(영문) 인천지방법원 2017. 08. 18. 선고 2016구합54132 판결

Any income earner shall revoke all of the notification of change in income amount which consists of F00 S00 S00 (Mono), income amount of 2,608,970,250 won.

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

Cheong-gu Office

The same shall apply to the order.

Reasons

1. Circumstances and basic facts of the disposition;

(a) F************************************* (hereinafter referred to as “unconforming”).

On November 18, 2009, the plaintiff who is in the status of a complete subsidiary of a Chinese legal entity (hereinafter referred to as "Korean legal entity") shall be subject to the former International Tax.

The foreign related party under Article 2 (1) 9 of the Adjustment Act (amended by Act No. 11126, Dec. 31, 201; hereinafter referred to as the "former International Tax Adjustment Act") also determined the interest rate of USD 10,000 per annum 2.6% [this time 2.6% per annum 2.6% [the AFR [the AFR : the interest rate published monthly for the purpose of collecting the federal income tax (hereinafter referred to as the "former International Tax Adjustment Act") as well as F***********************(Beruda) Lt.(hereinafter referred to as the "LFR")] of the United States corporation as the interest rate published every month for the collection of the federal income tax, and determined the annual corporate tax for each business year of 2010 or less (hereinafter referred to as the "business year of 201 or less, 2015.10%) and 216% of the Plaintiff'201 or 2014.14 business year of the business year of the year of 2010.

A. On the ground that the annual interest rate of 2.6% in the transaction of this case does not reach 5.2038% per annum corresponding to the arm’s length price under the former Adjustment of International Taxes Act (=the interest rate of time deposit with one-year maturity as of the date of the transaction of this case + the interest rate of 3.76% per annum under the National Tax Service’s arm’s length price decision system for payment guarantee (hereinafter “National Tax Service Model”) 1.438% per annum, while conducting a tax investigation on the transaction of this case, the Plaintiff obtained from the transaction of this case during

The interest income amounting to KRW 5,082,441,234 (=the interest income amounting to KRW 2,608,970,250 for the business year 2010 + the interest income amounting to KRW 2,473,470,984 for the business year 201) was omitted.

C. Defendant 00 Commissioner of the Regional Tax Office: (a) on March 2, 2016, pursuant to the result of the tax investigation under the above paragraph (b).

As to the income earner, F*************** (*), income amount was notified of the change of income amount of KRW 2,608,970,250, and Defendant 00 on March 16, 2016, upon notification of the change of income amount to the director of the regional tax office, the director of the regional tax office imposed a disposition of imposition of corporate tax amount of KRW 940,893,780 (including additional tax) on the Plaintiff on March 16, 2016 and imposed a disposition of imposition of KRW 837,255,830 (including additional tax) on the Plaintiff on April 4, 201 (hereinafter referred to as “each disposition of this case”).

D. On May 26, 2016, the Plaintiff filed an appeal with the Tax Tribunal on each of the instant dispositions.

On October 18, 2016, the Tax Tribunal dismissed the above appeal.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 1 through 4 (including additional number), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

Defendant 00 Commissioner of the Regional Tax Office, based on Article 5(1)1 through 5 of the former Enforcement Decree of the Adjustment of International Taxes Act (amended by Presidential Decree No. 23600, Feb. 2, 2012; hereinafter referred to as the "former Enforcement Decree of the International Tax Adjustment Act"), determined that the method of calculating the arm's length price under Article 7(1)1 through 5 of the former Enforcement Decree of the Adjustment of International Taxes Act cannot be applied to the instant transaction. Based on Article 7(6) of the same Act, the Commissioner of the Regional Tax Office, based on the premise that: (a) the Plaintiff’s retained earnings reserved in the Republic of Korea from the instant transaction are merely a short-term transaction in the United States; and (b) the Plaintiff, as a domestic corporation, could not be considered in calculating the arm’s length price for the instant transaction; and (c) the Plaintiff, based on the premise that the Plaintiff’s retained earnings reserved in the Republic of Korea corporation, was deposited with interest rate of deposit or investment and dividend; (d) the Plaintiff’s opportunity to use the fixed deposit model of 1000 U.

