When a taxpayer under Article 126 (4) of the Enforcement Decree of the Restriction of Special Taxation Act is not subject to the minimum tax under Article 132 of the same Act or files a corporate tax by applying mistakenly and applying the minimum tax under Article 132 of the same Act, if there are a number of reduction or exemption subject to the minimum tax, whether the tax authority should only set the exclusion order, such as reduction or exemption, to apply the minimum tax under Article 132 of the same Act (affirmative)

Article 59(1)1, 2, and 3 of the former Corporate Tax Act (Amended by Act No. 10423, Dec. 30, 2010); Article 132(1) and (3) of the former Restriction of Special Taxation Act (Amended by Act No. 7839, Dec. 31, 2005); Article 126(4) of the former Enforcement Decree of the Restriction of Special Taxation Act (Amended by Presidential Decree No. 17829, Dec. 30, 2003)

Pestd Korea semiconductor Co., Ltd. (Attorneys Noh Young-soo et al., Counsel for the plaintiff-appellant)

Deputy Director of the Tax Office

Seoul High Court Decision 2012Nu12084 decided November 23, 2012

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. The main text of Article 59(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides that “where the provisions on the reduction or exemption of corporate tax and the provisions on the tax credit are applied simultaneously in the application of this Act or other Acts, the order of application thereof shall be as follows, except as otherwise provided in the following:

Meanwhile, Article 132(1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Act No. 7839, Dec. 31, 2005; hereinafter “former Act”) provides that where the income tax or corporate tax on the restriction of the minimum tax on the reduction or exemption of corporate tax under any of the following subparagraphs is below the minimum tax, the portion equivalent to the deficiency shall not be reduced or exempted. Furthermore, Article 126(4) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829, Dec. 30, 2003; hereinafter “Special Act”) provides for the exemption of income tax or corporate tax from inclusion in deductible expenses under Article 132(1)5 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 17829, Dec. 30, 2003; hereinafter “Special Act”) provides that the exemption of income tax or corporate tax from inclusion in deductible expenses under Article 138(2)1 of the same Act shall be excluded from each of the following provisions:

Article 132 of the former Enforcement Decree of the Corporate Tax Act is difficult to view the provision of Article 59(1) of the former Corporate Tax Act as a separate provision providing for an exception to deduction or exemption under Article 59(1) of the same Act, and where tax reduction or exemption is simultaneously applied, “the tax reduction or exemption on income for each business year” shall be earlier applied than “the tax credit that is recognized as deduction for interest” (see Supreme Court Decision 2012Du4173, Jun. 14, 2012). In addition, in light of the regulatory structure and language of Article 132(1) and (3) of the former Act and Article 126(4) of the former Enforcement Decree of the former Enforcement Decree of the Special Act, Article 126(4) of the former Enforcement Decree of the Special Act, which does not apply to the minimum tax so that a taxpayer is not subject to the minimum tax reduction or exemption under Article 132 of the former Enforcement Decree of the Special Act, and is not subject to the minimum tax reduction or exemption under Article 26(3) of the former Special Act.

2. According to the reasoning of the lower judgment, the lower court determined as follows: (a) based on the adopted evidence, found the facts as indicated in its reasoning; and (b) determined that the instant disposition imposing additional corporate tax on the business year and 2005 business year was unlawful on the ground that the Defendant’s tax credit for research and human resources development expenses, which is recognized as having been carried forward, should be applied first to the reduction of and exemption from corporate tax (Article 121-2 of the former Act) to which the restriction on the minimum tax is applied, as a tax credit for the income for each business year (Article 121-2 of the former Act), should be applied more than the tax credit for research and human resources development expenses (Article 10 of the former Act) to which the restriction on the minimum tax is applied prior to the reduction of and exemption from corporate tax for foreign investment (Article 10 of the former Act); and (c) on that premise, on the ground that the calculation of legitimate tax amount cannot be concluded to be more than the amount of the instant disposition, the lower court rejected the Defendant’s assertion by applying the minimum tax exemption under Article 126(4).

The judgment of the court below is just and acceptable as it is in accordance with the above legal principles, and there are no errors in the misapprehension of legal principles as to Article 59 (1) of the former Corporate Tax Act, Article 132 of the former Act, and Article 126 (4) of the former Enforcement Decree of the Act on Special Assistance, or the omission of judgment.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee In-bok (Presiding Justice)