LSF case and one other (Law Firm LLC, Attorneys Kang Han-hun et al., Counsel for the plaintiff-appellant)

The director of the Nam-gu Tax Office (Attorney Soh-ho et al., Counsel for the plaintiff-appellant)

October 17, 2014

1. A. On July 9, 2012, the part that exceeds KRW 210,394,417,039, among the disposition rejecting correction of KRW 387,645,171,890 as of March 5, 2012, the Defendant’s disposition rejecting correction of KRW 210,39,39,00,000,000,000.

B. Of the disposition of withholding corporate tax of KRW 4,307,168,570 (including additional tax) for the business year 2010 to the Plaintiff Han Financial Branch Co., Ltd. on February 1, 2013, the part exceeding KRW 2,37,715,744 of the disposition of withholding taxes of KRW 2,37,715

Each cancellation shall be revoked.

2. The plaintiffs' remaining claims are dismissed.

3. Of the costs of lawsuit, 1/2 shall be borne by the Plaintiffs, and the remainder by the Defendant.

1. The Defendant’s disposition rejecting correction of KRW 387,645,171,890 as of March 5, 2012, issued to Plaintiff LSF C on July 9, 2012, was revoked.

2. The Defendant’s disposition of withholding corporate tax of KRW 4,307,168,570 (including additional tax) for the business year 2010 against the Plaintiff Han Financial Branch Co., Ltd. on February 1, 2013 shall be revoked.

1. Details of the disposition;

A. Plaintiff LSF case (hereinafter “Plaintiff SC”) is a legal entity established in accordance with the Belgium (hereinafter “Belgium”). Plaintiff SC transferred the total amount of KRW 3,915,607,796,800 (hereinafter “instant shares”) shares issued by Korea Exchange Bank Co., Ltd. (hereinafter “Korea Exchange Bank”) to the Plaintiff Han Financial Branch Co., Ltd. (hereinafter “Plaintiff”) on February 9, 2012, 329,042,672 shares issued by Korea Exchange Bank Co., Ltd. (hereinafter “Korea Exchange Bank”).

B. On January 18, 2012, the director of the Seoul Regional Tax Office notified the Plaintiff IF that “The Plaintiff is liable to withhold the instant capital gains.” Accordingly, on March 5, 2012, the Plaintiff IF withheld and paid KRW 391,560,779,680, equivalent to 10% of the instant capital gains, to the Defendant, and paid the remainder to Plaintiff IF.

C. (1) On May 9, 2012, Plaintiff SC requested correction pursuant to Article 4 and Article 13 of the Convention between the Republic of Korea and Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Korea-Belgium Tax Treaty”), on the ground that “No taxation may be levied on capital gains accruing from the transfer of stocks.” However, the Defendant did not notify the Plaintiff that the tax base and tax amount should be determined or corrected, or that there is no reason to make any decision or correction within two months thereafter, thereby deeming that it refused the request for correction pursuant to Article 45-2(3) of the Framework Act on National Taxes (amended by Act No. 11604, Jan. 1, 2013; hereinafter the same) (hereinafter “instant disposition rejecting correction”).

(2) On December 20, 2012, the Defendant voluntarily cancelled and refunded the portion of KRW 3,915,60 (excluding refund excluding refund ) equivalent to 10% of advance payment, on the ground that “The instant share purchase and sale contract was concluded on November 29, 2010 and paid KRW 39,156,07,968 as advance payment around that time, the obligation to withhold withholding tax was established in the business year 2010.” On the other hand, the Defendant issued a withholding disposition on February 1, 2013 (including additional tax) of corporate tax of KRW 4,307,168,570 (including additional tax) to the Plaintiff Finance for the business year 2010.

D. Plaintiff E.C. filed each appeal on August 17, 2012, and Plaintiff L.C. on March 29, 2013, but was dismissed by the Tax Tribunal on June 18, 2014.

[Ground of recognition] Facts without dispute, Gap's 1 to 7, 36 to 40 evidence (including paper numbers), the purport of the whole pleadings

2. Whether the lawsuit of this case is lawful

A. The defendant's assertion

Since a withholding agent for the transfer income of this case is a financing company of the Plaintiff, Plaintiff SC is not the person who is not the person who is the person who is the subject of the claim for correction. In addition, the subject of the claim for correction is the person who is the person to whom the transfer income of this case belongs pursuant to the substance over form principle, and Plaintiff SC merely is the person to whom the transfer income of this case belongs under the pretext of the transfer income of this case. Therefore, Plaintiff SC does not have a standing to sue against the disposition of refusal of correction of this case. Thus, the lawsuit

B. Determination

(1) Article 45-2(4) of the Framework Act on National Taxes provides that “Where a person having domestic source income falling under Article 93 subparag. 1, 2, 4 through 6, and 8 through 10 of the Corporate Tax Act (amended by Act No. 11607, Jan. 1, 2013; hereinafter the same) falls under any of the following subparagraphs, a person subject to withholding (hereinafter referred to as “person subject to withholding subject to withholding”) may file a request for correction with the head of the competent district tax office.” Article 45-2(4) of the same Act provides that “Where a withholding agent pays corporate tax withheld at source in accordance with Article 98 of the Corporate Tax Act and submits a payment record within the submission deadline in accordance with Article 120.”

