trust protection.

Therefore, the plaintiff's assertion that the disposition of this case violates the principle of trust protection is without merit.

E. Whether it constitutes abuse of rights

As seen earlier, the instant disposition is in accordance with Article 45-2(1) of the former Framework Act on National Taxes, which set the deadline for filing a claim for rectification, and the purpose of providing the deadline for filing a claim for rectification is to prevent tax legal relations from being neglected in an unstable state for a long time. As such, the Defendant’s disposition of this case pursuant to the provisions of the Framework Act on National Taxes cannot be deemed an abuse

Therefore, the plaintiff's assertion of abuse of rights is without merit.

F. Whether the principle of tax equality is violated

Since a taxpayer has a right to dispute over the legitimacy of a legal judgment made by the tax authority, the plaintiff is likely to dispute the inappropriate administrative guidance of the tax authority by refusing a revised report or filing a revised report pursuant to Article 45-2(1) of the former Framework Act on National Taxes immediately after a revised report is filed.

Nevertheless, even if the Plaintiff failed to exercise the above rights guaranteed by the law that ensure the lapse of the time limit for filing a claim for correction under the above provisions and thereby, the Plaintiff bears a large amount of tax amount compared to other taxpayers, in light of the legislative intent of the Framework Act on National Taxes to protect the interests of taxpayers by introducing the system for filing a claim for correction, and prevent the tax legal relationship from being neglected in unstable state, and it cannot be deemed that the Defendant, who is the tax authority, handles the Plaintiff equally compared to other taxpayers when imposing

Therefore, the Plaintiff’s assertion that the instant disposition violates the principle of tax equality is without merit.

3. Conclusion

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