Whether the shares of the consolidated subsidiary corporation stated in the balance sheet falls under the assets subject to removal when calculating the loan interest to be deducted.

If the consolidated parent corporation does not remove the shares of the consolidated corporation acquired outside the consolidated group from the balance sheet of the consolidated corporation, the shares of the consolidated subsidiary corporation that the plaintiff stated in the balance sheet are subject to removal because the total amount of the consolidated corporation and the stock value of the consolidated parent corporation are double totaled.

2015Guhap65995 Revocation of Disposition of Corporate Tax Imposition

Doeng Co., Ltd.

O Head of tax office

on December 22, 2016

on 13, 2016

1. Of the disposition imposing corporate tax of KRW 00,000,000 (including additional tax of KRW 00,000,000) for the consolidated business year 2010 that the Defendant imposed on the Plaintiff on December 2, 2013, the part imposing additional tax of KRW 00,000,000 and KRW 00,000 (including additional tax of KRW 00,000,000) for the consolidated business year 201 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the costs of lawsuit, 00% is assessed against the Plaintiff, and the remainder 00% is assessed against the Defendant, respectively.

Cheong-gu Office

Of the disposition imposing corporate tax of KRW 00,000,000 (including additional tax of KRW 00,000,000) on the Plaintiff on December 2, 2013, the part exceeding KRW 0,000,000 (including additional tax of KRW 0,000,000) among the disposition imposing corporate tax of KRW 0,000,000 for 2010 for the consolidated business year that the Defendant imposed on the Plaintiff on the Plaintiff on December 2, 2013, and the part exceeding KRW 0,00,000 (including additional tax of KRW 00,000,000) of the disposition imposing corporate tax of KRW 0,00 for 201 for the consolidated business year.

1. Details of the disposition;

A. The Plaintiff is a company that operates a prop business to control, guide, and arrange the overall business activities of the subsidiaries by acquiring and owning the stocks or shares of the subsidiaries. The Plaintiff applied the consolidated tax return system from 2010 to the consolidated parent corporation, and the Plaintiff is a consolidated parent corporation, and the other domestic corporation (6 consolidated business year, 2011 five consolidated business year, and 5 consolidated business year) that the Plaintiff owns 100% shares as the consolidated subsidiary was paid corporate tax.

B. On the ground that there is an error in calculating the amount of dividend income under Article 76-14(1)4 of the Corporate Tax Act among the income for the 2010 consolidated business year and 201 consolidated business year reported by the Plaintiff, the Defendant, on December 2, 2013, notified the Plaintiff of the correction of the corporate tax of KRW 00,000,000 (including the additional tax of KRW 00,000,000) and the corporate tax of KRW 00,000 for the 2011 consolidated business year (including the additional tax of KRW 00,00,000) (hereinafter “instant disposition”).

C. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on February 13, 2014, but was dismissed on March 17, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 3, Eul evidence Nos. 1 and 2 (including branch numbers; hereinafter the same shall apply), the purport of the whole pleadings

2. Judgment on the Defendant’s defense prior to the merits

The defendant does not dispute the plaintiff during the disposition of this case (a transaction between consolidated corporations)

Since the amount of tax reasonably calculated pursuant to the sales claim and the shares of a consolidated corporation appropriated as a result of transactions between consolidated corporations, the lawsuit on the above part of the Disposition in this case shall be dismissed. However, the plaintiff contests with the defendant about how to determine the value of the shares of the consolidated corporation appropriated as a result of transactions between consolidated corporations, and how much the amount of tax so determined, and reduced the purport of the claim regarding the legitimate portion of the tax amount calculated by the plaintiff himself/herself. Ultimately, the part of the tax amount which the defendant did not reduce the purport of the claim in the part of the tax amount which the plaintiff raised a defense prior to the merits should be determined by calculating the reasonable tax amount.

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In cases where corporate tax is calculated by the consolidated tax return system, the method of calculating the amount of non-inclusion of income dividends paid from domestic corporations, other than the consolidated group, by deeming the consolidated group as a single domestic corporation pursuant to Article 76-14(1)4 of the Corporate Tax Act and Article 120-19 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 23589, Feb. 2, 2012; hereinafter “former Enforcement Decree of the Tax Act”).