(2) According to the evidence Nos. 1 and 2 of this case, it is not easy to determine whether a person who was not entered in the statement of payment is the actual owner of income, and it is difficult to expect that he would make a request for correction on the premise that he is the actual owner of income. (4) Since the income or the recipient of income amount is not the unit of tax liability, it is not the intrinsic element of the corporate tax withheld, as corporate tax is withheld under the name of the income earner under Article 120 of the Corporate Tax Act, so long as corporate tax on domestic source income has been withheld under the name of the income earner, the income earner has legal interest to make a request for correction in the name of the income earner in order to avoid the income tax liability imposed on him. (3) It is difficult to determine whether a person who was not entered in the statement of payment on the statement of payment is the actual owner of income, and therefore, it is not reasonable to distinguish the income amount or income amount from the corporate tax withheld, and thus, the tax authority is not the actual owner of income but the actual owner of income from the tax base return.

3. Whether the instant disposition is lawful

A. The plaintiffs' assertion

(1) As to the application of the Korea-Belgium Tax Treaty

Plaintiff SC as a Belgium resident, reported income subject to taxation in the Belgium, and the tax authorities in the Belgium explicitly confirmed Plaintiff SC as a resident. Since a limited partnership, which is the aggregate of investment funds, exists independently as a profit-making organization performing its own business activities, it shall be deemed as the beneficial owner of income. In addition, in order to view Plaintiff SC as a sole entity, only performed the role of the transaction party in form, and there is a separate person who actually controls and manages it. The disparity between such form and substance is derived from the purpose of tax avoidance and the independent economic profit is not recognized. Plaintiff SC was active through Lone Star Capital Management SPL (hereinafter “lsM”), so there was sufficient human and material elements. Meanwhile, Plaintiff SC did not have the burden of proving that it is the beneficial owner of income and the actual existence of the Plaintiff’s income belongs to the Defendant.

Therefore, since the transfer income of this case belongs to Plaintiff SC, it is necessary to apply the Korea-Belgium Tax Treaty.

(2) As to the application of the Korea-U.S. Tax Treaty

The instant transfer income was reverted to final investors, and the resident states and the Republic of Korea of final investors have concluded the Convention between the Republic of Korea and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and the Encouragement of International Trade and Investment (hereinafter “Korea-U.S. Tax Treaty”), the Korea-U.S. Tax Treaty, the Korea-U.S. Tax Treaty, the Korea-U.S. Tax Treaty, the Korea-U.S. Tax Treaty, the Korea-U.S. Tax Treaty, the Korea-U.S. Tax Treaty, the Convention on the Privilege and Exemption of the United Nations, and the International Monetary Fund Agreement (IMF)

A person shall be appointed.

(b) Related statutes;

It is as shown in the attached Table related statutes.

(c) Fact of recognition;

The investment structure of the instant stock investment is as stated in the attached Form “The investment structure of the instant stock” and the investment shares, structure, etc. are as follows.

(1) An overview of the investment of Plaintiff SC

(A) Lone Star Fund U.S. Lone Star Fund (Lone Star Fund IV (U.S.), L.P., hereinafter “Lone Star U.S.”) is established under the laws of the United States Dedelawa (Dete) and the U.S. investors invest as limited partners (hereinafter “GP”), and the rest of Lone Stared Partn (hereinafter “LP”) is an entity’s legal system in the form of limited liability only within the scope of shares. In general, the general partner has expertise in managing the fund and executes the daily business of the fund, and bears unlimited liability for partnership activities, while limited liability partners are passive investors that do not actively participate in the management of the fund, and are liable for investment risks arising from investment activities of partnership partners within the scope of investment limits).

Hudco Partners Korea Ltd. (Hudco Partners IV, Korea, Ltd, hereinafter “Hudco Partnership”) is a community corporation established under the laws of the State of Bada to provide Lone Star Fund’s subsidiaries and employees in the Republic of Korea with investment opportunities.

Lone Star Funds, Funds, Bolivia Korea L.P., Lone Star Fund, Lone Star Fund, L.P., L. L. L.), V. V. L. V. L. L.P., K. V. V. L. L. L.P., K. B. V. V. L. L. L.P. H., K. V. V. L. L. V. L. V. L, V. V. V. L. V. L. L, V. V. L. V. L. L,

The GP of superior investors is Lone Star Partners IV (Beruda) and LSP is 1.00% of Lone Star Partners's equity ratio, and LSP's GP is Loneone Star Entertainment Co., Ltd., IV, Lt (Beruda), and LSMC's equity ratio is 1.0% of Lone Star Holdings's equity ratio, and Loneone Star Entertainment Co., Ltd., Ltd. (hereinafter referred to as lsMC) in which Nonparty 1 (English name omitted) holds 100% of equity ratio.

