Cho High Court Decision 2015Na0406 ( October 30, 2015)

Since it cannot be deemed that the head office is actually relocated, it is legitimate to exclude the reduction or exemption of the head office from the relocation.

Since the business performance of the plaintiff's main business was conducted in Seoul office, it cannot be deemed that the main office was relocated to the local government, and it does not violate the principle of good faith.

Daejeon District Court 2015Guhap104304 Disposition of revocation of the imposition of corporate tax

Co., Ltd. 00

00. Head of tax office

obs 2016.12

oly 2016.23

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 15,320,304,570, corporate tax for the year 2009 against the Plaintiff as of September 1, 2014, and the imposition of KRW 79,650,190, and corporate tax for the year 2010 shall be revoked in all.

1. Details of the disposition;

A. On April 23, 2001, the Plaintiff is a company established for the purpose of software development and service business (hereinafter “Plaintiff company”).

B. On December 28, 2005, EWR acquired the Plaintiff Company under the name of ETR, and on January 20, 2006, changed from 00,000,000,000,000,000,000,000 from 00,000,000,000,000,000,000,000,000 (hereinafter referred to as the “instant office”) from the location of the headquarters on the registry. This is a person who worked for 9 years as the head of EW building management office owned by EWG, 00,00,000,000,000.

C. On November 23, 2007, 200 U.S. Co., Ltd. (hereinafter “00 U.S.C”) and TGADX (hereinafter “TGADX”) acquired 49% of the shares of the Plaintiff Company, and the remaining 2% acquired by Kim GGR, who is in charge of tax consultation, such as EG and EWR, and the details of the change of shareholders of the Plaintiff Company before and after that time are as follows.

(Omission - Details of shareholders change)

D. The 000 U.S.C. is a company established on November 17, 2007 (capital KRW 50 million) with the investment, etc. in non-performing loans and low-evaluation stocks for its business purposes. The current shareholder status is as follows:

E. TG ADX is a company whose business objective is to invest, etc. in a company subject to restructuring, and whose date of AWR is on May 16, 2006, by accepting the entire shares on May 16, 2006, and then changing its representative into AWR on November 2007. The current shareholder status is as follows:

F. On December 5, 2007, EDG, AWR and its children donated 303,800 shares (total amount of 98%, appraised value of 19,747,000,000 shares) to the Plaintiff Company. Next, on August 19, 2009 and December 31, 2009, EDG and AWR donated total of 57,780,94,959 shares of term deposits to the Plaintiff Company and KRW 10.7 billion amount of loan claims.

G. The Plaintiff Company filed a corporate tax return from the business year of 2007 to the business year of 2011 on the basis of the former Restriction of Special Taxation Act (amended by Act No. 8827 of Dec. 31, 2007; hereinafter the same applies) with respect to KRW 21,947,550,469, corporate tax on the increase of assets, profit from asset management, profit from the donation, etc. generated from the same donation, etc., on the basis of Article 63-2 (hereinafter referred to as the “instant reduction provision”) of the same Act (amended by Act No. 8827 of Dec. 31, 2007) that “where the location of the headquarters (the head office or principal office) located in the overconcentration control region in the Seoul Metropolitan area is relocated to outside the Seoul Metropolitan

H. Around February 2013, 00 won: (a) around 00, a regional tax office requested a disposition of a result of audit to the effect that the Plaintiff Company’s additional collection of corporate tax collected insufficient by reviewing whether it constitutes corporate tax reduction and exemption, as it appears to fall under the grounds for additional collection of corporate tax under Article 63-2(7)3 of the former Restriction of Special Taxation Act, such as that the Plaintiff Company has a department in which the Plaintiff Company serves as its head office in Seoul, 00 Dong 0-100, 100 building 4 (hereinafter “00 offices”).

