Seocho 2010Ch2169 ( October 18, 2011)

Where a loan is made to a person with a special relationship lower than the interest rate determined by the Commissioner of the National Tax Service, it is subject to wrongful calculation.

As long as interest at a rate of 6% lower than that set by the Commissioner of the National Tax Service is received and lent to a person with a special relationship, the difference between the interest income actually received after re-determination of the interest income at an annual rate of 9% corresponding to the market price is legitimate as taxation is included in gross income for each business year, and as long as the legislator appears to have delegated the authority to correct the interest rate on the overdraft to the Commissioner of the National Tax Service in determining the overdraft interest rate, it is reasonable to

2011Revocation of disposition of revocation of corporate tax, etc.

XX Traffic Corporation

Director of the Gangwon Tax Office and one other

November 9, 2011

November 23, 2011

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 of 35,086,180 won for the business year of 2004 against the plaintiff on February 3, 2010, corporate tax of 67,018,410 won for the business year of 2005, corporate tax of 62,71,670 won for the business year of 2006, corporate tax of 49,493,770 won for the business year of 2007, corporate tax of 2007, corporate tax of 11,84,780 won for the business year of 208, and the disposition of imposition of corporate tax of 11,84,780 won for the business year of 208 by the Director of the Gangseo-gu Regional Tax Office against the plaintiff on February 3, 2010 shall be revoked, respectively.

1. Details of the disposition;

A. On August 11, 2009, through October 30, 2009, the commissioner of the Western Regional Tax Office conducted an integrated investigation into the corporate tax system for the business year 2004 through 2008 against the Plaintiff corporation running the taxi transport business, and confirmed that he/she received interest of 6% per annum from 2004 to 2008 from 2004 to 2008 from the joint representative director of the Plaintiff corporation, and notified the Defendant.

B. Based on the above findings, the Defendant deemed that the Plaintiff unduly reduced tax burden by lending the instant amount to a person with a special relationship at an interest rate lower than the market price in XXL, etc., and thus, deemed that it constitutes a reduction of tax burden, and thus, Article 52(1) and (2) of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter referred to as the “former Corporate Tax Act”) and Articles 8(1)6 and 89(3) of the former Enforcement Decree of Corporate Tax Act (amended by Presidential Decree No. 19891, Feb. 28, 2007; hereinafter referred to as the “former Enforcement Decree”), Article 43(1) of the former Enforcement Rule of Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 547, Mar. 30, 207; hereinafter referred to as the “former Enforcement Rule of Corporate Tax Act”), Article 52(1) and (2) of the former Corporate Tax Act (amended to 3080% interest and 40.

C. On February 3, 2010 based on the above taxation data, the head of Gangnam Tax Office revised and notified the Plaintiff of KRW 35,086.180, corporate tax for the business year 2004; KRW 67,018,410, corporate tax for the business year 2005; KRW 62,71,670, corporate tax for the business year 2006; KRW 49,493,770, corporate tax for the business year 2007; KRW 11,84,780, corporate tax for the business year 2008 (hereinafter “instant disposition”).

D. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on May 4, 2010, but the Tax Tribunal dismissed the decision on April 18, 201.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 to 6 (including paper numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons. 1) As to the application of the wrongful calculation panel

A) The Plaintiff applied the interest rate of 6% per annum with an adequate reduction of the interest rate of bank loans, and thus, there was no reduced tax burden. Thus, the loan transaction of this case is not subject to the avoidance of wrongful calculation under Article 52 of the former Corporate Tax Act. However, the Defendant uniformly concluded that 9% of the interest rate of the loan of this case under the notice of this case is deemed the market price at the market price. Accordingly, the Defendant calculated the interest rate by deeming that the loan of this case is subject to the avoidance of wrongful calculation.

B) Even if the interest rate on overdrafts as stipulated in the instant notice is deemed the market price, 9% of the interest rate on overdrafts as stipulated in the instant notice was enacted by the Commissioner of the National Tax Service beyond the scope delegated by the relevant laws and regulations. Therefore, this part of the disposition, which was made based on the instant notice null and void, is also unlawful.

