A. The meaning of foreign corporation's domestic source income

B. Whether a domestic branch of a foreign corporation can independently become the other party to the taxation disposition (negative)

C. The burden of proving and proving necessary expenses in a lawsuit to revoke the revocation of the disposition imposing corporate tax

D. Whether a foreign corporation’s overseas branch is liable to withhold taxes from the benefits paid to its representative (negative)

A. Unlike a domestic corporation, a foreign profit-making corporation is liable to pay corporate tax only for domestic source income. The term "domestic source income" refers to income listed in Article 55 (1) of the Corporate Tax Act, whose source of income is the Republic of Korea, and so long as the "place of occurrence of such income" is a domestic place, the realization of such income was conducted at a domestic place, or was done through the head office or branch office of a foreign country without going through a domestic place of business or distinction thereof

B. Even if a foreign corporation established a domestic branch and completed the registration of a branch, such domestic branch does not become a separate entity from a foreign corporation, and thus, the domestic branch cannot independently become the other party to the taxation disposition. Even if a tax authority imposed a tax in the name of a foreign corporation, barring special circumstances, it should be deemed a disposition that is not a domestic branch of a foreign corporation, but a foreign

C. In light of the fact that the tax authority bears the burden of proving the tax base, which is the basis of taxation in a lawsuit seeking revocation of disposition of imposing corporate tax, and the tax base is deducted from necessary expenses, so the burden of proving the income and necessary expenses is against the tax authority, but most of the facts causing the necessary expenses are favorable to the taxpayer, and the burden of proving the necessary expenses is easy in the area controlled by the taxpayer, the presumption of non-existence of the necessary expenses is consistent with the concept of fairness.

D. According to the interpretation of Article 142(1) of the Income Tax Act, a foreign corporation does not have a withholding duty on Class B earned income, and under Article 21(1)2(b) of the same Act, income received from a foreign corporation located abroad shall be Class B earned income. Thus, if the salary received by the representative of the domestic branch of the foreign corporation is not paid by the domestic branch but directly paid by the overseas branch of the corporation, it constitutes Class B earned income and the foreign corporation does not have a withholding duty.

(a) Articles 1(3) and 55(1) of the Corporate Tax Act; Article 1(3) of the Corporate Tax Act; Article 26 of the Administrative Litigation Act; Articles 142(1) and 21(1) of the Income Tax Act;

Supreme Court Decision 86Nu121 Decided May 24, 198, 86Nu267 Decided October 8, 1985

[Defendant-Appellant] Radson Trading Lyd Co., Ltd., Counsel for defendant-appellant-appellant

Head of Dong Busan District Office

Daegu High Court Decision 87Gu36 delivered on July 13, 1988

Of the part against the plaintiff in the original judgment, the part of the claim for revocation of Class A earned income tax for the year 1984, Class A earned income tax for the year 1985, Class A earned income tax for the defense, and the part of the case shall be reversed and remanded to the Daegu High Court.

The remaining appeals by the plaintiff and the defendant are dismissed, respectively.

The costs of appeal for the part dismissed shall be borne by each person.

1. As to the ground of appeal by the Plaintiff’s attorney

(A) Unlike a domestic corporation, a foreign profit-making corporation is liable to pay corporate tax only on domestic source income (Article 1(3) of the Corporate Tax Act). The term "domestic source income" refers to the income listed in Article 55(1) of the Corporate Tax Act that the source of income is a domestic source, and as such, as long as the "place of such income occurred" is a domestic source, the realization of such income was conducted at a domestic branch, or was done at the domestic branch or through the head office or branch office of a foreign country immediately without going through a domestic branch.

In addition, even if a foreign corporation established a domestic branch and completed the registration of a branch, the domestic branch is not a legal entity separate from a foreign corporation, and thus the domestic branch cannot independently become the other party of the taxation disposition, and even if the taxation authority imposed a tax in the name of a foreign corporation, it should be deemed a disposition that is not a domestic branch of a foreign corporation, but a foreign corporation as a taxable party

In the same purport, the court below determined that the plaintiff corporation is a foreign corporation established for the purpose of selling and arranging the purchase of various kinds of new events, and it constitutes a seller in Korea after its establishment on August 31, 1983 and the non-party 1 of the United States trading company Murur Rour Rour Rour Ro Rour Rour Rour Ro Rour Rour Rour Rosur Ro Rosur Rosur Rour Rosur Rosur Rosur Rosur Rosur Ro 1, 198,853,02 won during the business year from April 1, 1984 to March 31, 1985, as the price negotiations, quality inspection, shipping, etc. for new events between the seller and the purchaser and the non-party 1 of the United States trading company, and thus, it is correct that the plaintiff corporation is liable to pay the plaintiff corporation's domestic source income tax, and it constitutes no other domestic source tax revenue.