(B) The upper-tier investors established KEB Hold L.P. (hereinafter “KHL”) in the Republic of Korea, by contributing funds for the purpose of investing in the issued stocks of the foreign exchange bank. On August 21, 2003, the upper-tier investors established Plaintiff SP in accordance with the Belgium Act.

(C) Lone Star U.S., Hudco Partners, Lone Star Funds Korea Ltd., Ltd., in succession, acquired the equity shares of Lone Star Global Holdings (Loneone Loneone Lone World Holdings, Lt) and KHL, which are corporations in the Republic of Korea. The remaining top investors, in succession, acquired the equity shares of Lone Star Venck L (K.P.), which are limited partnership companies established in the Republic of Korea, and L.P., which are corporations established by the Luxembourg law, and L.S. V. Senck Investment (L.) which are corporations established by the Luxembourg law. Of the equity shares of Plaintiff E.S., 99.9% LCI and the remainder of 0.1% of the equity shares of Plaintiff E.C., respectively, were owned by each legal director of the Luxembourg.

(D) ① The ratio of shares of upper investors to Plaintiff SC is as follows.

L.P.21 ② L.P. (Beruda) 8.21 ② HEB Investment Partnership II, L.P.(Beruda) 3.863.86, lsF IV II, B. 1.65, L.P.(Beruda), L.65, L.P. 3.78 ④ L.78 ④ L.F. II, II, II, II, II, II, II, II, and IV.4.4.4).

② Lone Star U.S. invested 38 investors, including the LP Medical Foundation, California Retirement Teachers’ Pension, etc. with a higher-tier investor. In addition to the instant shares, Lone Star U.S. invested indirectly in other Korean assets, such as Kudong Construction Co., Ltd., and in Japan, Tadong Construction Co., Ltd., Germany, France, and the United States. Meanwhile, Lone Star Partnership was established according to a joint investment program for performance compensation among executives and employees of the three countries of the United States, Ireland, and Korea.

LP, other than GP, of Lone Star U.S. (GP) is as follows.

본문내 포함된 표 론스타 유에스 투자자(거주지국 : 미국) 1 Howard Hughes Medical Institute 20 Fresno County Employees’ Retirement Association 2 Washington State Investment Board 21 Trustees of Columbia University in the City of New York 3 Board of Trustees of the Leland Stanford Junior University 22 Dallas Police ＆ Fire Pension System 4 State of Oregon Public Employees' Retirement Fund 23 Houston Municipal Employees Pension System 5 New York State Teachers' Retirement System 24 Kresge Foundation (philanthropic foundation) 6 William ＆ Flora Hewlett Foundation 25 University of Louisville Foundation, Inc. 7 California State Teachers’ Retirement System 26 Surdna Foundation, Inc. (foundation fostering U.S. sustainable communities) 8 Bullshead Limited Liability Company (affiliateofIBMPensionFund) 27 PNC Investment Corp. (affiliate of PNC Bank) 9 State of Wisconsin Investment Board: Real Estate Division 28 Scripps College 10 State of Wisconsin Investment Board: Opportunity Fund 29 BMO Private Equity (U.S.), Inc. (affiliate of Bank of Montreal) 11 Massachusetts Institute of Technology; MIT 30 Northern Trust Company (GuideStone Financial Resources of the Southern BaptistConvention) 12 Massachusetts Institute of Technology; Basic Retirement Plan 31 WFC Holdings Corporation (affiliate of Wells Fargo Bank) 13 University of Notre Dame du Lac 32 소외 5 14 Mandel Family Investors: Manbro R.E. I, L.P. 33 Henry E. Huntington Library and Art Gallery 15 Mandel Family Investors: MAF Investments, Ltd. 34 Walter ＆ Elise Haas Fund (philanthropic foundation) 16 Mandel Family Investors: Foundation Investments of Ohio, Ltd. 35 Vaucluse LLC (investment by U.S. individuals) 17 Weyerhaeuser Company Master Retirement Trust 36 Louisville Presbyterian Theological Seminary 18 Houston Firefighters' Relief and Retirement Fund 37 Lucile Packard Foundation for Children’s Health 19 Boston Safe Deposit and Trust Company (John Deere Pension Trust) 38 Claude Worthington Benedum Foundation (philanthropicfoundation)

③ The current status of investors of six higher-tier investors except Lone Star U.S and Hudco Partners is as follows. Six higher-tier investors are composed of final investors who hold passive equities and unlimited partners who assume the responsibility for management (lsP), and partners who can open and maintain overseas bank accounts without restriction under the foreign exchange regulation law with authorization from Baol countries.

