Han Bank Co., Ltd. (Attorney Lee Jae-soo, Counsel for defendant-appellee)

Head of Central Tax Office

June 23, 2004

1. As to the Plaintiff:

A. The portion exceeding 137,319,300 won in the disposition of imposition of corporate tax of KRW 160,267,450 for the business year of March 22, 1999;

B. The portion exceeding KRW 220,693, 140 among the disposition of imposition of corporate tax of KRW 271,082,580 for the business year of March 15, 200, and the portion exceeding KRW 9,023,820 among the disposition of imposition of KRW 271,082,580 for the special rural development tax of KRW 10,858,780 for the special rural

Each cancellation shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the costs of lawsuit, 5/6 shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

The defendant imposed corporate tax of KRW 160,267,450 on the plaintiff for the business year 1993 as of March 22, 1999 and imposed corporate tax of KRW 271,082,58,780 for the business year 1994 as of March 15, 200 and the special rural development tax of KRW 10,858,780 for the plaintiff shall be revoked.

1. Details of the disposition;

(a) Loans to the employees without any houses of the Plaintiff (the first trade name was the Seoul Bank, but the name was changed to the Han Bank after the merger of Han Bank; and

(1) The Plaintiff loaned funds to homeless employees for the acquisition and lease of a house below the national housing size prescribed by the Housing Construction Promotion Act.

(2) Of the Plaintiff’s loans for house purchase and lease to employees without any houses, the Defendant already acquired a new house prior to the transfer of the previous house; ② In a case where a new house is acquired with a new loan prior to the transfer of the previous house; ③ marriage, inheritance, donation, and the household with a lineal ascendant after the loan; ④ in a case where a person becomes two houses owner after acquiring a house exceeding the scale of national housing or acquiring a house below the scale of national housing after acquiring a house below the scale of national housing; and ④ in a case where an additional house is acquired after acquiring a new house, the difference between the interest and the amount equivalent to the interest calculated based on the interest rate for the current house in accordance with the provisions of Article 20 of the former Corporate Tax Act (amended by Act No. 5581, Dec. 28, 1998; hereinafter “former Act”) and Article 46(2)7 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 1468, Dec. 31, 1994; hereinafter “former Enforcement Decree”).

(b) Imposition and reduction of corporate tax for the business year 193;

(1) On March 22, 1999, the Defendant included KRW 436,050,311 in gross income according to the above method, calculated the amount of income for the business year 1993, and imposed corporate tax of KRW 255,031,870 except for the amount of tax payable.

(2) Accordingly, the Plaintiff filed an objection against the Defendant on June 19, 199. The Defendant did not accept the Plaintiff’s assertion on the ground that there was no evidence to acknowledge that the loan was used in relation to the acquisition of the above house when the Plaintiff’s employee acquired the house after acquiring the house from the Plaintiff on August 11, 1999. However, where the Plaintiff became two houses due to inheritance or donation after the loan, and where the Plaintiff became two houses due to inheritance or donation, where the employee became two houses due to the same lineal ascendant and the household, and where the employee jointly inherited the house before receiving the loan, but there was no other house except for the house (excluding the inheritor with the largest share in inheritance) by deeming that the transfer data was omitted due to the error in computerized computerized data of the National Tax Service or acquired the house below the scale of national housing, and thereby, the Plaintiff’s objection against the taxable portion was reduced to KRW 136,32,923 by excluding the corporate tax from the gross income on August 24, 1999 to KRW 175,27140.

(3) Since November 10, 1999, the Plaintiff filed a request for review on the remaining portion after the said reduction with the Commissioner of the National Tax Service. On May 12, 2000, the Commissioner of the National Tax Service, even if he acquired a house below the national housing scale due to an error in computerized data of the National Tax Service, deemed that he acquired a house exceeding the national housing scale and subsequently acquired a loan, and thereby excluded the taxation from the object of wrongful calculation and calculation. Accordingly, on June 9, 2000, the Defendant reduced corporate tax to KRW 160,267,450 by excluding KRW 25,653,287 from the gross income.

(4) On August 19, 200, the Plaintiff filed an appeal on the remaining portion after the said reduction with the National Tax Tribunal, but was dismissed on February 12, 2001.

(c) Imposition and reduction of corporate tax for the business year 194;

(1) On March 15, 200, the Defendant included KRW 382,804,789 according to the aforementioned method in gross income; calculated income of KRW 230,042,467 by not adding the borrowed interest to deductible expenses; and imposed corporate tax of KRW 336,585,510 and special rural development tax of KRW 13,482,630, 190, excluding the already paid tax amount, respectively.

