Busan High Court 2013Nu1379 ( December 25, 2013)

Whether the interim settled amount of retirement allowances is included in personnel expenses eligible for tax credit for research and human resources development expenses

The tax credit system for research and human resources development expenses under the Restriction of Special Taxation Act should only be subject to the tax credit for the expenses directly related to research and human resources development in the taxable year. Therefore, the expenses paid in a lump sum after the contract is completed for a long time, such as retirement allowances, are merely a reasonably estimated amount for the purpose of calculating profit and loss

Article 10(1) of the Restriction of Special Taxation Act

2014Nu342 Revocation of revocation of the imposition of corporate tax

AAA, Inc.

Head of Suwon Tax Office

Busan District Court Decision 2012Guhap2307 Decided May 10, 2013

Judgment prior to remand

Busan High Court Decision 2013Nu1379 Decided September 25, 2013

Supreme Court Decision 2013Du22147 Decided March 13, 2014

May 23, 2014

June 27, 2014

1.The decision of the first instance shall be revoked.

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant’s imposition of corporate tax on December 1, 2010 on the Plaintiff is revoked in excess of the KRW OOO in the imposition of corporate tax for the business year of 2006, exceeding the KRW OOOO in the imposition of corporate tax for the business year of 2007, exceeding the KRW OOO in the imposition of corporate tax for the business year of 2008, exceeding the KRW OOOO in the imposition of corporate tax for the business year of 2008, and exceeding the KRW OOO in the imposition of corporate tax for the business year of 209.

2. Purport of appeal

The same shall apply to the order.

1. Details of the disposition and related statutes;

The court's explanation on this part is the same as the corresponding part of the judgment of the court of first instance. Thus, this part is cited in accordance with Article 8 (2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

2. Whether the disposition is lawful;

A. The issues of the instant case

Article 10(1) of the former Restriction of Special Taxation Act (amended by Act No. 9272 of Dec. 26, 2008 and Article 10(1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Act No. 9921 of Jan. 1, 2010; hereinafter “former Restriction of Special Taxation Act”) provides that where a national has expenses prescribed by Presidential Decree (hereinafter “research and human resources development expenses”) among expenses for research and human resources development for each taxable year, an amount prescribed in each of the following subparagraphs shall be deducted from income tax or corporate tax for the pertinent taxable year. Accordingly, Article 9(2)6 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307 of Feb. 4, 2009) and Article 8(1)6 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590 of Feb. 2, 2012) is one of the research and human resources development expenses prescribed by Ordinance of the Plaintiff.

B. Determination

The purpose of the tax credit system of research and human resources development expenses under the Restriction of Special Taxation Act is to deduct a certain amount from the income tax or corporate tax for the pertinent taxable year in cases where there are labor expenses within a certain scope required by the department exclusively in charge of research and human resources development (see Supreme Court Decision 9Du8718, Jan. 19, 2001). Thus, only the expenses directly corresponding to research and human resources development in the pertinent taxable year should be subject to the tax credit. However, it cannot be deemed as the expenses directly corresponding to research and human resources development for the pertinent taxable year only when the labor contract is terminated, such as retirement allowances, which are paid in lump sum in consideration of the long-term continuous service period. Furthermore, even if it can be included in deductible expenses in calculating the income amount for the pertinent taxable year under the Corporate Tax Act, it is merely reasonably estimated for the purpose of calculating the amount of expenses for the pertinent taxable year, and thus, it does not necessarily constitute labor expenses subject to the tax credit under the Restriction of Special Taxation Act.

Therefore, an interim retirement allowance paid with allowance for severance benefits or the financial resources therefor does not constitute personnel expenses subject to the tax credit for research and human resources development expenses under Article 10(1) of the former Restriction of Special Taxation Act. Therefore, the prior plaintiff's assertion on a different premise is without merit.

3. Conclusion

Therefore, the judgment of the court of first instance is unfair with different conclusions, so the judgment of the court of first instance is revoked and the plaintiff's claim is dismissed. It is so decided as per Disposition.