Busan District Court 2018Guhap21164 ( November 02, 2018)

fee paid by an error option does not constitute other income of a foreign corporation’s domestic source under the Corporate Tax Act.

(1) Article 93 of the Corporate Tax Act provides that domestic source income of a non-listed foreign corporation shall be limited to the assets owned by the foreign corporation, so the subject of the business in the Republic of Korea shall be limited to the foreign corporation, and the assets in the Republic of Korea shall be limited to the assets owned by the foreign corporation.

Article 93 of the Corporate Tax Act on Domestic Source Income of Foreign Corporation

2018Nu23947 Revocation of Disposition of Imposing Corporate Tax, etc.

○○○ Co., Ltd.

Doegi Tax Director

Busan District Court Decision 2018Guhap21164 Decided November 02, 2018

oly 2019.19

oly 17, 2019

1. The defendant's appeal is dismissed.

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

1. Purport of claim

The disposition of imposition of corporate tax, income tax, and additional tax for unfaithful payment on January 11, 2017 by the defendant against the plaintiff shall be revoked, respectively.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Quotation of judgment of the first instance;

The reasons for this Court concerning this case are as follows: "A withholding agent under Article 98 (1) 3 of the same Act" shall be added to "Article 98 (1) 3 of the same Act" and "No. 11 of the same Act" shall be added to "No. 4 below," and "No. 10" shall be added to "No. 10," and the defendant's argument in the trial of the court of the first instance shall be as stated in the reasoning of the judgment, except for the addition of the judgment, as to the defendant's argument in the trial of the court of the first instance, Article 8 (2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act shall

2. Additional determination

A. The defendant's assertion

1) Article 93 subparagraph 5 of the former Corporate Tax Act provides that "business operated by a foreign corporation" shall be defined as "business operated by a foreign corporation", while Article 93 subparagraph 10 (j) of the same Article (hereinafter referred to as "the provisions of this case") provides that "business operated in the Republic of Korea" shall be defined as "business operated in the Republic of Korea" and does not specify the business entity as a foreign corporation. In light of the fact that Article 93 subparagraph 10 (c) of the former Corporate Tax Act is clear that the owner of assets in the Republic of Korea is not a foreign corporation, the "business entity" stipulated in the provisions of this case shall include not only a foreign corporation, but also a domestic corporation shall be interpreted as not only the assets located in the Republic of Korea but also the assets located in the Republic of Korea.

2) However, since the fee of this case was paid in connection with a shipbuilding business of domestic shipbuilding companies or a shipbuilding ship located in Korea, it constitutes an income derived from economic benefits provided in relation to the "business operated in Korea" or "property in Korea" under the provision of this case. In addition, since the claim equivalent to the fee of this case arising from the contract of the fee of this case constitutes "property in Korea of foreign vessel owners", it constitutes an income arising from economic benefits provided in relation to "property in Korea" under the provision of this case.

B. Determination

1) Article 93 subparag. 5 of the former Corporate Tax Act explicitly states that the entity of the business is a foreign corporation, and Article 93 subparag. 10(c) of the same Act stipulates that the entity of the business is not a foreign corporation, as alleged by the Plaintiff. However, although Article 93 subparag. 10(a) of the former Corporate Tax Act does not specify the entity of the business as a foreign corporation as stated in the instant provision, the entity should be deemed to mean only a foreign corporation, not a domestic corporation, in light of the purport of the said provision. (2) In the case of Article 93 subparag. 10(c) of the former Corporate Tax Act, it is against the fact that Article 93 subparag. 10(c) of the former Corporate Tax Act provides that the entity of

Article 93 of the former Corporate Tax Act provides that a foreign corporation shall be liable to pay corporate tax only for domestic source income, unlike domestic corporations (see Article 2 (1) 2 of the former Corporate Tax Act). The domestic source income of a foreign corporation means only the income enumerated in each subparagraph of Article 93 of the former Corporate Tax Act, where the source of income is in Korea (see, e.g., Supreme Court Decision 95Nu8904, Nov. 15, 1996). Although income generated in Korea, income not listed in each subparagraph of Article 93 of the former Corporate Tax Act can not be subject to corporate tax even if it is income generated in Korea (see, e.g., Supreme Court Decision 85Nu80, Jun. 9, 1987). If interpreting the meaning of "business entity within the Republic of Korea" and "property within the Republic of Korea," unlike the Plaintiff's assertion, it means that a foreign corporation's business or money is limited to domestic source income in Korea.

2) From this point of view, the issue of whether the fee of this case constitutes an economic interest related to the "business in the Republic of Korea" or "property in the Republic of Korea" shall not be considered as a "business in the Republic of Korea" for the following reasons: (i) the overseas vessel owners engaged in a business that does not have a place of business in the Republic of Korea or is unrelated to the purchase of vessels and the brokerage business of goods, etc.; (ii) the conclusion of the contract with the domestic shipbuilding company or the conclusion of the contract with the Plaintiff for the fee of this case; and (iii) the act of designating the Plaintiff's remote valveer system by exercising an option to use the Plaintiff's remote valveer system in the Republic of Korea does not constitute an "business in the Republic of Korea"; and (iv) the above fee of this case does not constitute an "business in the Republic of Korea" of this case, which is similar to the above fee of this case, and therefore, the defendant's assertion that the fee of this case cannot be deemed as an "income subject to taxation" under the former Enforcement Decree of the Corporate Tax Act.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and the judgment of the court of first instance is just in conclusion, and the defendant's appeal is dismissed as it is without merit.