LF IVB Korea I, L.P. community 19.0% of 19.0% of l9.1% of L.P. community 199.1% of 0.1% of L.P. community 199.9% of 0.9% of L.P. Community 199.9% of 0.01% of L.P. Community 199.9% of L.99% of 199.9% of L.P. Community 199.9% of 0.01% of 0.01% of 2, L.P. community 199.99% of 0.9% of 0.01% of 0.9% of 0.9% of 0.01% of 0% of 0.9% of 0.9% of 0.9% of 0.9% of 19.9% of 19.9% of 0.9% of 19.0% of 0.0% of 19.0% of PE

The defendant asserts that top-tier investors within the territory of the Republic of Korea I, L.C. 10 Red Holdings 2, L.C. 10 Red Cross Povesa, III Piragle Management Pound Firgs, Safrashly, International Malves International Malve Robling Limited IMF (Brazian flapily), Tvove Dozed IMF, Trus R2RRP St. Doz. 3rder's Roves, C. 1.3rder's Roves, Furter's LBS 297 U.S.M.M. 3rder's Roves, Inc., Ltd. 3rder's Poves, Publicer's LBreer's Rove Roster Roster 297 U.S. 1.297.M.M. 3rder's Republic of Korea

(E) Plaintiff SC did not have an employee affiliated with it, and did not pay wages, rent, fixtures, etc. which are essential for its business activities. 9% of its total assets were composed of stocks of the foreign exchange bank, and the remainder is composed of the credit purchase amount and cash related to the investment company. Meanwhile, the address of Plaintiff SCC is the same as the location of the KC Holdings SCA and LCM, a company related to Lone Star Fund’s other Belgium.

(F) lsM was established in the Belgium on March 5, 2003, and was established in the Belgium, and managed Plaintiff SP as a statutory director and a shareholder. lsM, in addition to Plaintiff SPPL, managed global investment holding companies, including Japan. Thereafter, Loneone Star Investment Management SPL (hereinafter “lsM”) was established in the Belgium around 2009, and succeeded to all officers, employees, and businesses of lsM.

(2) Investment mode IV of Loneone Lone Faunder IV

(A) Lone Star Fund is a private equity fund in the form of a partnership that mainly raises funds by means of private placement and primarily creates profits from financial institutions or ordinary companies, acquisition and merger of non-performing loans, purchase of non-performing loans, and investment in real estate. On the completion of each investment, Lone Star Fund was established by Non-Party 1 in the mid 1990s. On the completion of each investment, Lone Star Fund was again established from Loneone Star Fund first to Loneone Star Fund IV in the form of constituting a new fund (hereinafter referred to as “lsF,” hereinafter referred to as “LF”).

(B) lsF IV consists of lsP, LP, LP, LP, LP, LP, LP, LP, LP, LP, and other high-tier investors. GP determines whether to make an investment upon delegation of the right of operation from LP, the time of sale of assets, methods of management, etc., and LP can only receive dividends depending on the results of the operation of the GP, and may not control or participate in the operation of the GP. lsP consists of 25 LP, GP, LP, and 1, Nonparty 2, Nonparty 3, and Nonparty 6 are included in the LP.

(C) Lone Star Fund has Lone Star global quiis (hereinafter “SGA”) established by Lone Star global quid for the purpose of discovering and assessing investment targets as a related company. Nonparty 1 owns all equity shares. In addition, for the purpose of managing the assets invested in each country, Lone Star Fund has Lone Star Roson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodson Rodon (hereinafter “HAL”). Nonparty 1, and the remainder 0.1% of its equity shares are owned by each corporation of which Nonparty 1 owns all equity shares (Ad Rod Ro Ro Rod Ro Rod, Inc.). The Lone Star Fund establishes a contract with Lone Star and HAL to discover and manage its assets and services, and owns the fees for its respective subsidiaries.

(3) Domestic structure of corporations related to LSF IV

(A) The domestic subsidiary of LSG is Lone Star Round Korea (Loneone Round Korea) established on February 10, 1999, and was in charge of assisting investment in the Republic of Korea of Lone Star Fund. LSAK is composed of experts in each field, such as investment financing experts, certified public accountants, and financial institutions, and is in charge of assisting investment in the Republic of Korea. LSAK is in physical coloring assets subject to investment, such as non-performing loans, and upon the decision of the head office’s investment, received the intent of investment by participating in the bidding, and entered into an asset acquisition contract.

The domestic subsidiary of HAL is Hudson Korea(Hudson Advis Korea) established on the same day, and Ludson Fund is an asset management company that manages the assets invested in Korea by Lud Star Fund. It consists of certified public accountants, appraisers and real estate development experts as asset management companies established under the Asset Securitization Act.

lsAK and HAK concluded an entrustment contract with LSG, HAL on December 12, 2001 with respect to the discovery of domestic investment objects and management of assets, and received the prescribed fees in return.

(B) The acquisition of non-performing loans was discovered by the non-party 3, etc. of LSAK’s assets to be invested, was reported to the head office located in the U.S. Tech through the non-party 2, and the investment was finally decided by the Investment Committee located in the head office. However, the sale of non-performing loans was conducted by the intention of the HAK Asset Management Team.