The amount of income dividends excluded from gross income = Revenue dividends 】 ratio of exclusion from gross income £­ Loan interest exclusion amount = Loan interest 】 exclusion rate from gross income 】 (number of book values of stocks of another domestic corporation / Total assets removed from assets appropriated in accordance with transactions between consolidated corporations in the balance sheet of each consolidated corporation)

As seen in the above formula, Article 120-19 (3) of the former Enforcement Decree of the Corporate Tax Act provides that "the removal of assets appropriated as a result of transactions between consolidated corporations" from the total sum of total assets of each consolidated corporation in the balance sheet when calculating the amount of loan and exclusion amount. However, since most of the stocks of consolidated corporations owned by the Plaintiff are acquired from a third party other than a consolidated group and are not appropriated as a transaction between consolidated corporations, it does not remove the total assets of each consolidated corporation from the balance sheet of each consolidated corporation. Nevertheless, since the Defendant considers the stocks of the consolidated corporation acquired and held by the Plaintiff from a third party as assets appropriated as a transaction between consolidated corporations, the instant disposition is unlawful.

2) In a case where the Plaintiff, a consolidated subsidiary, participated in the capital increase with new shares issued by 000 and acquired 00,000,000 shares per share (hereinafter referred to as “00 shares”) and removed 00,000 shares from the assets appropriated in accordance with the “transaction between consolidated corporations”, the Plaintiff must remove 00,000,000 won, which is the acquisition value and the tax book value, of the above shares. If the Plaintiff removes 00,000 shares on the balance sheet as alleged by the Defendant, the Plaintiff would remove 00,000 shares through the appraisal of the equity shares law, as well as all net assets fluctuations recognized as transactions with third parties other than the consolidated group, and thus, it violates the provisions of the above corporate tax law and regulations to remove assets appropriated in accordance with the “transaction between consolidated corporations.”

B. Relevant statutes

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

C. Determination

1) Whether the instant shares are assets appropriated as a result of transactions between consolidated corporations

A) Summary of the system to exclude import dividends from taxable income

Article 18-3 of the Corporate Tax Act and Article 17-3 of the former Enforcement Decree of the Corporate Tax Act provide that when a for-profit domestic corporation receives dividends from another domestic corporation in which it has invested more than a certain equity ratio, the amount calculated in accordance with the following calculation-1 of the said dividends shall be excluded from

The above provision focuses on the fact that dividends received by the relevant domestic corporation are already distributed profits after the tax payment of corporate tax by another domestic corporation, so that the relevant domestic corporation does not pay corporate tax again by excluding part of the dividend income of the relevant domestic corporation from gross income. In this case, some of the loan interest paid by the relevant domestic corporation shall be deducted from the amount of income dividends from the amount of income dividends. This purpose is to restrain the acquisition of stocks of another domestic corporation by acquiring stocks of the other domestic corporation or using loans from which a large debt amount is debt amount is debt amount of the relevant domestic corporation, and to promote the improvement of the financial structure of the relevant domestic corporation by preventing double benefits that would be obtained when the relevant domestic corporation includes interest paid by the relevant domestic corporation in deductible expenses and does not exclude the income dividends from gross income. In calculating the amount excluded from the actual loan interest in taxation practice, the book value of stocks of another domestic corporation is the book value that is not the book value on the balance sheet (the acquisition value in taxation of securities recognized by corporate accounting), and the balance sheet of the relevant domestic corporation shall be excluded from the amount of loans calculated in accordance with the language and text of the former Enforcement Decree.