However, the computation of the arm's length price pursuant to Article 5 (1) 6 of the former Adjustment Act is possible only when the arm's length price cannot be calculated by the method under Article 5 (1) 1 through 5 of the former Adjustment Act as stipulated in the proviso of Article 5 (1) of the former Adjustment Act. The director of the regional tax office of 00 et al. calculated the arm's length price pursuant to Article 5 (1) 6 of the former Adjustment Act immediately without any proof as to the fact that the arm's length price cannot be calculated by the above method.

the director of regional tax office of defendant 00 shall be appointed pursuant to Article 5(1)6 of the former Adjustment of International Taxes Act.

Without considering the fact that the instant transaction, while calculating the upper price, the Plaintiff, a domestic corporation, lent US$ 10,000 to the Do community corporation, the Plaintiff applied the interest rate on time deposit in Korean won to the Korean won, which is not specially related to the instant transaction, and did not fully consider the expenses incurred in converting the said transaction into currency, and the expenses incurred in extinguishing the risks, such as exchange loss due to exchange rate fluctuations (or so-called "hedge expenses"). In addition, the interest rate on time deposit in Korean won to the Korean won, which is not specially related to the instant transaction, was applied to the estimated loss rate based on the National Tax Service model that lacks rationality. Accordingly, each of the instant dispositions by the Defendants following the calculation of the arm's length price as above, should be revoked in entirety because

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination

1) Interpretation of relevant legal principles and relevant statutes

In order for a tax authority to impose a tax on a resident’s foreign related party based on an arm’s length price, based on applying Article 4(1) of the former Adjustment of International Taxes Act, it shall choose the most reasonable arm’s length price calculation method based on the data collected through a request, etc. for the submission of data to the taxpayer. In a case where the difference in the compared circumstances significantly affects the compared transaction’s price or net profit, the difference shall be reasonably adjusted and calculated. The tax authority bears the burden of proving that the arm’s length price, which forms the basis for the taxation, was lawfully calculated through such a process (see, e.g., Supreme Court Decisions 9Du3423, Oct. 23, 201; 201Du6127, Dec. 26, 2012).

Meanwhile, the main sentence of Article 5(1) of the former Adjustment of International Taxes Act provides that "the normal price shall be the price calculated by the most reasonable method among the methods in each of the following subparagraphs," and the proviso of subparagraph 6 provides that "the method in subparagraph 1 through 5 of Article 5 of the former Adjustment of International Taxes Act shall apply only where the arm's length price cannot be calculated by the methods in subparagraphs 1 through 5 of Article 5 (1) of the former Adjustment of International Taxes Act," and "other reasonable methods determined by Presidential Decree" under Article 5(1)1 through 5 of the former Adjustment of International Taxes Act, "the method in which the arm's length price cannot be calculated by the methods in subparagraphs 1 through 5 of Article 5 of the former Adjustment of International Taxes Act

A supplementary application shall be made only when the arm's length price cannot be calculated due to "the method of net profit ratio", etc.

It is obvious that the text can be seen as clear.

2) In calculating the arm’s length price of the instant transaction, Article 5(1) of the former Adjustment of International Taxes Act

Whether the method provided for in subparagraphs 1 through 5 can not be applied

In light of the following circumstances where evidence revealed the overall purport of the pleading, it is difficult to view that the transaction of this case constitutes a case where the method stipulated in Article 5(1)1 through 5 of the former Adjustment of International Taxes Act is not applicable. Thus, the arm’s length price calculated by adding the additional interest rate according to the National Tax Service model to the interest rate on time deposit in Korean won at the domestic market by the director of the regional tax office, cannot be deemed a lawful calculation in accordance with Article 5(1) of the former Adjustment of International Taxes Act.