(C) The domestic manager of LSF IV is Nonparty 2. Nonparty 2, in fact, has overall control over the affairs of HAK and LSAK, participated in the meetings of the advisory committee at the head office as a regional manager, and held office as the representative director of LSAK until July 22, 2003.

(D) Nonparty 3 worked as the former office of HAK from October 200 to December 2 of the same year and became the representative director from January 2001 to work as the representative director of LAK from July 23, 2003 to June 30, 2009, and was actually engaged in the duties of HAK. Meanwhile, Nonparty 3 was in charge of the acquisition team duties in the process of acquiring Korea Exchange Bank by establishing the Plaintiff EA, and was appointed as a registration director of the Korea Exchange Bank immediately after acquiring the said bank.

(E) On August 199, Nonparty 6 entered HAK and served as the former director in charge of finance, and became the representative director around March 2002.

(4) Acquisition and sale of shares in lsF IV

(A) The acquisition of the shares of LSF IV was made on Nonparty 2’s proposal. Nonparty 2 strongly recommended LSG and LSP to purchase a domestic bank as a representative of LSAK, and around October 2002, Nonparty 3 visited Nonparty 7, a president of the foreign exchange bank, at the time of Nonparty 3, and officially expressed the intent of Lone Star Fund’s investment. Thereafter, Nonparty 3, as the representative of LSAK on February 10, 2003, began the acquisition of the foreign exchange bank officially, including submitting a preliminary proposal for acquiring the foreign exchange bank. Nonparty 2, along with Nonparty 2, participated in negotiations for acquiring the foreign exchange bank as a representative of LSK.

(B) On April 3, 2003, Nonparty 2 entered into negotiations with the foreign exchange bank on the acquisition of new stocks worth KRW 600 billion as the representative director of the LSAK. In addition, Nonparty 2 attended the meeting held by Lone Star U.S. on June 8, 2004 and explained the conditions, possibility, and condition of investment in the foreign exchange bank to the participants, such as Nonparty 1, Nonparty 8, and other participants of Lone Star U.S.

(C) On August 27, 2003, Nonparty 3 participated in an underwriting agreement conference of the foreign exchange bank on behalf of lsK and took charge of the acquisition team of the foreign exchange bank.

(D) The sale of the shares of a foreign exchange bank was conducted under the direction of Nonparty 1 through a sphids sphids.

(E) Nonparty 3, Nonparty 1, Nonparty 8, Nonparty 4, and Nonparty 2 were outside directors of the foreign exchange bank after the acquisition of stocks of the foreign exchange bank.

(5) Action seeking revocation against a higher investor’s taxation of a permanent establishment

(A) On August 22, 2007, through May 23, 2008, the director of the Seoul Regional Tax Office issued a tax investigation with respect to the superior investors, and then notified the Defendant that “The beneficial owner of the stock transfer income is not the Plaintiff Es. of the Belgium nationality but its superior investors, and he acquired the stock transfer income by carrying out business activities with the permanent establishment in Korea, so he is subject to taxation on the stock transfer income.”

(B) Accordingly, on July 7, 2008, the Defendant, on the premise that the beneficial owner of the stock transfer income is a superior investor, and that the upper-tier investors have a permanent establishment in Korea, imposed corporate tax on Hudco partnership in proportion to upper-tier investors, and income tax on the remaining upper-tier investors, respectively. After that, the Defendant rendered a decision from the Supreme Court on January 27, 2012 (2010Du5950) that “foreign limited partnership companies constitute a foreign corporation under the Corporate Tax Act, and thus, imposed corporate tax after ex officio cancelling the imposition of income tax on the remaining upper-tier investors (hereinafter “permanent establishment taxation”).

(C) Accordingly, the upper-tier investors filed a revocation suit regarding the taxation of permanent establishment [the Seoul Administrative Court 2010Guhap36824, 2012Guhap13672 (combined)], and on February 8, 2013, issued a favorable judgment on the ground that “i) Plaintiff SC merely controls and manages the stock transfer income by means of a conduit company established for the purpose of tax avoidance. Therefore, it cannot be said that the stock transfer income actually belongs to the company, and (ii) it is difficult for upper-tier investors to view that they have permanent establishment in Korea.”

(D) Thereafter, the instant case was rendered by the Seoul High Court (2013Nu8792) on January 10, 2014, and the Defendant’s dismissal judgment was pending in the Supreme Court (2014Du3044).

