early 201J 2645 ( November 22, 2011)

It is the first application of reduction or exemption under the Corporate Tax Act in the order of deduction reduction or exemption.

In the event that both a temporary tax credit subject to minimum tax and a foreign investment tax reduction or exemption are simultaneously applied, it is difficult to apply the tax reduction or exemption in the order of tax reduction or exemption in accordance with the Corporate Tax Act, and it is difficult to regard the provision of exclusion of tax reduction or exemption in the Restriction of Special Taxation Act as a separate provision in the order of tax reduction or exemption in accordance with

2012Guhap1700 Revocation of Disposition of Imposing corporate tax

AAAA Corporation

Head of Pyeongtaek Tax Office

November 2, 2012

December 14, 2012

1. The Defendant’s disposition of imposing corporate tax of KRW 000 for the business year of 2006 against the Plaintiff on December 1, 2010 shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a foreign-invested corporation established on April 2, 2001 for the purpose of manufacturing and selling electronic materials and general chemicals.

B. Pursuant to the provisions of Article 121-2 of the former Restriction of Special Taxation Act (amended by Act No. 7003 of Dec. 30, 2003, the same shall apply below), the Plaintiff received a decision to reduce or exempt foreign investment corporate tax (hereinafter referred to as "reduction or exemption of foreign investment tax") that reduces or exempt foreign investment tax for 7 years from the beginning of the taxable year in which the first income was generated, and for 3 years thereafter, 50% of the tax amount (hereinafter referred to as "foreign investment tax reduction or exemption"), among the tax amount calculated by multiplying the corporate tax on the income arising from a manufacturing project of ARC, which is a semiconductor material, and of the amount of temporary tax credit for investment and special tax credit for increased employment (hereinafter referred to as "temporary tax credit for investment") under the former Restriction of Special Taxation Act, from 2005 to 204 business years.

C. The Plaintiff reported and paid corporate tax for 2005 and 2006 business year to the Defendant, and applied the tax credit for temporary investment, etc. after applying the tax reduction and exemption from the calculated tax amount as listed below under the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter the same).

(The following table omitted):

D. However, unlike the Plaintiff’s order of tax reduction and deduction, the Defendant first applied the temporary tax credit to which the minimum tax is applied in the calculated tax amount, and then notified the Plaintiff of the correction and notification of KRW 000 (including additional tax) of the corporate tax for the business year 2006 to the Plaintiff on December 1, 2010 (hereinafter “instant disposition”).

E. The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on November 22, 201, but the said claim was dismissed.

[Ground of Recognition] The non-contentious facts, Gap evidence 1 to 3, and Eul evidence 1 (including each number), and the purport of the whole pleadings

2. Determination on this safety defense

According to the following allegations, the Defendant calculated the amount of corporate tax under the premise that it does not fall under the “ separate provision setting an exception to the order of reduction or exemption under Article 59(1) of the former Corporate Tax Act” under Article 132(1) of the former Restriction of Special Taxation Act, and instead, calculated the amount higher than the amount of the tax of the instant disposition, and the Plaintiff’s lawsuit seeking revocation of the said disposition is unlawful as there is no interest in the lawsuit. However, if the amount of tax is calculated on the premise of the Plaintiff’s assertion, it cannot be readily concluded that the amount higher than the amount of the instant disposition is calculated, and even if not, there is no interest in the lawsuit seeking revocation of the instant disposition. The Defendant’s defense of safety is without merit.

3. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

In calculating corporate tax, where both tax reduction and tax credit are applied simultaneously, the tax credit should be applied first, unless otherwise prescribed in Article 59(1) of the former Corporate Tax Act. In addition, Article 132(1) of the former Restriction of Special Taxation Act merely provides for the method of calculating the limit of the amount of tax credit and tax credit subject to the minimum tax, rather than setting the order of application of tax credit and tax reduction and exemption, it does not constitute a separate provision, which is an exception to the order of tax credit and tax reduction and exemption under Article 59(1) of the former Corporate Tax Act. Nevertheless, it is unlawful for the Defendant to consider Article 132(1) of the former Restriction of Special Taxation Act as "the separate provision on the order of tax credit and tax reduction and exemption under Article 59(1) of the former Corporate Tax Act" and to correct the increase in corporate tax by applying the tax credit first applied

(2) The defendant's assertion

The reduction or exemption of foreign investment tax is "tax reduction or exemption that is not subject to the minimum tax", and "tax reduction or exemption that is subject to the minimum tax". In addition, the minimum tax provision under Article 132 (1) of the former Restriction of Special Taxation Act is a provision for calculating corporate tax by applying "tax reduction or exemption that is subject to the minimum tax" in the pre-application of "tax reduction or exemption that is not subject to the minimum tax on income for each business year of domestic corporations, etc." and thus, it constitutes a special provision under Article 59 (1) of the former Corporate Tax Act that sets the order of deduction or exemption. Therefore, the disposition of this case applying the reduction or exemption of foreign investment tax, which is not subject to the minimum tax under Article 132 (1) of the former Restriction of Special Taxation Act

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) The key issue of the instant case is the order of application in cases where the temporary investment tax credit, etc. to which the minimum tax provision under Article 132(1) of the former Restriction of Special Taxation Act applies, and the foreign investment tax reduction or exemption that is not applicable to the said city

(2) Therefore, it is reasonable to view that the above provision should be applied in preference to the tax credit for temporary investment under Article 59(1) of the former Corporate Tax Act, by comprehensively taking into account the health conditions and the following circumstances with respect to the order of application of the above provision on deduction and exemption, and the minimum tax provision under Article 132(1) of the former Restriction of Special Taxation Act.