A) The instant transaction is a domestic corporation with a special relationship with the Plaintiff, which is a resident. ① Article 2(1)1 of the former Adjustment of International Taxes Act provides that an international transaction is “the sale and lease of tangible or intangible assets, the provision of services, the lending and borrowing of money, and other transaction related to profits and losses and assets of the trader.” Thus, it is difficult to view the instant transaction as an asset or service transaction. In calculating the arm’s length price for the instant transaction, Article 5(1)2 of the former Adjustment of International Taxes Act (the method of resale price: if a resident and a foreign related party sell assets again to an unrelated party after the transaction, the price calculated by subtracting the amount which can be seen as the purchaser’s normal profit from the selling price, from the purchaser’s normal profit, and Article 2(1)1 of the former Adjustment of International Taxes Act provides that the said transaction is “the sale and purchase and lease of tangible or intangible assets, the provision of services, and other transaction related to profits and losses of the trader.” Article 5(1)3 of the former Adjustment of International Taxes Act (the method of allocation between residents and foreign related party cannot be seen as the Plaintiff’s trading price.)

B) However, as to the instant transaction, insofar as it cannot be objectively impossible for a domestic corporation to lend a insufficient transaction between a resident who is a non-related foreign corporation and a non-related foreign corporation, and such transaction does not exist at all, insofar as there is no evidence to deem that the said transaction does not exist at all, Defendant 00 Director of the Regional Tax Office, who has conducted a tax investigation, has high possibility of comparison, high possibility of securing and using the data used, high possibility of economic conditions, etc., high degree of correspondence to the reality, and impact on the computation of the arm’s length price of the used data or established family defects, and the method of computation was not found. In calculating the arm’s length price of the instant transaction, Article 5(1)1 of the former Adjustment of International Taxes Act (non-interparty pricing method: Method of deeming an arm’s length price between a resident and a foreign related party under similar circumstances in an international transaction between them) or Article 5(1)5 of the former Adjustment of International Taxes Act (i.e., a transaction between a foreign related party and a resident and a related party without special relationship.

(C) ① The AFR published each month by the AFR is used as a standard for determining whether the interest rate applicable to loan transactions between related parties is appropriate, and the AFR-related regulation provides that “the provisions apply to loan of money among class members of an enterprise controlled by the AFR,” and that “the provisions are not applicable to loan of foreign currency,” not only are the subject of AFR, but also the AFR-related transactions are not limited to less than those within the United States, and it appears that AFR may be applicable to the AFR-related transactions between affiliates of a corporation within the United States;

(2) In addition, AFR is published every month, even if it is a transaction between related parties.

Inasmuch as it appears on the premise that the low-income transaction based on such interest rate may actually take place or may be assessed at an appropriate level compared with the transaction between unrelated parties, there is room to deem that a subsidiary company of the United States corporation, such as Do community corporation, is able to make a transaction by borrowing from the United States corporation, etc. with a special relationship with the United States corporation, etc., and thus, it would be able to enter into a transaction at the prescribed interest rate under AFR, barring special circumstances. Thus, it is reasonable to deem that an affiliate company of the United States corporation, such as an affiliate company of the United States corporation, which is a wholly owned subsidiary of the United States corporation, may take into account AFR as the case, etc.

D) In addition, the short-term AFR is calculated by taking account of the monthly average market rate of Treasury Bill which is a short-term state bond issued by the Treasury of the United States of America with a maturity of three years or less, and the mid-term AFR is calculated by taking into account the monthly average market rate of the products with a maturity of three to nine years out of the Treasury Bil, and the long-term AFR is calculated by taking into account the market rate of the products with a maturity of nine years or more, such as the monthly average market rate of the products with a maturity of nine years or more among Treasury Bil, and thus, it can be sufficiently utilized as one factor to verify the market price of the products in the course of international short-term transactions.

3) In the event of assumption that Article 5(1)6 of the former International Tax Adjustment Act applies, the Defendant’s calculation

Whether a reasonable arm's length price can be recognized

Even if it is assumed that the arm's length price of the instant transaction cannot be calculated by the method under Article 5 (1) 1 or 5 of the former Adjustment of International Taxes Act, in light of the following circumstances, the director of the regional tax office, based on Article 5 (1) 6 of the former Adjustment of International Taxes Act, cannot be said to constitute "a method deemed reasonable in light of the substance and practice of the transaction" under Article 4 (3) of the former Enforcement Decree of the International Tax Adjustment Act.