I. Accordingly, as of March 25, 2013, the Defendant imposed corporate tax of KRW 7,579,363,010 on the Plaintiff Company for the business year of 2007, in which the exclusion period was imminent. As of September 1, 2014, the Defendant imposed corporate tax of KRW 15,320,304,570, and corporate tax of KRW 79,650,190, and corporate tax of KRW 75,205,810 for the business year of 2011 for the business year of 209 (hereinafter referred to as “instant disposition”).

(j) On November 21, 2014, Plaintiff Company filed a request for a tax trial on the instant disposition with the Intellectual Property Tribunal (Seoul High Court 2015.00), but the Tax Tribunal rendered a decision to dismiss the Plaintiff Company’s claim on June 30, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 7, Eul evidence 1 through 13 (including branch numbers), the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff company's assertion

1) The issue of whether the Plaintiff constitutes the “principal agent” as provided in the instant reduction provision ought to be determined at the location of the head office or principal office on the corporate registry regardless of whether the Plaintiff’s business is actually a place of business operation, and the instant office, which is the location of the principal office on the corporate registry, constitutes the “principal agent” as provided in the instant reduction provision. Moreover, the Plaintiff Company, after its relocation to the instant office, performed its business such as production on its website, etc., which is the main business. Accordingly, the Plaintiff Company was unlawful in the instant disposition imposing corporate tax on the Plaintiff Company, even though it could be lawfully exempted pursuant to the instant reduction and exemption provision.

2) The Plaintiff Company: (a) made a public opinion statement on October 24, 2006, each of the laws and subordinate statutes as of July 16, 2007; and (b) notified the director of regional tax office of May 20, 2009 of the result of the follow-up management as of May 20, 2009 that the Plaintiff Company may be eligible for corporate tax reduction and exemption pursuant to the provision of the instant tax reduction and exemption; (c) made an additional donation from EG and EWR on August 19, 2009 and made an application for corporate tax reduction and exemption pursuant to the provision of the instant tax reduction and exemption; and (d) made the instant disposition contrary to the existing public opinion statement, against the principle of trust and good faith, and thus, was unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the office of this case constitutes a "principal agent" as provided in the reduction and exemption provision of this case

A) Under the principle of no taxation without law, the interpretation of tax laws and regulations 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 cause. In particular, it accords with the principle of fair taxation to strictly interpret the provisions that clearly indicate preferential provisions among the requirements for reduction and exemption (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009).

The term "head office or principal office" refers to "the head office or principal office" and grants benefits from corporate tax reduction or exemption in cases of transferring all factory facilities or the head office to an area other than the Seoul Metropolitan area in the overconcentration control region in the Seoul Metropolitan area. However, if a corporation that has been granted corporate tax reduction or exemption establishes its head office in the Seoul Metropolitan area, it shall pay corporate tax. This constitutes a preferential provision, which

On the other hand, the provision of this case, one of the criteria for determining the amount of corporate tax reduction and exemption, presents the ratio of the number of employees or executives working at the relocated headquarters. In light of the form, structure, language, etc. of the provision of this case, the purport of the provision of this case is to benefit from corporate tax reduction and exemption to the company that relocates the headquarters or factory from metropolitan area to an area outside the Seoul metropolitan area, and to achieve substantial regional balanced development and the suppression of overconcentration of the Seoul metropolitan area by providing benefit only for the number of employees transferred from the actual metropolitan area to an area outside the Seoul metropolitan area, or for

However, similar to the tax reduction provision of this case, the contents that impose special cases on a corporation that moved its head office, principal office, or factory to an area outside the Seoul Metropolitan area can be found in the "special cases for taxation for balanced development between regions" in Section 6 of the former Act on the Regulation of Tax Reduction and Exemption (amended by Act No. 5561, Sep. 16, 1998; hereinafter the same shall apply) which is a telegraph of the Restriction of Special Taxation (amended by Act No. 5561, Sep. 16, 1998; hereinafter the same shall apply). Since the special cases under the above Regulation of Tax Reduction and Exemption Act were established at the tax policy level, the issue of whether the pertinent requirements are the premise for its application should be determined by the substance rather than by the form thereof (see Supreme Court Decision 96Nu230, May 7, 1997). The purpose and purpose of the former Restriction of Tax Reduction and Exemption Act are locationed in "special cases for balanced development between regions", and the purpose of the former Restriction of Tax Reduction and Exemption Act is in light of the national economy.