B) Summary of income calculation method for each consolidated business year

The consolidated tax payment system was introduced on December 26, 2008 when the Corporate Tax Act was amended (amended on January 1, 2010) to the effect that, under the taxation system on each individual corporation, it is difficult to actively change the corporate tax burden due to the change in the business environment because of the difference in corporate tax burden on each individual corporation's structural structure, it is economically the same chain mother.The corporate tax was imposed on the independent corporation as one taxable object, thereby guaranteeing the neutrality of taxation in the corporate organization selection, flexibly responding to the business environment, making it possible for the enterprise to flexibly cope with the business environment, and making it taxed to meet

Income for each consolidated business year under Article 76-14 (1) of the Corporate Tax Act shall be calculated by calculating income or loss for each consolidated corporation through the settlement of accounts and tax adjustment by each consolidated corporation, and ② income dividends not included in gross income under Articles 18-2 and 18-3 of the Corporate Tax Act in the tax adjustment by each consolidated corporation shall be included in gross income, and donations and entertainment expenses not included in deductible expenses under Articles 24 and 25 of the Corporate Tax Act shall be included in deductible expenses ( ④ as mentioned above, the consolidated group shall be calculated in the gross income amount of income dividends, donations and entertainment expenses in the gross income amount of the consolidated corporation, ③ the inclusion of dividend income between consolidated corporations in gross income, entertainment expenses paid between consolidated corporations, bad debt allowances established in the bonds of the consolidated corporation, in the gross income or non-deductible expenses (this refers to the purport that the principal items of the consolidated group internal transactions that cannot be included in gross income or loss are denied in the gross income amount of one consolidated corporation, ④ the consolidated group shall be calculated by adding the amount of income dividends to gross income, entertainment expenses or non-deductible expenses of each consolidated corporation, and then calculated by tax adjustment.

C) Method of calculating the amount of income dividends excluded from gross income when calculating income for each consolidated business year

Article 76-14 (1) 4 of the Corporate Tax Act and Article 120-19 of the former Enforcement Decree of the Corporate Tax Act provide that when each consolidated corporation in a consolidated group receives dividends from "a domestic corporation other than a consolidated group that has invested more than a certain ratio in view of the whole consolidated group", the consolidated group shall be deemed a domestic corporation and the consolidated group shall be deemed as one domestic corporation, and the amount of income dividends shall be calculated as follows, and it shall be calculated as non-Inclusion of income dividends, and it shall be divided into each consolidated corporation in proportion to the equity ratio of each consolidated corporation in the total equity ratio of the consolidated group, and the amount distributed shall

D) the scope of "property appropriated as a result of transactions between consolidated corporations";

In view of the following circumstances in the purport of the introduction of the system for exclusion of the dividend income and the consolidated tax return system as seen earlier, the "property appropriated as a result of transactions between consolidated corporations" under Article 120-19 (3) of the former Enforcement Decree of the Corporate Tax Act shall not exceed the stocks acquired due to capital transactions between consolidated corporations.

Nr. It is reasonable to view that a consolidated corporation as the shares in this case includes shares acquired from a third party outside the consolidated group, and it is justifiable for the Defendant to calculate the amount of exclusion from gross income of import dividends in accordance with such interpretation while rendering the disposition in this case. The Plaintiff’s assertion in

① Under the principle of no taxation without law, the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring any special circumstance, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. However, where it is necessary to clarify the meaning through mutual interpretation between the laws and regulations, it shall be permitted to make a combined interpretation in light of the legislative intent and purpose, etc. to the extent that it does not undermine the legal stability and predictability pursued by the tax law (see, e.g., Supreme Court Decision 2007Du1781, Jul. 9, 2009).

② Article 76-14(1)4 and (3) of the former Enforcement Decree of the Corporate Tax Act provides that a consolidated group shall be deemed as a single domestic law entity for the amount excluded from the income dividends of the entire consolidated group under Article 120-19 of the former Enforcement Decree of the Corporate Tax Act. Considering that the consolidated tax payment system is a system introduced to maintain tax neutrality in corporate organization selection, the amount to be excluded from the income dividends calculated under the above Corporate Tax Act shall be the same as the amount to be excluded from the income dividends that would have been calculated if the consolidated group had been a domestic corporation. Therefore, when interpreting Article 120-19 of the former Enforcement Decree of the Corporate Tax Act, the consolidated group shall be deemed as a single domestic corporation.