A) The Plaintiff leased USD 10,000, which was reserved in the company, to Ba community corporation, a related party, through the instant transaction. Defendant 00 Commissioner of the Regional Tax Office determined that the amount equivalent to the interest that the Plaintiff would have to deposit the said money in Korean currency to the domestic fixed deposit was the opportunity cost incurred from the instant transaction, and thus becomes the premise for the computation of the arm’s length price. However, Defendant 00 Commissioner of the Regional Tax Office’s computation method as above is difficult to readily conclude that the Plaintiff had deposited USD 10,00 in Korean currency with KRW 10,00,000, without considering the exchange rate difference or change in exchange rate if the Plaintiff did not engage in the instant transaction. Even if the Plaintiff had deposited 10,000 in Korean currency at the domestic time, it does not fit the Plaintiff’s incidental expenses (in preparation for exchange expenses, exchange rate fluctuations, or loss from exchange rate fluctuations) incurred therefrom.

B) As mentioned earlier, “transaction and practice” in accordance with the substance and practice of transactions under Article 5(1)6 of the former Adjustment of International Taxes Act and Article 4(3) of the former Enforcement Decree of the International Tax Adjustment Act is deemed to be between persons who are not foreign related parties. In the event that an international transaction is leased between persons, other than foreign related parties, the arm’s length price is determined according to the supply and demand of the international transaction for the shortfall. During that process, consumers and suppliers determined the arm’s length price in accordance with the main international interest rate, such as the LIBR interest rate (LL) interest rate, the delivery rate of deposit certificates in the United States, the return rate on distribution of deposit certificates in the United States, the lender, or the borrower’s residing in the country where the lender or the borrower resides, taking into account various factors such as interest rates or exchange rates, which are the highest interest rate for the difference between the lender and the borrower desired to be the most reasonable rate in assessing the arm’s length price from the standpoint of the director of the regional tax office in Korea.

C) Meanwhile, the Defendants asserted that the National Tax Service model is a credit rating model based on the financial model development methodology used by the credit information company or financial institution, and suggested that the difference in the additional interest rate corresponding to the standardized credit rating of the parent company and its subsidiaries is "the method of calculating the arm's length price." However, it is desirable that the foreign related party should have designed the model using the defaulted data of the country in which the foreign company is located, since the calculation of the expected loss rate among the additional interest rates based on the credit rating of the foreign related party is aimed at assessing the credit rating of the foreign company and calculating the default rate. However, it is desirable that the National Tax Service model should have used the defaulted data of the country in which the foreign company is located. However, the National Tax Service model is not consistent with the reality. ② The National Tax Service model uniformly assessed the credit rating model of the Financial Supervisory Service based on the calculation of the expected loss rate by the National Tax Service model without distinguishing the difference by industry such as the type of business of the company, etc.

D. Sub-committee

Therefore, it is difficult to see that the method under Article 5 (1) 1 through 5 of the former Adjustment of International Taxes Act can not be applied to the transaction of this case, so it is impossible to calculate the arm's length price on the basis of the "other reasonable method" under Article 5 (1) 6 of the same Act as asserted by the commissioner of the regional tax office of 00. The calculation method of the arm's length price of the defendant 00 director for the transaction of this case based on Article 5 (1) 6 of the former Adjustment of International Taxes Act is also unreasonable. Thus, the defendants' each disposition of this case on the premise that the arm's length price can be calculated based on Article 5 (1) 6 of the former Adjustment of International Taxes Act, and that it is reasonable to calculate the arm's length price of the

3. Conclusion

Therefore, the plaintiff's claim against the defendants is justified, and all of them are accepted, and it is so decided as per Disposition.

심급 사건

인천지방법원 2017.08.18.선고 2016구합54132

-서울고등법원 2018.07.18.선고 2017누72074

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