(2) As the Plaintiff raised an objection against the Defendant on June 9, 200, the Defendant excluded the amount of KRW 44,768,580 from the deductible expenses except for the amount of KRW 74,768,665 from the gross income on July 25, 200 to the amount of KRW 44,78,580 from the deductible expenses, thereby reducing the special agricultural and fishing villages tax to 271,082,58,788,780,780 from the special agricultural and fishing villages tax by excluding the amount of KRW 74,78,580 from the deductible expenses except for the amount of KRW 74,768,580 from the gross income on July 25, 200, where the Defendant became two houses due to inheritance or donation.

(3) On August 19, 200, the Plaintiff filed an appeal with the National Tax Tribunal on the remaining portion after the said reduction, but was dismissed on February 12, 2001.

(hereinafter referred to as the "instant disposition" is added to the imposition disposition of corporate tax for the business year 1993 remaining after reduction and the imposition disposition of corporate tax and special tax for rural development for the business year 194.

[Based on recognition] Evidence Nos. 1, 2 through 6-1, 2, and 1-1, 2, 3, 4, 5, 6, 7, 8, 9, 10-1, 10-2, 10-3, 10-4 through 5-5-1, 2, 3, 4, 5, 6, 7, 8, 9, 10-1, 10-2, 10-3, 10-4, 11-1, 11-2, and 11-3 of the evidence No. 1, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Plaintiff asserts that the disposition of this case is unlawful as follows, in light of the proviso of Article 46 (2) 7 of the former Enforcement Decree, which excludes those subject to the avoidance of wrongful calculation from the “where a person without a house lends funds required for the acquisition and lease of a house smaller than the scale of national housing to an employee without a house” means an employee with no house other than the house acquired by the loan, and it does not necessarily mean only an employee who does not own a house on the record at the time of loan of the

(1) In a case where it was found that the loan was acquired after the lapse of the loan;

(1) Where a person owns another house as of the date of loan - 84 persons (1993, 1994), 8 persons (194)

(2) Where a person does not own another house as of the date of loan - one (1993, 1994), two (194).

(2) In the case of acquisition before the loan

1. - 21 persons (193, 1994), 15 (194), 6 persons (193, 1994, and the part recognized by the National Tax Tribunal's decision regarding a disposition of corporate tax assessment against the plaintiff in the business year 1995 through 1998) where the period of two houses does not exist

(2) Where two housing periods have elapsed, - 10 persons (1993, 1994), 8 persons (1994)

(3) If the date of loan and the date of acquisition are equal - 2 persons (1993, 1994)

(4) In the case of acquiring a house below the scale of the national housing - two persons (1993, 1994), two persons (194)

(5) 193, 1994 - 2 persons who did not have a house loan in 194

B. Relevant statutes

Gu law

Article 20 (Dispudiation of Wrongful Calculation) The Government may, under the conditions as prescribed by the Presidential Decree, calculate the income amount for each business year of the concerned corporation in case where it is deemed that the domestic corporation’s act or the calculation of income amount has unjustly reduced the tax burden on the corporation’s income in transactions with the related parties as prescribed by the Presidential Decree.

Enforcement Decree of the Gu

【Improper Conduct or Calculation of Juristic Person】

(1) The term "a person having a special relationship" under Article 20 of the Act means any of the following persons:

2. Executives, employees, or investors of a corporation (referring to the executives, in case of a profit-making corporation, and the director and founder, in case of a non-profit corporations) or other persons than employees, whose livelihood depends on the money and other assets of the corporation or investors, and their relatives who depend upon them for their livelihood;

(2) "Where it is deemed that the tax burden has been unjustly reduced" in Article 20 of the Act means cases falling under any of the following subparagraphs:

7. Where money and other assets or services are provided to investors, etc. free of charge or at a low interest rate, tariff, or rental rate: Provided, That this shall not apply where a corporation lends money (limited to the amount determined by the Ordinance of the Ministry of Finance and Economy) required for the acquisition or lease of a house smaller than the scale of national housing (including the land attached to the house) to homeless employees;

【Calculation of Recognized Interest, etc.】

(1) Where an investor, etc. has lent money to the investors, etc. at a rate lower than that prescribed by the Ordinance of the Ministry of Finance and Economy (hereinafter referred to as the “monthly interest rate”), the difference between the amount equivalent to the interest calculated according to the monthly interest rate for the current account and the amount equivalent to the interest shall be included

(2) Where a loan has been made to an investor, etc. and there exists a loan higher than the overdraft interest rate, the difference between the amount equivalent to the interest calculated by the relevant interest rate or the amount equivalent to the relevant interest shall be included in gross income within the scope of such loan, notwithstanding the provisions of paragraph (1): Provided, That where a loan has been made to a related party (limited to a corporation or an individual operating a business) and an agreement has been made to receive the interest at the overdraft interest rate after setting the maturity period, the overdraft interest rate shall be deemed the overdraft interest rate in calculating the relevant loan

(3) Paragraph (1) shall not apply to cases prescribed by the Ordinance of the Ministry of Finance and Economy.