[Ground of recognition] Facts without dispute, Gap evidence Nos. 29 through 36, 44 through 47 (including paper numbers), Eul evidence Nos. 1, 2, 3 and 8 (including paper numbers), the purport of the whole pleadings

D. Determination

(1) As to the application of the Korea-Belgium Tax Treaty

(A) The taxation treaty is established for the purpose of the avoidance of double taxation and the prevention of Fiscal Evasion by adjusting the issue of taxation between the Contracting States, so it does not create the taxation right, and thus functions to allocate or restrict the already established taxation right under the tax laws of one Contracting State. Therefore, in order to apply the tax treaty, the person to whom the income belongs should be identified as a resident of the Contracting State, and the determination of the person to whom the income accrues ought to be based on the interpretation of the

The principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes, in cases where there is a separate person to whom such income, profit, property, transaction, etc. belongs, unlike the person to whom such income, profit, etc., belongs, is to be the person to whom such income, profit, property, or transaction, etc., belongs, rather than the person to whom such income, belongs in form or appearance. Therefore, the nominal owner of the property does not have the ability to control and manage the property, and there is another person who substantially controls and manages the property through the control, etc. over the nominal owner, and where such disparity between name and substance arises from the purpose of tax evasion, income on the property shall be deemed to be reverted to the person who actually controls and manages the property and shall be the person to whom such income belongs (see Supreme Court en banc Decision 2008Nu8499, Jan. 19, 2012). This principle applies in interpreting and applying a tax treaty having the same effect as law, unless there is any special provision excluding this (see Supreme Court Decision 2011Du

(B) In light of the following circumstances, Plaintiff SC is merely a Do official established to obtain the resident qualification in the Belgium to avoid the taxation of the transfer income of the instant case. Therefore, the instant transfer income does not belong to Plaintiff SC, and thus, the Korea-Belgium Tax Treaty cannot be applied.

① At the time of the acquisition of a foreign exchange bank, Belgium was used by a multilateral-national investment institution as a means of tax reduction in accordance with the Korea-Belgium Tax Treaty, and was classified as a single-state group in which the OECD would comply with international tax standards.

② From the time of establishment, LSF IV studies and reviews the tax system, investment benefits, tax treaties, etc. of each country including Korea as a means of tax avoidance in order to seek maximizes the profit from assets investment in Korea in the future. In order to design the optimal investment structure to benefit from tax exemption under the Korea-Belgium Tax Treaty, the LSF IV analyzed the laws and systems of the investment hub countries, such as Korea and Belgium.

③ On August 21, 2003, before the conclusion of the Korea Exchange Bank’s stock acquisition contract, lsF IV accepted the stocks of the foreign Exchange Bank on August 27, 2003, for the purpose of applying the tax exemption of Korea tax authorities on stock transfer income pursuant to the Korea-Belgium Tax Treaty.

④ Under the purchase and sale contract of the foreign exchange bank, Plaintiff SC was named in the name of the Plaintiff SC, but was conducted in accordance with the investment structure and governance structure as seen earlier, and purchased the shares of the foreign exchange bank with the funds of the higher-tier investors invested in Korea. In addition, Nonparty 2, Nonparty 3, etc., the officers of the domestic asset management company lsK, the HAK, and Nonparty 3, etc., who were officers of the HAK, led to the entire process

⑤ Plaintiff SC was used in the optimal investment structure by top-tier investors, and there is no circumstance in which Plaintiff SC performed any other business purpose or activity within its resident state in addition to its formal role as a holding company for investment in LSF IV. Moreover, there is no independent economic interest other than dividends to top-tier investors.

④ In managing funds, the necessity of an investment holding company, such as Plaintiff SC, cannot be denied for the efficient management and operation of investment funds and investment assets. The actual person in charge of actual source of funds, investment and asset management activities in the investment through an investment holding company, and the ultimate person in charge of the investment proceeds, may not be reconvened in the transactional relationship by referring to the issue. However, the establishment of Plaintiff SC in the Belgium that is irrelevant to the actual resident state of the investors in Korea or LSF IV, and the structure of the investment structure through a number of holding companies seems to be an act to consider benefits under the tax treaty.

7. The tax treaty does not establish a taxation right, but functions as a part of allocating or restricting the tax authority already established under the tax laws of a Contracting State. As such, the application of the tax treaty would immediately serve as a requirement for non-taxation, reduction or exemption of the tax authority under the domestic tax law. In a lawsuit, the taxpayer bears the burden of proving the non-taxation requirements and the requirement for tax exemption (see Supreme Court Decision 98Du16095, Jul. 7, 200). The person who pays domestic source dividend income is liable to withhold corporate tax on the basis of the actual person to whom the income accrues (see Supreme Court Decision 2011Du3159, Apr. 11, 2013). However, the Plaintiffs are not liable to withhold corporate tax on the income under the tax law by stipulating that the withholding agent is not liable to withhold corporate tax on the income under the tax treaty, and that the said person is not liable to withhold corporate tax on the income under the real person to whom the income accrued belongs (see Supreme Court Decision 98-6, Dec. 31, 2011>

(8) Proof of a resident shall prove the fact of actual operation in addition to the establishment of the main office in a foreign country (see Supreme Court Decision 93Nu13162 delivered on April 15, 1994).

