Pakistan Co., Ltd. (Law Firm Rate, Attorneys So-young et al., Counsel for the plaintiff-appellant)

Head of Ansan Tax Office

December 22, 2006

Suwon District Court Decision 2005Guhap7618 Decided April 5, 2006

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. The defendant shall revoke the disposition of imposition of KRW 164,819,251 of the corporate tax for the 1999 business year against the plaintiff on June 1, 2004.

1. Quotation of judgment of the first instance;

The reasoning for the court's explanation concerning this case is that "before the amendment by Act No. 6299" in Part 19 of Part 2 is "the amendment by Act No. 6297" among the grounds for the judgment of the court of first instance, and the part of Part 3 "C" in Part 19 of Part 3 is as stated in the grounds for the judgment of the court of first instance, and therefore, it is cited as it is in accordance with Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act.

2. Determination

A. Article 2 subparagraph 1 of the former Support for Small and Medium Enterprise Establishment Act (amended by Act No. 3831 of May 12, 1986) provides that "the scope of the establishment of a new small and medium enterprise shall be prescribed by Presidential Decree." Accordingly, Article 2 (1) of the former Enforcement Decree of the Support for Small and Medium Enterprise Establishment Act (amended by Presidential Decree No. 11984 of July 19, 1986) provides that "the scope of the establishment of a new business means that the scope of the establishment does not fall under any of the following subparagraphs, and it means that the new business is commenced under Article 3 of the Act and Article 3 of the Enforcement Decree of the Support for Small and Medium Enterprise Establishment Act, and Article 2 subparagraph 2 of the same Act provides that "if a small and medium enterprise which is an individual business operator is converted into a corporation or continues the same business as the previous business after changing the form of a corporation, etc., it shall not apply to the scope of the establishment of a new business."

On the other hand, Article 25(1) of the former Support for Small and Medium Enterprise Establishment Act (Act No. 3831) provides that corporate tax, income tax, acquisition tax, property tax and registration tax may be reduced or exempted for technology-intensive small and medium enterprises and founders of agricultural and fishing villages under the conditions as prescribed by the Regulation of Tax Reduction and Exemption Act. The former Regulation of Tax Reduction and Exemption (amended by Act No. 3865 of Dec. 26, 1986) amended by the Act on the Support for Small and Medium Enterprise Establishment and the Enforcement Decree thereof (amended by Act No. 4021 of Dec. 26, 1988), which is the provision of tax reduction and exemption for small and medium enterprises under Article 25(1) of the former Support for Small and Medium Enterprise Establishment Act (amended by Act No. 4021 of Dec. 26, 198), which is the provision of tax reduction and exemption for small and medium enterprises under Article 25(

B. The change in each of the above Acts provides for the scope of a small or medium enterprise subject to the former Support for Small or Medium Enterprise Establishment Act on its behalf pursuant to Article 25 of the same Act. However, “the scope of a small or medium enterprise” prescribed in the former Support for Small or Medium Enterprise Establishment Act has been gradually changed to the former Act on the Regulation of Tax Reduction and Exemption in accordance with Article 25 of the same Act. In particular, the former Act on the Support for Small or Medium Enterprise Establishment (amended by Act No. 4894, Jan. 5, 1995) provides for the scope of a small or medium enterprise’s income for the first time after the date of its establishment under Article 25 of the same Act (amended by Act No. 6194, Jan. 21, 200); “The Act on the Assistance for Small or Medium Enterprise Establishment, etc. (amended by Act No. 972, Dec. 16, 197; hereinafter referred to as “the former Act on the Regulation of Tax Reduction and Exemption in the Small or Medium Enterprise Establishment”).

Meanwhile, the former Act on the Support for Small and Medium Enterprise Establishment, which was amended by Act No. 6194, Jan. 21, 2000, which was confirmed by the Administrator of the Small and Medium Business Administration as a small and medium start-up venture enterprise, has no provision on taxation support for small and medium start-up enterprises, and Article 6 of the former Restriction of Special Taxation Act is applied as a direct basis for the benefits of tax reduction and exemption for small and medium start-up enterprises. The former Restriction of Special Taxation Act amended by Act No. 6297, Dec. 29, 2001 and limited the scope of business start-up by newly establishing the provision that “if a new corporation is established by converting a business operated by a resident into a corporation, it shall not be deemed a start-up business”

C. In light of the principle of no taxation without the law, the interpretation of tax laws and regulations must be strict, barring special circumstances, and the expanded interpretation and analogical interpretation should be interpreted in accordance with the law without permission (see, e.g., Supreme Court Decision 2002Du5955, Mar. 12, 2004). However, if the concept of a specific term is not separately defined in the pertinent law, it should be examined whether the concept can be determined in the system with other provisions within the pertinent law. If it is difficult to do so, the meaning should be interpreted on the premise of the terms or concepts used in the pertinent law directly or premised on the pertinent law for the systematic interpretation of the pertinent law.

However, in full view of the details of the provision on special taxation for small and medium enterprises under the former Regulation of Tax Reduction and Exemption Act and the process of comprehensively regulating the special taxation for small and medium enterprises under the former Regulation of Tax Reduction and Exemption Act, it is reasonable to deem that the former Regulation of Tax Reduction and Exemption Act intends to grant benefits for tax reduction and exemption to small and medium enterprises under the premise of the establishment of a small and medium enterprise under the former Support of Tax Reduction and Exemption Act and the Enforcement Decree thereof. In addition, even if the former Restriction of Special Taxation Act was newly enacted a provision that restricts the scope of the establishment of a small and medium enterprise under the former Restriction of Tax Reduction and Exemption Act and the Enforcement Decree thereof, the scope of the “small and medium enterprises’ establishment” under the former Restriction of Special Taxation Act is clearly defined as the scope of the “small and Medium Enterprises Establishment Support Act and the Enforcement Decree thereof,

D. Therefore, in a case where the Plaintiff was converted into an individual entrepreneur, it does not constitute a “business start-up small and medium enterprise” which is a requirement for corporate tax exemption under the former Restriction of Special Taxation Act. Thus, even if the Defendant erroneously applied Article 6(4) of the former Restriction of Special Taxation Act, which was amended by Act No. 6297, Dec. 29, 200, to the ground provision, the instant disposition does not contravene the principle of retroactive taxation prohibition or the principle of clarity of tax requirements.

3. Conclusion

Therefore, the judgment of the court of first instance is legitimate, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

Judges Kim Jong-soo (Presiding Judge)