Enforcement Rule of the former Corporate Tax Act (amended by Ordinance of the Prime Minister No. 492 of March 30, 1995; hereinafter referred to as the "former Enforcement Rule")

【Scope of Housing Purchase Funds】

(1) The amount prescribed by the Ordinance of the Ministry of Finance and Economy under the proviso to Article 46 (2) 7 of the Decree shall be twenty million won.

(2) "Fund required for acquisition or lease" in the proviso to Article 46 (2) 7 of the Decree means the fund for purchasing a house, the money for lease on a deposit basis, or a security deposit.

C. Determination

(1) The Plaintiff’s act of lending housing acquisition funds or leased funds to its employees at a low interest rate falls under the main sentence of Article 46(2)7 of the former Enforcement Decree, and thus, the act is subject to the denial of wrongful calculation under Article 20 of the former Enforcement Decree, insofar as the act does not fall under the proviso of Article 46(2)7 of the former Enforcement Decree. Therefore, if the Plaintiff’s act does not fall under the subject of the denial of wrongful calculation, the Plaintiff’s act is subject to the exclusion of wrongful calculation under Article 46(2)7 of the former Enforcement Decree, i.e., the leased employee, and the leased employee’s non-resident, and the house acquired or leased by the employee should be smaller than the national housing size. The amount of the subsidy must meet three requirements that the amount of the subsidy does not exceed 20 million won under Article 22(1) of the former Enforcement Decree. However, the tax law

Wrongful calculation is an act of reducing or excluding the tax burden that arises when a taxpayer takes the ordinary rational transaction form by taking the bypassing act, the multi-stage act and other abnormal transaction form without a reasonable transaction form. The purport of Article 20 of the former Act, which provides for the denial of unfair calculation by wrongful calculation, is to ensure fairness in taxation and prevent tax avoidance by imposing a tax on the taxpayer by deeming that a taxpayer was objectively reasonable in terms of tax law, when deeming that a transaction with a corporation and a person with a special relationship has neglected economic rationality by abusing all the forms of trade listed in each subparagraph of Article 46(2) of the former Enforcement Decree, and that it is unfair in terms of tax law (see Supreme Court Decision 9Du10131, Nov. 27, 2001). The existence of economic rationality should be determined based on whether the transaction lacks economic rationality in light of sound social norms or commercial practices, taking into account the overall circumstances of the transaction (see Supreme Court Decision 9Du10131, Nov. 27, 2001).

In light of the purport of Article 46 (2) 7 of the former Enforcement Decree of the Act, the issue of whether a person is a homeless employee shall be, in principle, determined based on whether a person is a homeless employee as prescribed by the proviso of Article 46 (2) 7 of the former Enforcement Decree of the Act. Therefore, if the registration of ownership transfer of a house at the time of the loan of housing was completed in the future of the borrower, it shall not be deemed a homeless employee. However, in principle, the Plaintiff is allowed to apply for a loan of housing funds within three months after the purchase of a house if there is any inevitable reason for an employee loan of a general customer (Article 7-2). (Article 46 (2) 7-2 of the former Enforcement Decree of the Act). Thus, in light of social norms, if the Plaintiff’s employee first acquired a house within three months from the date of the purchase of the house, and used the house funds related to the acquisition of the above house, it cannot be deemed that it was unfair in terms of tax law compared to ordinary customers, and thus, if the above is deemed an employee as a homeless employee.

However, even though an employee who had been holding a house entered into a contract for transferring the house, he/she received a new house with the loan from the Plaintiff, or used the loan from the Plaintiff to repay the funds related to the acquisition of the house within three months after he/she acquired the house, but only entered into a contract for transferring the house which was previously owned at the time of the loan of the house, and the transfer of ownership is not completed in the future, and thus, he/she temporarily became two houses due to the lack of ownership transfer registration in the name of an employee who owned the house. Thus, it cannot be deemed that the employee who owned the house constitutes a homeless employee under the proviso of Article 46(2

(2) On the premise of such interpretation, we examine specifically whether the instant disposition is unlawful by the type of illegal cause alleged by the Plaintiff.

(A) Where the Plaintiff owned another house at the time of the loan (the part of paragraphs (1) (1) and (2) of the illegal cause alleged by the Plaintiff)

Where a house was acquired after the loan, but the house was owned by another house as of the date of loan, and the house was acquired before the loan, but the two houses period is not deemed to be a homeless employee under the proviso to Article 46 (2) 7 of the former Enforcement Decree.