However, according to the statements in Gap evidence Nos. 10 through 23 (including the paper numbers), only the plaintiff Eul is registered as a corporation in the Belgium, and only the details of the lsm's activities can be recognized. lsm is a company controlled through LKR. Thus, it is insufficient to recognize the fact that the plaintiff Eul's actual operation of the business was conducted, and there is no other evidence to acknowledge it.

9) The Plaintiffs asserted that “lsM and lsM operated Plaintiff SP, and thus, Plaintiff SP had human and physical elements.” However, considering that ls and lsM owned only 1% of the shares issued by Plaintiff SP but substituted all the activities, and they manage not only Plaintiff SP but also all the global investment holding companies, the activities of ls and lsM are merely merely a company managing LP and lsM’s investment in the entire world, and their human and physical elements cannot be deemed as Plaintiff SP.

(10) The Plaintiff SC asserts that “The Plaintiff Company exercised its rights as the beneficial owner with respect to the instant capital gains by preferentially using the bank loans and senior bonds, and by paying the instant corporate tax, etc. on November 8, 2012.” However, Plaintiff SC is operated by ls and lsIM, and is distributed to high-tier investors as indicated in the attached Form “the investment structure of the instant stocks”. Thus, it does not constitute the beneficial owner of the instant capital gains, since it does not constitute the beneficial owner of the instant transfer income.

(11) From among top-tier investors, it is difficult to deem that there was no tax avoidance purpose under the tax treaty among some top-tier investors on the ground of the benefit of the tax treaty, taking into account the following: (a) there is a person entitled to benefit under the tax treaty; (b) there is a person who does not receive benefit under the tax treaty; and (c) the establishment of Plaintiff SC on the Belgium after confirming the benefit under the tax treaty on the stock transfer income.

(2) As to the application of the Korea-U.S. Tax Treaty

(A) The source tax liability of higher investors

Article 21(2)1 and Article 22(2)3 of the Framework Act on National Taxes (see Articles 21(2) and 22(2)3 of the same Act) of the corporate tax withheld at the same time when the tax liability is established and automatically determined at the time of paying the amount of income or the amount of income (see Articles 21(2) and 22(2)3 of the same Act). As such, it is reasonable to view that a taxation authority’s disposition of collecting the amount of income or the amount of income to be withheld is merely a claim for performance of the tax liability that has already been determined by payment of the amount of income or the amount of income, and thus does not affect the existence or scope of the original tax liability that the recipient of the amount of income or the amount of income bears, but Article 9(1) of the National Tax Collection Act (amended by Act No. 11605, Jan. 1, 2013) provides that “the basis for calculating the amount of income or the amount of income shall not be included in the “the basis for calculating the amount of income”.

(B) Determination of a source taxpayer

Where a foreign unincorporated association, foundation or other organization acquires domestic source income under Article 119 of the Income Tax Act (amended by Act No. 11611, Jan. 1, 2013) or Article 93 of the Corporate Tax Act and distributes it to individuals who are partners, if a foreign corporation under the Corporate Tax Act can be seen as a foreign corporation, it shall be liable to pay corporate tax on domestic source income. If a foreign corporation under the Corporate Tax Act can not be seen as a foreign corporation, it shall impose income tax on the income amount distributed to each of its partners as a taxpayer in the same manner as the resident is a foreign corporation. In addition, whether a foreign corporation can be seen as a foreign corporation under the Corporate Tax Act shall be determined depending on whether the organization can be deemed as a separate right and obligation independent of its members under the Korean Law (Judicial) in light of its content and substance in the country where the organization is established, unless otherwise provided in the Corporate Tax Act (see Supreme Court Decisions 2010Du5950, Jan. 27, 2012; 2013Du163614.

The burden of proving that the instant shares are established by top-tier investors, excluding eight top-tier investors located next to the instant shares, as stated in the attached Form “The investment structure of the instant shares”, is difficult to be recognized only by the statement in Gap’s evidence 5, 10, and 23 (including serial numbers). Meanwhile, top-tier investors also operated by lsP (GaP whose share ratio is 1% or 0.01%), which is a general partner, play a role in inviting final investors and distributing them (six top-tier investors established in Canadian countries have a unique purpose for opening and operating foreign bank accounts without restriction on foreign exchange regulations, and are composed of 10% or more of the total investment shares of the pertinent 10% of the total investment partners, including the United States, etc., which are final investors through subordinate corporations, and 10% of the total investment shares of the pertinent 10% of the total investment partners and partners, which are composed of 10% of the total investment partners and partners.

(c)Application of the tax treaty;

① As to partnershipship, whether a member of a private law organization in Korea can be seen as the subject of separate rights and obligations independent from a member of the private law organization, that is, whether a member of an independent taxpayer under the Corporate Tax Act constitutes a foreign corporation or a foreign corporation, or if so, an investor who is a member of a partnership cannot be deemed a taxpayer (see Supreme Court Decision 2011Du4411, Jul. 11, 2013). As seen earlier, insofar as a higher investor is deemed a foreign corporation under the Corporate Tax Act, tax treaties cannot be applied on the basis of the place of residence of the final investor by treating the higher investor as a taxable object and treating it as a foreign corporation.