(3) The calculation-type 2 applies to an individual corporation, compared with the calculation-type 1, which applies to the consolidated tax payment. The calculation-type 2 applies to the consolidated group, which is the dividend amount received from another domestic corporation, and the calculation-type 2 applies to the exclusion-based ratio of gross income calculated based on the total amount of equity shares held by the consolidated group against another domestic corporation. In addition, the calculation-type 2 applies to the consolidated group if the consolidated group was one domestic corporation. In addition, the calculation-type 2 applies to the calculation-type 1, which deducts the interest on loans between consolidated corporations from the total amount of equity interest on loans between consolidated corporations, and deducts the asset appropriated according to the transaction between consolidated corporations from the total amount of total amount of assets. The calculation-type 1, calculation-type 1, and the balance between the total amount of assets and the balance sheet by removing the interest on loans and assets of the consolidated group.

④ The Plaintiff, a consolidated parent corporation, assessed the instant shares as a share law in accordance with the corporate accounting standards. The share law means securities that reflects the change in net assets of invested companies in the net assets of invested companies (e.g., internal transactions between invested companies and invested companies) at the time of settlement of accounts for each fiscal year by the amount calculated by multiplying the ratio of the invested company’s equity in the book value of the invested company. If the Plaintiff, a consolidated parent corporation, formed a single domestic corporation by means of a merger with the consolidated subsidiary corporation, etc., instead of acquiring the stocks of the consolidated subsidiary corporation, the capital account on the account book of the consolidated parent corporation and the consolidated subsidiary corporation was nonexistent. In such cases, the reason why the consolidated parent corporation acquired the stocks of the consolidated subsidiary corporation from a third party or established the consolidated corporation by itself does not have any particular meaning, such as whether the consolidated parent corporation acquired the stocks of the consolidated corporation from a third party, or whether the consolidated corporation was acquired by the consolidated parent corporation, regardless of the developments leading to the acquisition of the stocks of the consolidated corporation or the total amount of assets of the consolidated group.

⑤ If, as alleged by the Plaintiff, a consolidated parent corporation does not remove the shares of a consolidated corporation acquired from outside the consolidated group from the total amount of assets of the consolidated corporation, the total amount of assets of the consolidated parent corporation and the amount of the stock value of the consolidated parent corporation is double. This is because the equity law evaluates part of the net assets of the invested corporation as its own value. As a result, the total amount of assets of the consolidated parent corporation is excessive compared to the case where the consolidated group is deemed a single domestic corporation. For example, where the consolidated parent corporation only owns the shares of the consolidated subsidiary corporation acquired from a third party without other assets and liabilities (100% of the equity ratio) and the consolidated subsidiary corporation owns only 100 won in cash, the total amount of assets shall be deemed a single domestic corporation, compared to the amount of 100 won in cash if the consolidated group is deemed a single domestic corporation. According to the Plaintiff’s assertion, according to the Plaintiff’s claim, the total amount of

(6) In addition, in light of the fact that Article 120-19 (3) of the former Enforcement Decree of the Corporate Tax Act provides that the "property appropriated as a result of transactions between consolidated corporations" shall be removed from the "total sum of total assets in the balance sheet of each consolidated corporation," the meaning of "property appropriated as a result of transactions between consolidated corporations" shall be interpreted to mean the removal of assets appropriated in the balance sheet of consolidated corporations as of the end of the fiscal year according to the bond relationship between consolidated corporations and the investment relationship, etc. without

7) Such interpretation is a combined interpretation that takes into account the structure and legislative intent of the Corporate Tax Act, which is the mother corporation, and such interpretation cannot be said to undermine the legal stability and predictability oriented by the no taxation without the law. Rather, emphasizing only the principle of strict interpretation in accordance with the language and text, excluding the stocks acquired from a third party outside the consolidated group from the scope of assets subject to removal, ultimately, waiver of the combined and systematic interpretation, and the tax principle of taxation based on the ability to pay taxes.