(가) 구 법인세법 제59조 제1항에 의하면， 법인세의 감면에 관한 규정과 세액공제에 관한 규정이 동시에 적용되는 경우 그 적용은 별도의 규정이 있는 경우를 제외하고는 '㉠ 각 사업연도의 소득에 대한 세액감면，㉡ 이월공제가 인정되지 아니하는 세액공제，㉢ 이월공제가 인정되는 세액공제' 순서로 적용하여야 한다. 그런데 외국인투자세액감 면은 구 법인세법 제59조 제1항 제1호 소정의 '㉠ 각 사업연도의 소득에 대한 세액감면'에 해당하고， 임시투자세액공제등은 구 법인세법 제59조 제1항 제3호 소정의 '㉢ 이월공제가 인정되는 세액공제'에 해당한다. 그러므로 법인세법 및 다른 법률에서 그 적용순위에 관한 '별도의 규정'이 없는 이상 외국인투자세액감면이 임시투자세액공제등보 다 먼저 적용되어야 한다.

(B) Article 132(1) of the former Restriction of Special Taxation Act and Article 126(2) of the Enforcement Decree of the same Act provide that in calculating corporate tax on income for each business year, the remaining tax amount shall not be reduced or exempted if the remaining tax amount is below the minimum tax, and the part equivalent to the deficient tax amount shall not be reduced or exempted, etc. However, in light of the following circumstances, it is difficult to view that the minimum tax prescribed in Article 132 of the former Restriction of Special Taxation Act is a separate provision that provides for the exception to the order of tax reduction or exemption under Article 59(1) of the former Corporate Tax Act.

① The former Enforcement Decree of the Restriction of Special Taxation only prescribes the method of determining the ‘limit of reduction or exemption, etc. to which the minimum tax is to be applied’, and does not directly express the order of application with the reduction or exemption to which the minimum tax is not applied.

② Article 132(1) of the former Restriction of Special Taxation Act provides that "a reduction or exemption, etc. which is not subject to the minimum tax," but subject to the minimum tax, etc., should be applied to the calculation of the tax when it is calculated by adding "a reduction or exemption, etc. which is subject to the minimum tax" to "a reduction or exemption, etc. which is subject to the minimum tax". It seems that it is natural that "a reduction or exemption, etc. which is subject to the minimum tax" should not be applied to the calculation of the corporate tax, and whether it should be "a reduction or exemption, etc. which is not subject

③ As in the instant case, there is no change in the amount of the carried-over deduction depending on the difference in the order of application of reduction, exemption, etc., and there is no change in the minimum tax calculated under Article 132(1) of the former Restriction of Special Taxation Act, and it is difficult to view that the order of application of reduction, exemption, etc. related to the

④ Article 126(4) of the Enforcement Decree of the Restriction of Special Taxation Act sets the order of exclusion within the scope of "where corporate tax reported by a taxpayer falls short of the minimum tax amount of corporate tax and is corrected, etc., it shall be subject to the minimum tax."

(C) The Defendant, on the ground that the “minimum tax amount subject to reduction and exemption, etc.” should be applied first, refers to the preparation of the attached Form 3 of Article 82(1)3 of the former Enforcement Rule of the Corporate Tax Act (amended by Ordinance of the Ministry of Finance and Economy No. 497 of Mar. 14, 2006), the “tax base and the adjusted account statement” in attached Form 4 of the same paragraph, and the “minimum adjusted account statement” in attached Form 4 of the same Article. However, this is merely a provision of administrative procedures necessary for reporting and paying corporate tax under the former Corporate Tax Act and the Enforcement Decree of the same Act, and it cannot be deemed as a “ separate provision” that sets an exception to the order of application of deduction and exemption under Article 59(1)

(D) Article 132(3) of the current Restriction of Special Taxation Act (amended by Act No. 9921, Jan. 1, 2010) provides that the minimum tax shall be applied at the same time when both reduction, exemption, and other reductions and exemptions are applied. However, in light of the principle of no taxation without law, the above provision is not a provision confirming the order of reduction and exemption under Article 59(1) of the former Corporate Tax Act and Article 132(1) of the former Restriction of Special Taxation Act, but rather a provision newly establishing an exception to the order of reduction and exemption under Article 59(1) of the former Corporate Tax Act. Accordingly, the business year of the corporate tax in this case and the said provision newly established after the instant disposition cannot be applied to the instant disposition.

(3) Therefore, the instant disposition that corrected the corporate tax amount by first applying the foreign investment tax deduction, etc. compared to the foreign investment tax reduction and exemption in imposing corporate tax against the Plaintiff is unlawful.

4. Conclusion

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