B) In light of the above legal principles, we examine whether the office of this case constitutes a “principal agent” as provided in the instant reduction and exemption provision.

On January 20, 2006, the location of the headquarters of the Plaintiff Company’s registry changed from 700:00 to 704-10, 2006, and the fact that the Plaintiff Company was a company for software development and service business, etc. as seen earlier. According to the above evidence, the Plaintiff Company is recognized as having worked in the instant office from 2007 to 2011.

However, the above facts alone are insufficient to recognize that the office of this case is in fact a place where it is in business as the head office or principal office of the plaintiff company, and otherwise there is no evidence to support that the office of this case constitutes a "main office" as provided by the reduction provision of this case. Rather, in full view of the above facts of recognition and the evidence and the following circumstances recognized by the whole purport of oral argument, the office of this case cannot be deemed a place where it is in business as the head office or principal office, and thus, it does not constitute a "main office" as provided by the reduction provision of this case. Accordingly, this part of the plaintiff company's assertion that differs from this premise is without merit.

��이DG과 안WR이 2005. 12. 28. 이RT 명의로 원고 회사를 인수하고 2006. 1. 20. 원고 회사의 등기부상 본점 소재지를 이 사건 사무소로 변경한 이후, 이DG과 안WR의 인수 이전에 원고 회사에서 근무하던 종전 직원들은 모두 퇴사하였다.

② At the instant office, Kim AD and one female employee, the representative director on the registry of the Plaintiff company, were permanently stationed in the office of this case, and all Kim AD and female employees did not have professional knowledge and experience in the production, maintenance and repair of the website.

③ From 2006 to 2011, the Plaintiff Company had much more sales cost, sales cost, and management expense (the annual average sales loss on the income statement reported by the Plaintiff Company during the pertinent period is 1.4 million won). The sales amount in 2009 was KRW 3.29 million for the Plaintiff Company, KRW 1.65 million for the sales amount in 201, and KRW 6,2640 for the sales amount in 201.

④ Madododododo is one of the major customers of the Plaintiff Company, and TW is a joint start-up company between DaG and AWR.

⑤ 00 U.S.C. 00 U.S. and TGAX owned 49% of the shares in the Plaintiff Company. The company is a shareholder. The profits subject to the disposition of this case are most of the stocks, deposits, and assets increase or profit from the bond, and their children did not have profit from the sale of software development services.

6. The above management work of the Plaintiff Company was carried out by Isra, AWR, or was carried out by Israd, AD’s visa. The above DG, AWR, and ED were permanently stationed in the office of 00 and dealt with the above work.

7) Although the Plaintiff Company’s seal held by KimD, the representative director of the Plaintiff Company, the Plaintiff Company, but when the Plaintiff Company operates and manages financial assets, such as stocks and cash, donated by Isra, Ansan, etc., Kim AD visited the Plaintiff Company’s seal, affixed the Plaintiff Company’s seal to 00 office, affixed the Plaintiff Company’s seal to ED, and returned to the instant office upon the completion of its use.

8) The Kim DongD is the head of Kim GGR who is in charge of tax consultation, such as Lee Dog and AnalWR, and Kim TPP, which was an auditor of the Plaintiff company, from January 20, 2006 to April 26, 201, is the head of Kim GGR.

① From 2006 to 2009, the annual wage of KimD was KRW 18,00,000 to KRW 19,200. The representative director of the Plaintiff Company, the representative director of the Plaintiff Company, was the corporation’s corporate profit after its relocation to the instant office, and the Plaintiff Company was unaware of the details and operating status of the property donated to DoG, etc., but was not aware of the corporate profit. In the event that the instant office’s operating expenses are insufficient, the Plaintiff Company was provided with subsidies in the form of a pre-payment from NA.