2) As to the non-deductible interest portion

In light of the fact that the Plaintiff entered into an agreement for the discount of gas from XXL to sell the instant money in return for the loan to XXL, and that the Plaintiff leased the instant money to the Plaintiff, i.e., the Plaintiff is closely related to the Plaintiff’s taxi transport business, and that the instant money was inevitable for the purpose of making a loan to XXL, etc. for the purpose of using the Plaintiff’s taxi transport business until the purchase of the replacement notice as the payment for the passenger vehicle, it is reasonable to deem that the Plaintiff lent the instant money in relation to the business of XXL, etc., and therefore, the interest on the relevant loan is not subject to non-taxation under Article 28(1)4(b) of the former Corporate Tax Act.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) As to the first argument

A) Under Article 52(1) of the former Corporate Tax Act, the term "unfair reduction of the tax burden on corporation's income as a transaction with a person with a special relationship" is defined as "unfair calculation method", and the specific type of wrongful calculation is delegated to the Enforcement Decree. Article 88(1)6 of the former Enforcement Decree of the Corporate Tax Act provides that "where an asset is leased at a rate lower than the market price" among the types of wrongful calculation. In addition, Article 89(3) of the former Enforcement Decree of the Corporate Tax Act provides that "the interest rate on loans as provided by the Ordinance of the Ministry of Finance and Economy is defined as the market price, and the specific number is delegated to the Ministry of Finance and Economy, and Article 43(1) of the former Enforcement Rule of the Corporate Tax Act provides that "the interest rate on loans as provided by the Ordinance of the Ministry of Finance and Economy" shall be determined by the Commissioner of the National Tax Service in consideration of the distribution rate of bonds with three-year maturity (hereinafter "distribution rate") guaranteed by a financial institution.

B) As seen earlier, inasmuch as the Plaintiff received interest at a rate of 6% per annum below 9% per annum from the party loan interest rate, which is a person with a special relationship, and lent the instant money, the Defendant’s act of lending the instant money in accordance with the provisions of the relevant laws and regulations does not constitute a wrongful calculation subject to unfair calculation, deeming that the Defendant’s act of lending the instant money constitutes a wrongful calculation subject, and thus, it cannot be deemed that there was any error in the imposition of this part of the interest income included in the calculation of earnings for each business year in the calculation of earnings for each business year. Accordingly, this part of the Plaintiff’s assertion is without merit.

2) As to the second argument

(5) In light of the following circumstances, it is difficult to view that there was a decline of 0% by 1: (1) the interest rate per share in lending between the related parties; (2) the Commissioner of the National Tax Service, based on the distribution rate no longer than 3 per annum; and (3) the public notice of this case was made on December 31, 201 that the current interest rate no less than 9% of the current interest rate per share in lending was 0 per annum; (4) the current interest rate no longer than 1) the current interest rate no less than 0 per annum no more than 10 per annum of the current 6-10 per annum of the current 6-10 per annum of the current 6-10 per annum of the current 6-10 per annum of the current 7-10 per annum of the current 6-10 per annum of the current 7-10 per cent of the current 7-10 per cent of the current 7-10 per cent of the current 197-10 per annum of the current interest rate.

3) Whether the interest paid in deductible expenses is applied

A) Article 28 (1) 4 (b) of the former Corporate Tax Act provides that, when a corporation acquires and holds assets prescribed by the Presidential Decree, such as provisional payments paid by a corporation to a specially related person without any connection with its business, the amount calculated as prescribed by the Presidential Decree (limited to interest on loans equivalent to the relevant asset value) out of the interest on loans paid by the corporation shall not be added to deductible expenses in calculating the income amount for each business year. The legislative purpose of the above provision is to prevent the deterioration of the financial structure of the corporation through the production of corporate funds and to encourage the sound economic activities of the corporation through the production of corporate funds by preventing any abnormal acts of lending loans to a specially related person, such as an affiliated company, without any connection with its business, by giving any tax disadvantage to exclude the interest on loans corresponding thereto from the income amount for each business year (see, e.g., Supreme Court Decision 200Du12578, Feb. 15, 200).

B) In light of the above legal principles, the Plaintiff submitted an agreement to sell and discount gas (Evidence A No. 8-1-2) by asserting that the Plaintiff was receiving a gas discount from XXL in return for leasing the instant money to XXL, etc. However, in light of the above agreement, the said agreement merely consists of DD Transport Co., Ltd. or △△△△△○ Co., Ltd., and thus, the Plaintiff cannot be deemed to gain any business profit pursuant to the above agreement. The Plaintiff also lent the instant money to four companies in a position other than the gas supplier under the above agreement, and the Plaintiff did not mention in the above agreement, and it is difficult to prove that there was no direct relation with the Plaintiff’s lending of the instant money. In light of the above agreement, it is difficult to view that the Plaintiff’s act of leasing the instant money was not related to the Plaintiff’s business, and it is difficult to prove that there was no direct relation with the Plaintiff’s business.

3. Conclusion

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