The grace period shall not be invalidated even if a company which has been postponed by a small or medium enterprise falls under a related company.

The grace period after graduating from a small or medium enterprise due to its failure to meet the requirements of the small or medium enterprise shall not expire even if the grace period is applicable to a related enterprise.

Enforcement Decree of the Restriction of Special Taxation Act (Scope of Small and Medium Enterprises)

Enforcement Decree of the Small and Medium Enterprises Act (Scope of Small and Medium Enterprises)

revocation of revocation of revocation of rejection of corporate tax revision, Suwon District Court-2015-Gu 65439

AA

o Head of the tax office

November 19, 2015

oly 2016.18

1. The Defendant’s rejection of an application for the reduction of corporate tax for the year 2012 against the Plaintiff on September 4, 2014 is revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

As set forth in the text.

1. Details of the disposition;

A. The Plaintiff, as a company engaged in the manufacturing business of gold parts, etc. by the business year of 2009, was subject to special taxation under the Restriction of Special Taxation Act by the business year of 2010, and did not constitute a small or medium enterprise by exceeding KRW 100 billion. However, pursuant to the main text of Article 2(2) and proviso to Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 24368, Feb. 15, 2013; hereinafter the same), the Plaintiff was subject to the grace period from 2010 to 2013

B. As of the business year 2012, the Plaintiff is an enterprise subject to external audit pursuant to Article 2 of the Act on External Audit of Stock Companies. As of December 31, 201, the Plaintiff holds 51% of the shares of AA Stock Companies (including shares held by relevant parties) as of December 31, 201.

C. The Plaintiff, in accordance with Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act, deemed the grace period for small and medium enterprises in the business year of 2012 as well as the grace period for small and medium enterprises, applied the tax credit for research and development expenses and the tax credit for job creation investment under the Special Cases Concerning Small and Medium Enterprises under the Restriction of Special Taxation Act, and reported and paid corporate tax calculated by applying

D. On August 7, 2013, the Defendant: (a) directed the Plaintiff on August 7, 2013; (b) the Plaintiff, as a related company, to file a revised return; (c) the Plaintiff failed to meet the standards prescribed in Article 2(1)3 of the Enforcement Decree of the Restriction of Special Taxation Act; and (d) Article 3(1)2(c) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 25302, Apr. 14, 2014; hereinafter the same) and the grace period is not applicable pursuant to Article 2(2)3 proviso of the former Enforcement Decree of the Restriction of Special Taxation Act; and (d) accordingly, (c) provided that the assessment of corporate tax by granting tax credit, etc. on the premise that the Plaintiff

E. After July 3, 2014, the Plaintiff filed an application for reduction of corporate tax with the Defendant on the premise that the Plaintiff falls under the scope of the grace period for small and medium enterprises and filed an application for reduction of corporate tax with the OO members on the premise that the return of the existing corporate tax was lawful. However, the Defendant dismissed the application on September 4, 2014 (hereinafter “instant disposition”).

F. The Plaintiff appealed and filed an appeal with the Tax Tribunal on October 24, 2014, but was dismissed on March 19, 2015.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 3, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition should be revoked on the grounds that it is unlawful for the following reasons.

1) Article 2(2) proviso 3 of the former Enforcement Decree of the Restriction of Special Taxation Act applies only to a case where a small or medium enterprise becomes not a small or medium enterprise for the first time because it falls under a non-corporate entity under Article 2(1)3 of the same Act. Thus, the instant disposition that applied the proviso of Article 2(2) proviso of the former Enforcement Decree of the Restriction of Special Taxation Act to a non-corporate entity for reasons other than each subparagraph of Article 2(2) proviso of the former Enforcement Decree of the Restriction of Special Taxation Act is not applicable again to a case where a "corporate subject to the grace period" falls under a non-corporate entity under Article 2(1)3 of the former Enforcement Decree of the Restriction of Special Taxation Act. Therefore, the Defendant’s disposition

2) Even if Article 2(2)3 proviso of the former Enforcement Decree of the Restriction of Special Taxation Act applies to the Plaintiff who was subject to the grace period, Article 3 subparag. 2(c) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises was newly established by Presidential Decree No. 21368, Mar. 25, 2009, and the said provision became effective from 2012 under the former Enforcement Decree of the Restriction of Special Taxation Act, and thus, the Plaintiff’s grace period should be recognized pursuant to Article 2(5) of the former Enforcement Decree of the Restriction of Special Taxation Act. Therefore, the instant disposition that was conducted without applying the grace period on the premise of the Defendant is unlawful