(B) The case where it was found that the Plaintiff acquired the loan after the loan (the part concerning paragraph (1) (2) of this Article among the illegal grounds alleged by the Plaintiff)

Although the plaintiff's employees acquired a house on April 27, 1993 after obtaining a loan on June 10, 1993, the amount equivalent to the interest shall be included in the gross income in calculating corporate tax for the business year 193 and 1994. The maximum price (No. 266 listed in the attached Table 2) was extended on September 23, 1994 and acquired a house on November 10, 1994, and the above employee is deemed to have acquired the house before the loan, and thus, the amount equivalent to the interest shall be calculated in calculating corporate tax for the business year 1994, since there is no dispute between the parties who included the amount equivalent to interest in gross income.

(C) Where the Plaintiff did not own another house at the time of the loan as acquisition before the loan (the part of paragraph (a) (2) among the illegal grounds alleged by the Plaintiff)

From among the plaintiff's employees, 37 persons such as Lee Young-chul (Attached 1, 2, 48, 74, 153, 180, 478, 498, 535, 567, 797, 889, 902, 971, 1236, 1310, 20, 209, 216, 216, 237, 237, 237, 29, 27, 29, 29, 29, 27, 29, 27, 29, 28, 29, 28, 286, 29, 29, 37, 200, 300, 19, 300, 200, 29, 29, 29, 278, 2828, 26.

Although the Plaintiff asserts that the amount equivalent to the interest related to the loan to the said employee was included in the gross income on the ground that he received the loan after acquiring a house among its employees, according to the overall purport of the statements and arguments as stated in the evidence No. 10-3 and No. 4-2, the said employee acquired a house on April 14, 1987 and purchased a new house on February 27, 1991 after receiving the loan of a house acquisition fund on February 27, 1991, it cannot be deemed as a homeless employee, and thus, the amount equivalent to the interest corresponding to each of the business years and 1994 should be included in the gross income. On the other hand, although the Defendant asserted that among the Plaintiff’s employees, he owned a house that was previously acquired on the loan at the time of receiving the loan, there is no evidence to acknowledge this.

(D) Where the date of loan and the date of acquisition are equal (the part of paragraph (1) (3) of the illegal grounds alleged by the plaintiff)

Of the Plaintiff’s employees, the Plaintiff acquired the house on the day of each loan, but all of them owned the existing house at the time of loan does not conflict between the parties, and thus, the said employees cannot be deemed to constitute a homeless employee.

(e) Where a person acquires a house below the national housing scale (the part of paragraph (a) (4) out of the unlawful grounds alleged by the plaintiff)

Although the Plaintiff’s employees acquired the housing smaller than the scale of national housing, the Defendant deemed that the said employees acquired the housing exceeding the scale of national housing, and included the amount equivalent to the interest related to the loan in gross income. However, on the other hand, the fact that the said employees owned the existing housing as of the date of each loan does not conflict between the parties, and thus, the said employees cannot be deemed to constitute a homeless employee.

(f) In a case where no house loan was made in 193 or 1994 (the part on the grounds of illegality alleged by the plaintiff among the grounds of illegality)

Although the Defendant borrowed housing funds from the Plaintiff after 1994 from the Plaintiff’s employees during 1994, the Defendant deemed that the said employees were loaned housing funds from the Plaintiff in the business year 1993 and calculated corporate tax, etc. for the business year 1993 and 1994, the fact that the amount of the recognized interest and the amount equivalent to the gross income was calculated is not disputed between the parties, and thus, the part against the said employees is unlawful.

(3) Calculation of a reasonable amount of tax

In the disposition of this case, the portion of the imposition disposition of this case, which exceeds KRW 137,319,30 among the imposition disposition of KRW 160,267,450, and KRW 220,693,140, among the imposition disposition of KRW 271,082,58,58,780, which reverts to the business year of 1994, exceeds KRW 9,023,820 among the imposition disposition of KRW 160,267,450, which is deemed as provisional payment related to the business and imposed corporate tax (the above part recognized as illegal) by the Defendant.

D. Sub-committee

Therefore, the part which exceeds 137,319,30 won among the disposition of imposition of corporate tax of 160,267,450 won on March 22, 1999 against the plaintiff, and the part which exceeds 220,693,140 won among the disposition of imposition of corporate tax of 271,082,580 won on March 15, 2000 on March 15, 2000, exceeds 10,858,780 won, and the part which exceeds 9,023,820 won among the disposition of imposition of corporate tax of 271,082,58,780 won on the plaintiff shall be revoked.

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable within the scope of the above recognition, and the remaining claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment List omitted]

Judge Han-gu (Presiding Judge)