The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the second ground for appeal

A. The principle of substantial taxation under Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010) refers to a person to whom the income, profit, property, transaction, etc. belongs, if there is a separate person to whom the income, profit, property, or transaction belongs, unlike the nominal person, belongs, is the person to whom the income, profit, or transaction belongs, and who is not the nominal person

Therefore, if a person to whom the property belongs is not capable of controlling and managing it, and there is another person who substantially controls and manages it by means of control, etc. over the nominal owner, and the disparity between the name and the substance arises from the purpose of tax evasion, the income on the property shall be deemed to have been reverted to the person who actually controls and manages the property, and shall be

(2) The principle of substantial taxation is likewise applicable to international trades in which a non-resident or a foreign corporation establishes a nominal company in a country benefiting from a tax treaty and uses it only in the form of a legal entity in order to avoid Korean tax, which is the source country (see, e.g., Supreme Court en banc Decision 2008Du8499, Jan. 19, 2012). Moreover, the principle of substantial taxation is likewise applicable to international trades in which a resident or a domestic corporation establishes a so-called “base Company” and uses only the legal form of the legal entity and unfairly reserves the income to be attributed to the actual controlling manager by unfairly reserving the income to be attributed to the actual controlling manager.

B. The reasoning of the judgment below.