(ii) the value of 000 shares to be removed from total assets on the consolidated group balance sheet;

If the total amount of assets of consolidated corporations is simply added to the balance sheet of consolidated corporations, the total amount of assets will be combined with the book value of 000 shares assessed by the Plaintiff under the equity law and the total amount of assets of 000 shares, which are consolidated corporations. If only the acquisition value of 000 shares is removed as alleged by the Plaintiff, the difference between the book value and the acquisition value assessed under the equity law will still remain double aggregate. If the consolidated group is deemed a domestic corporation, it is inconsistent with the removal of the total amount of stock

Therefore, as seen earlier, in the interpretation of Article 120-19(3) of the former Enforcement Decree of the Corporate Tax Act, the assessment value of shares 000, which is counted in the Plaintiff’s balance sheet, shall be entirely removed as the “property appropriated in accordance with the investment relationship between the consolidated corporation”. The change in net assets 000 is a result of performing business activities, etc. inside and outside the consolidated group. However, the Plaintiff’s book value of 000 shares is an asset appropriated in the balance sheet by the Plaintiff according to the investment relationship between the Plaintiff and 000 as of the end of the consolidated business year. Therefore, it is justifiable to eliminate the book value of shares assessed by the Defendant as above.

3) The legality of the disposition of this case

A) Under the Corporate Tax Act, an additional tax is a kind of administrative sanction that is imposed when a taxpayer corporation imposes an obligation to report a tax base and pay a tax amount in good faith in order to ensure the propriety of taxation, and if the taxpayer neglects to perform his/her duty as a means of securing the obligation. Such a sanction is not imposed if there is a circumstance where the taxpayer cannot be deemed to be unaware of the obligation due to a conflict of opinion due to the interpretation of the tax law beyond the scope of simple legal sites or misunderstandings, or where there is a circumstance where it is deemed that the taxpayer cannot be aware of the obligation due to a conflict of opinion due to the interpretation of the tax law, etc., or where there is a circumstance where it is deemed that the performance of the obligation cannot be expected to be difficult for the party (see Supreme Court Decision 2008Du2330, Feb. 10, 201).

B) Upon ex officio in light of the above legal principles, ① Article 76-14 of the Corporate Tax Act at issue in this case, and Article 120-19 of the former Enforcement Decree of the Corporate Tax Act, etc. are related to the consolidated tax payment system enforced for the first time 2010. As such, in 2010 and 2011, the Plaintiff’s corporate tax return of corporate tax could have sufficiently been established as to the interpretation of the above statutes because the interpretation method of the above statutes or the taxation practice has not been settled. ② The phrase of Article 120-19 of the former Enforcement Decree of the Corporate Tax Act cannot be deemed to be erroneous for the Plaintiff to have determined that the shares of this case do not fall under “property appropriated for taxation through transactions between consolidated corporations”. ③ A tax authorities revised Article 120-19(3) of the former Enforcement Decree of the Corporate Tax Act to allow taxpayers to understand more clearly, it is difficult to view that the Plaintiff’s calculation of corporate tax for exclusion of income without removing the shares of this case constitutes “justifiable cause”. On the other hand, it is difficult to deem that the Plaintiff’s legitimate reason for disposal.

C) Accordingly, the penalty tax for a legitimate reason among the instant disposition is calculated as follows.

(1) 20,000,000 won for the consolidated business year 2010

Additional tax 00,000,000 won 】 (1.00,000 won which the Defendant included in the gross income at the time of the disposition of this case - The amount which the Plaintiff should have been included in the gross income by removing the sales bonds between consolidated corporations and the book value of 000 stocks - The amount which the Plaintiff should have been included in the gross income at the time of the disposition of this case / Amount of 00,000,000 won

(2) 20,000,000 won for consolidated business year:

Additional tax amount of KRW 00,00,000 】 (200,000,000 which the Defendant included in the calculation of earnings at the time of the disposition of this case - Amount of KRW 000,000 which the Plaintiff should have obtained by removing sales claims between consolidated corporations) / Amount of KRW 0,00,000 which the Defendant should have obtained by inclusion in the calculation of earnings at the time of the disposition of this case

4) Sub-determination

Among the disposition of this case, the penalty tax amount corresponding to the legitimate ground for not imposing penalty tax on the plaintiff is unlawful and the remainder is lawful.

4. Conclusion

The plaintiff's claim shall be accepted within the scope of the above recognition, and the remaining claims shall be dismissed as it is without merit, and the costs of lawsuit shall be shared by the plaintiff and the defendant according to the winning ratio. It is so decided as per Disposition.

Judges and decoration of the presiding judge;

Judges Lee Dong-gu

Judge Lee Jong-hoon