② The place of residence of the top-tier investors, other than Lone Star U.S., is both Do community countries, and a tax treaty has not been concluded between Do community countries and the Republic of Korea, thus, the withholding of the instant capital gains cannot be exempted.

③ Since Lone Star U.S.’s residence is the United States, and the Korea-U.S. Tax Treaty has been concluded between the United States and the Republic of Korea, withholding tax on the instant capital gains may be exempted.

Meanwhile, Article 3(1)(b) of the Korea-U.S. Tax Treaty provides that “A resident of the United States” means the following. (i) other persons residing in the United States for tax purposes (excluding corporations or organizations treated as corporations under the laws of the United States), but only to the extent that income generated by such a person is subject to U.S. tax as income of a resident of the Republic of Korea.” Article 2(1)(e)(ii) of the Korea-U.S. Tax Treaty provides that “a resident of the United States or a corporation of the United States is not subject to the application of the provisions of the Korea-U.S. Tax Treaty to a resident of the Republic of Korea-U.S. Tax Treaty, which is established or organized under the laws of the United States or of the United States-U.S. Tax Treaty, or an unincorporated organization treated as a resident of the United States-U.S. Tax Treaty, which is not subject to the application of the proviso to the Korea-U.S. Tax Treaty, if the context otherwise requires an entity to be treated as a resident of the United States-U. Tax Treaty.

The case consists of ls, LSS and 38 final investors, which are GP (1% of shares), and LP (38 final investors, are residents of the United States. While the defendant asserts that 38 U.S. residents are "it is not possible to recognize U.S. residents only by Internet data." However, considering the names, addresses, and business contents of the final investors listed in Lone Star U.S. Partnership Agreement (No. 30 evidence), it is sufficient to recognize U.S. residents as U.S. residents in addition to the final investors listed in Lone Star U.S. Partnership Agreement (No. 30 evidence), it is clear that the income is distributed according to the investment shares of LP and GDPR, and it is not reasonable to consider that the final investors in the U.S. should bear the tax liability of GP as 9% of the investment shares if the final investors in the U.S. are not residents of 9% of the investment shares in the U.S. (30% of the investment shares).

Therefore, among the transfer income of this case, the portion attributable to LP of Lone Star U.S. (9% excluding 1% of the shares of LP, GP) is subject to the Korea-U.S. Tax Treaty.

(3) Justifiable tax amount

(A) In a lawsuit seeking the revocation of a taxation disposition, the subject matter of adjudication is whether the tax base and tax amount notified by the tax authority exist objectively. In a case where the tax base and tax amount recognized by the disposition are excessive compared to the legitimate tax base and tax amount, the disposition of imposition is unlawful within the scope exceeding the reasonable tax base and tax amount (see Supreme Court Decision 88Nu6504, Mar. 28, 1989). Thus, the relevant

(B) Since the portion reverted to LP of Lone Star U.S. among the transfer income of this case is exempted from taxation on stock transfer pursuant to Article 16 of the Korea-U.S. Tax Treaty, the Defendant cannot withhold the Plaintiff’s share 45.725% [ = 46.187% x 99% (100% - 1.0% of LSP), and the small number of less than four decimal places].

The legitimate amount of tax withheld and the amount of tax disposed of shall be calculated as follows:

① The amount of legitimate withholding tax is KRW 54.275% (=100% - 45.725%; hereinafter the same shall apply) applied to the transfer value of KRW 3,876,451,718,832 (3,915,607,796,800 - advance payment of KRW 39,156,077,968). As such, the portion exceeding KRW 210,394,417,039 (hereinafter the same shall apply) out of the disposition rejecting the correction of this case is unlawful.

(2) The tax amount subject to withholding tax in this case in the table Nos. 3,876,451,71,718,832, 3876,451,718,832, 100% 54.275% 3,876,451,718,832, 2,103,103,944, 170,396 won (387,645,171,890 won) 210,394,417,039 won in the transfer value.

② The amount of tax imposed upon legitimate collection is KRW 2,337,715,744, which applied 54.275% (i.e., 100% - 45.725%) in advance to KRW 39,156,07,968. As such, the portion exceeding KRW 2,337,715,744 in the instant collection disposition is unlawful.

(3) The tax base ratio of the transfer value, 100% 54.275% 54.275% 39,156,07,967,968 won, 156,07,968 won, 100% 39,156,07,968 won, 21,251,961,317 won. <3,915,607,796 won 2,125,196, 131 won, 391, 560, 560, 779 won, 212,519, 613 won, and 617 won, of the tax base (4,307,578, 2375, 37474, and 617 won)

4. Conclusion

Therefore, the plaintiffs' claims are justified within the scope of each of the above recognition, and each of the remaining claims is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Cho Han-chul (Presiding Judge)