In addition, examining the reasoning of the judgment of the court below in light of the matters stated in the attached Form 3, 4, and 5 and the corporate tax-related Acts and subordinate statutes, it is proper to cancel the part of the defendant's taxation (the plaintiff corporation is not a domestic branch of the corporation, but the plaintiff corporation), which exceeds the above recognized tax amount, since it is not difficult to find out the basis for calculating the legitimate tax amount at the time of the judgment of the court below, and there is no error of law by understanding the reasoning like the theory of the lawsuit, and the taxation subject to illegal

(B) The burden of proving the tax base, which is the basis of taxation in a lawsuit seeking revocation of disposition of corporate tax, is against the tax authority, and the tax base is deducted from necessary expenses, so the burden of proving revenues and necessary expenses shall be borne by the tax authority or necessary expenses shall be favorable to the taxpayer, and most of the facts generating necessary expenses shall be within the area controlled by the taxpayer, and thus, it is reasonable to presume the absence of necessary expenses, which the taxpayer does not perform the verification activities. Considering that it is easy to prove, it is consistent with the concept of fairness to recognize the necessity of proof to the taxpayer by allowing such presumption of absence (see Supreme Court Decision 86Nu121, May 24, 198).

In this case, the court below rejected the plaintiff's assertion on this point on the ground that there is no evidence to support that the Hong Kong branch office provided the service in connection with the revenue of the fee of this case and paid the expense, in light of the above legal principles, and there is no error of law by misunderstanding the burden of proof. The third point

(C) The court below affirmed the defendant's measures that held that the non-party 1 and the non-party 2, a joint representative of the Korean branch of the plaintiff corporation, received from the plaintiff corporation, on the ground that it is the wage and salary income paid in return for work as stated in the plaintiff's explanation, and that it is recognized that it is the wage and salary income paid in return for work. The court below's findings of fact and determination that the non-party 1 and the non-party 2 were the wage and salary income paid by the non-party 1 and the non-party 2 as the wage and salary income, is acceptable, and there is no violation of the rules of evidence against the rules of evidence such as the theory of lawsuit.

However, in the interpretation of Article 142 (1) of the Income Tax Act, a foreign corporation does not assume a withholding duty on Class B earned income (see Supreme Court Decision 84Nu267 delivered on October 8, 1985). Meanwhile, under Article 21 (1) 2 (b) of the same Act, income received from a foreign corporation located abroad is Class B earned income. Thus, in the instant case, if the said Nonparty’s paid benefits are not the domestic branch of the Plaintiff but the Hong Kong branch of the Plaintiff corporation directly pays as claimed by the Plaintiff, this constitutes Class B earned income, and thus, the Plaintiff corporation’s withholding duty cannot be denied.

Therefore, the court below should consider whether the above benefits were paid by the domestic branch of the Plaintiff corporation, and whether the Hong Kong branch of the Plaintiff corporation was paid. The court below recognized the Plaintiff’s withholding duty solely on the ground that the Plaintiff’s benefits constituted wage and salary income. Thus, it cannot be said that the court below erred by misapprehending the legal principles on withholding duty. The argument is with merit.

2. As to the grounds of appeal by Defendant Litigation Performers:

The fact-finding by the court below on the revenue amount of the plaintiff corporation shall be justified, and there is no violation of the rules of evidence, such as the theory of the lawsuit, incomplete deliberation, etc.

3. Therefore, the part of the case shall be remanded to the court below by reversing the part of the judgment against the plaintiff, Class A earned income tax in the year 1984, Class A earned income tax in the year 1985, and the part of the claim for revocation of disposition, and the part of the case shall be remanded to the court below. The remaining appeal by the plaintiff and the defendant's appeal shall be dismissed, and it

Justices Kim Yong-ju (Presiding Justice)