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that where a small or medium enterprise falls under the requirements for exclusion from small or medium enterprise under the proviso of paragraph (1) due to expansion of its size or fails to meet the standards for size of small or medium enterprise under paragraph (1) 1, the first taxable year to which the date on which such cause occurred belongs and the next three taxable years shall be seen as small or medium enterprise, and the grace period shall not apply to cases where it does not fall under a small or medium enterprise due to failure to meet the requirements for substantial independence under Article 2(2) proviso of the former Enforcement Decree of the Restriction of Special Taxation

In full view of the following circumstances, it is reasonable to view that the Plaintiff’s existing grace period granted to the Plaintiff is not null and void, even if the Plaintiff’s introduction of corporate standards as a requirement for small and medium enterprises under the Enforcement Decree of the Framework Act on Small and Medium Enterprises and the former Enforcement Decree of the Restriction of Special Taxation Act does not constitute “small and medium enterprises” under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act, since the annual sales in 2010 exceed KRW 100 billion, and is subject to the grace period under Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act. Therefore, the instant disposition based on the premise that the provision of grace period applied to the Plaintiff under the Enforcement Decree of the Restriction of Special Taxation Act becomes null and void (the remainder of the Plaintiff’s first assertion is not determined).

1) Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that “Where a small or medium enterprise falls under the proviso of paragraph (1) other than the said paragraph due to the expansion of its size, etc. or does not fall under a small or medium enterprise as a result of exceeding the standards set forth in subparagraph 1 of the said paragraph, only the first one time shall be deemed a small or medium enterprise for the taxable year to which the date on which the cause thereof occurred and the next three taxable years thereafter, and shall be determined by the provisions of paragraph (1) for each taxable year after the expiration of the said period.” According to the language and text of the above provision, if a small or medium enterprise ceases to fall under a small or medium enterprise due to the expansion of its size, etc., it shall be interpreted that it

2) In addition, the language and text of the aforementioned relevant statutes and the Enforcement Decree of the Restriction of Special Taxation Act amended by Presidential Decree No. 26070, Feb. 3, 2015 excludes the grounds for the restriction on the grace period in cases where a small or medium enterprise does not fall under a small or medium enterprise beyond the relevant corporate standards. It appears that the issue of whether to grant the grace period is the legislative policy. The Enforcement Decree of the Framework Act on Small and Medium Enterprises amended by Presidential Decree No. 21368, Mar. 25, 2009, when a company falling under a small or medium enterprise under the former Enforcement Decree as at the time of the enforcement of the amended Enforcement Decree of the Restriction of Special Taxation Act, introduced the relevant corporate standards as a requirement for substantial independence of a small or medium enterprise, does not fall under the category of a small or medium enterprise subject to the grace period under the main sentence of Article 20 of the Enforcement Decree of the Restriction of Special Taxation Act, and Article 201 of the former Enforcement Decree of the Restriction of Special Taxation Act does not apply to a related company.

3) Furthermore, the latter part of Article 2(2) proviso of the former Enforcement Decree of the Restriction of Special Taxation Act explicitly states that a grace period shall not apply to a company under a grace period when it fails to meet the requirements for a small or medium enterprise due to its merger with a company under a grace period. However, in light of the fact that the former part of the proviso of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act does not explicitly stipulate whether a grace period expires, unlike merger, in the case of a related company’s satisfaction with the standards for a merger, it is difficult to regard the former part of Article 2(2) proviso of the former Enforcement Decree of the Restriction of Special Taxation Act as a provision to invalidate a grace period already granted to a company under a grace period like the Plaintiff (Article 2(2) proviso of the former Enforcement Decree of the Restriction of Special Taxation Act even if it is interpreted that a grace period will be excluded immediately after the lapse of a grace period from the time of the grace period. In this respect, it is difficult to interpret the latter part of Article 2(2) proviso of the Restriction of Special Taxation Act as a grace period.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified, and it is so decided as per Disposition.