2) Whether the principle of good faith is violated

A) In general, in order to apply the principle of trust and good faith to the tax authority’s acts in tax and law relations, the tax authority should name the public opinion list that is the subject of taxpayer’s trust; the tax authority’s name of opinion statement is justifiable; the taxpayer does not have any cause attributable to the taxpayer; the taxpayer must trust the opinion statement; and what is the taxpayer’s name should be; and the tax authority made a disposition contrary to the above opinion statement, thereby infringing on the taxpayer’s interest (see, e.g., Supreme Court Decision 2007Du7741, Oct. 29).

In addition, the principle of trust and good faith and the principle of protection of trust in tax and legal relations are exceptional legal principles applicable only to cases where there are special circumstances deemed that the protection of taxpayer’s trust is consistent with the justice even if there is a sacrifice of the principle of legality. Therefore, in order to apply the principle of trust and good faith or the principle of protection of trust to the acts of the tax authority, the trust given by the tax authority through the public opinion statement, etc. should have an average taxpayer reasonable and justifiable expectation. Even if the tax authority expressed a certain opinion through inquiry, if it is followed by questioning without revealing the important facts and legal issues properly, it cannot be deemed that there is a trust given to the legitimate expectation by the public opinion statement (see, e.g., Supreme Court Decision 2011Du5940, Dec. 26, 2013).

B) In light of the above legal principles, in full view of the following circumstances acknowledged by the above facts, the above facts of recognition, the evidence and the purport of the entire pleadings, the disposition of this case is not deemed unlawful as it violates the principle of trust and good faith. Accordingly, this part of the plaintiff company's assertion is without merit.

① As of October 24, 2006 and July 16, 2007, each of the laws and subordinate statutes written by the 00 Administrations is merely a general theory, and it is not based on specific facts as to the Plaintiff Company and the office of this case. Thus, it is difficult to view that there was a statement of view that the provision on reduction and exemption in this case may apply to the Plaintiff Company.

② The notice of the result of the follow-up management review by the Director of the Regional Tax Office of October 24, 2006, 16 July 2007, 2007, and the director of the Regional Tax Office of May 20, 2009 was given without revealing that the office of this case is not the actual head office of the Plaintiff company.

③ In light of the circumstances leading up to the relocation of the headquarters in the Plaintiff Company’s registry and the purport of the provision on mitigation and exemption in this case seeking to promote balanced development among regions, there are no special circumstances to recognize that the trust of the Plaintiff Company is reasonable and justifiable to the effect that the provision on mitigation and exemption in this case applies to the Plaintiff Company.

3. Conclusion

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

Relevant statutes

○ former Restriction of Special Taxation Act (amended by Act No. 8827 of Dec. 31, 2007)

Article 1 (Purpose)

The purpose of this Act is to contribute to the sound development of national economy by ensuring fair taxation and implementing efficient tax policies through prescribing matters concerning special cases of taxation, such as tax reduction or exemption, excessive taxation, etc., along with matters concerning restriction on such special cases.

Article 63-2 (Temporary Special Tax Abatement or Exemption for Relocation of Corporation's Factory and Head Office Outside Seoul Metropolitan Area)

(1) Any corporation meeting the requirements falling under each of the following subparagraphs (hereafter in this Article, referred to as a “corporation relocated to an area outside the Seoul Metropolitan area”) may be subject to the reduction or exemption of corporate tax pursuant to paragraphs (2) through (4): Provided, That this shall not apply to any corporation engaged in consumptive service business

2. A relocation plan shall be submitted at the time of filing the tax base return for the taxable year whereto belongs the date of filing the tax base return for the taxable year whereto belongs the date on which December 31, 2008, as prescribed by Presidential Decree, to the entire factory facilities or the head office outside the Seoul Metropolitan area (in cases where factory facilities are relocated to another Metropolitan City, limited to the industrial complex under the Industrial Sites and Development Act; hereafter the same shall apply in this Article) under the conditions as prescribed by Presidential Decree; and

(2) With respect to the income falling under any of the following subparagraphs, the whole amount of the corporate tax for the taxable year whereto belongs the date of relocation and the taxable year ending within 4 years from the beginning date of the following taxable year, and the tax amount equivalent to 50/100 of the corporate tax for the taxable year ending within 2 years thereafter shall

1. Income accruing from a factory, in case where the factory is relocated;

2. In case of relocated head office, the income equivalent to the amount computed by multiplying the amount under item (a) by the smaller ratio among item (b) or (c).

(a) An amount obtained by subtracting the marginal profits on transfer of rights to acquire land, buildings and real estate from the tax base for the relevant taxable year;

(b) The ratio occupied by the total amount of salaries received after relocation by the relocated head office for the relevant taxable year to the total annual salaries received by all corporations.

(c) The ratio occupied by the employees working at the relocated head office in the Seoul Metropolitan area and at the relocated head office (if the ratio is less than 50/100, it shall be deemed zero).

3. Where a factory and head office are moved together, the income equivalent to the amount computed by adding up the incomes under subparagraphs 1 and 2: Provided, That it shall be limited to the income amount in the relevant taxable year.

(3) In applying paragraph (2) 2, the number of regular employees working at the relocated relocated head office means the number calculated by subtracting the annual average number of regular employees working at the relocated head office from the annual average number of regular employees working at the relocated head office (referring to the number of employees as of the end of each month and dividing it by the number of relevant months; excluding the number of employees working at the relocated head office in an area other than the Seoul Metropolitan area after the taxable year whereto belongs the date on which two years retroactively from the date of relocation to the relocated head office) to the annual average number of employees working at the relocated head office in the taxable year whereto belongs the date on which three years retroactively from the date of relocation; and in such cases, the number of employees working at the head office within the Seoul Metropolitan area after the relocation of the head office means the annual average number of employees working at the head office

(4) In applying paragraph (2) 2, where it falls under any of the following subparagraphs during the period of abatement or exemption of corporate tax, the corporate tax shall not be abated or exempted pursuant to paragraph (2) from the relevant

1. Where the ratio referred to in paragraph (2) 2 (c) falls short of 50/100; and

2. Where the ratio occupied by the number of officers prescribed by the Presidential Decree (hereafter in this Article referred to as the "executives") working at the relocated head office among the total number of officers working at the head office within the Seoul Metropolitan area and at the relocated head office falls short of 50/100

(5) Article 60 (2), (4) and (6) or Article 61 (3), (5) and (6) shall apply mutatis mutandis to corporate tax on gains from the transfer of a factory or head office in the overconcentration control region of the Seoul Metropolitan area by a corporation relocated to another area.

(7) Where a corporation relocated to an area outside the Seoul Metropolitan area, whose corporate tax has been abated or exempted, falls under any of the following subparagraphs, the tax amount calculated under the conditions as prescribed by the Presidential Decree shall be paid as the corporate tax:

1. Where a corporation discontinues its business or is dissolved within 3 years from the date on which it starts its business after relocating its factory or head office: Provided, That this shall not apply to cases due to a merger, division, or

2. Where he fails to start the business by relocating his factory or head office to an area outside the Seoul Metropolitan area under the Presidential Decree.

3. Where the corporation sets up in the Seoul Metropolitan area its head office or a factory producing the same products as those produced at the factory relocated under paragraph (1);

5. Where the relocated head office is established in the Seoul Metropolitan area beyond the standards as prescribed by the Presidential Decree.

6. Where the relocated head office falls under paragraph (4) 2.

(8) Where the corporate tax amount reduced or exempted under paragraph (2) is paid under paragraph (7), the provisions on the additional amount equivalent to interests in Article 40 (2) shall apply mutatis mutandis.

(9) In applying the provisions of paragraphs (1) through (5) and (7), the method of calculating a period, scope of salaries, applications for tax reduction or exemption, and other necessary matters shall be prescribed by the Presidential Decree