Gwangju District Court-2015-Gu Partnership-132 ( November 12, 2015)

early 2014 Mine1367 (2015.09)

If an enterprise under the grace period for small and medium enterprises falls under a related enterprise and fails to meet the requirements for small and medium enterprises, the grace period shall not be invalidated.

Even if an enterprise subject to the grace period for small and medium enterprises falls under "a related enterprise excluded from the scope of small and medium enterprises due to the enforcement of the Enforcement Decree of the Restriction of Special Taxation Act, the grace period is applied

Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act

2015Nu7431 Revocation of Disposition of Corporate Tax Imposition

J Construction Co., Ltd.

AA Head of the Tax Office

Gwangju District Court Decision 2015Guhap1132 Decided November 12, 2015

October 13, 2016

December 8, 2016

1. Revocation of a judgment of the first instance;

2. The Defendant’s imposition of corporate tax of KRW 446,859,246 against the Plaintiff on November 15, 2013 shall be revoked.

3. All costs of the lawsuit shall be borne by the defendant.

1. Details of the disposition;

A. The Plaintiff and the Plaintiff were established on May 20, 203 and settled the accounts on December 31 each year. As of December 31, 201 and December 31, 2012, the Plaintiff and the Plaintiff held 40% of the shares of the DNA Culture Co., Ltd. (hereinafter referred to as “D culture”) as of December 31, 201, and the sales of the Plaintiff and D Culture in the business year between 2010 and 2012 are as listed below. The Plaintiff is subject to external audit pursuant to Article 2 of the Act on External Audit of Stock Companies as of the business year 2012.

Sales.

corporate name, 2010 business year 2011 business year 2012

1,028 billion won 88.1 billion won 1,03.6 billion won

D Culture 500 million won 1.1 billion won

B. Plaintiff’s report of corporate tax for 2012 business year

Meanwhile, the Plaintiff’s sales for the business year 2010, exceeding KRW 100 billion for the first time, did not constitute a small or medium enterprise pursuant to the proviso to Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; Presidential Decree No. 23590, Feb. 2, 2012).

However, the plaintiff filed a corporate tax return for 2012 business year, and the former Enforcement Decree of the Restriction of Special Taxation Act

Pursuant to the main sentence of Article 2(2) of the former Restriction of Special Taxation Act (amended by Act No. 11614, Jan. 1, 2013; hereinafter referred to as the "former Restriction of Special Taxation Act") Article 7, 7-2, and 10 of the former Restriction of Special Taxation Act (amended by Act No. 11614, Jan. 1, 2013; hereinafter referred to as the "former Restriction of

C. Defendant’s imposition of corporate tax

On November 15, 2013, the Defendant owned 30% or more of the Dcultural shares as of the end of the business year 2012 to external audits, and constitutes a related company under Article 2 subparag. 3 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter referred to as the "former Enforcement Decree of the Framework Act on Small and Medium Enterprises"). Since the total sales of 2012 business year among related enterprises exceed KRW 10,00 billion, the Defendant issued a notice of 20 billion of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; Presidential Decree No. 24368, Feb. 15, 2013; hereinafter referred to as the "former Enforcement Decree of the Restriction of Special Taxation Act") and thus, cannot be subject to a disposition under Article 2 subparag. 264(2). 4). 36(2).

(d) Procedures of the previous trial; and

The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on February 11, 2014, but the Tax Tribunal dismissed the Plaintiff’s appeal on February 9, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 6, Eul evidence Nos. 1 to 3 and 5 (including each number), the purport of the whole pleadings

2. The plaintiff's assertion and relevant Acts and subordinate statutes;

A. The plaintiff's assertion

The instant disposition should be revoked on the grounds that it is unlawful for the following reasons.

(1) A violation of Article 23(1) of the Administrative Procedures Act

Article 23(1) of the Administrative Procedures Act provides that an administrative agency shall present the basis and reason to the parties when rendering a disposition. However, the Defendant issued the instant disposition in a manner that delivers a notice of payment to the parties, and it is difficult to ascertain whether the Defendant issued the instant disposition on the ground of any provision, as the grounds for the instant disposition is not specified in the notice of payment, etc.

(2) The Plaintiff constitutes a small or medium enterprise under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act.

Article 2 (1) 3 of the Enforcement Decree of the Restriction of Special Taxation Act and Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises

In full view of the provisions of Article 1(1)2(c) of the former Enforcement Decree of the Framework Act on Special Taxation, a small and medium enterprise subject to special tax reduction or exemption under the former Framework Act on Small and Medium Enterprises shall be an enterprise whose de facto independence meets the requirements of Article 3(1)2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, i.e., the number of full-time employees calculated pursuant to Article 7-4 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises in the case of an enterprise belonging to a related enterprise is not less than 1,00,000 won in its equity capital, not less than 10 billion won in sales, or not less than 50 billion won in total, or not less than 20 billion won in total, and Article 3-3 of the former Enforcement Decree of the Framework Act on Special Taxation provides that “The determination of whether the Plaintiff constitutes a small and medium enterprise under Article 3 of the same Act shall be based on the number of regular employees in the immediately preceding business year’s immediately preceding business year’s sales for the pertinent business year.

(3) The Plaintiff’s grace period under Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act

small and medium enterprises;

Even if the Plaintiff does not fall under a small or medium enterprise under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act, the Plaintiff was more than sales amounting to KRW 100 billion in the business year 2010, but became subject to the grace period up to 2013 pursuant to the main sentence of Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act. The proviso of Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act applies only to the determination of the first grace period requirement for the small or medium enterprise. As such, even during the grace period for the Plaintiff’s imposition of corporate tax for the business year 2012, the Plaintiff shall be deemed a small or medium enterprise during the grace period.

(4) The Plaintiff constitutes a case where Article 2(5) of the former Enforcement Decree of the Restriction of Special Taxation Act applies.

Article 3 (1) 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises does not constitute a small and medium enterprise under Article 2 (1) 3 of the former Enforcement Decree of the Restriction of Special Taxation Act, or Article 2 (5) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that when applying Article 3 (1) 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises and Article 3 (1) 1 and attached Table 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, if a company becomes a small and medium enterprise, it shall be deemed a small and medium enterprise, and if the company becomes a small and medium enterprise, it shall be deemed a small and medium enterprise, from the taxable year in which the cause occurs, and from the taxable year in which the date of the occurrence of the cause, if the company becomes a small and medium enterprise, it shall be deemed a small and medium enterprise, and it shall be deemed a "small and medium enterprise, as amended by Presidential Decree No. 21368 on Mar. 25, 2009.

It is as shown in the attached Table related statutes.

3. Determination

A. Whether Article 23(1) of the Administrative Procedures Act is violated

Article 3 (2) of the Administrative Procedures Act provides that "this Act shall not apply to matters falling under any of the following subparagraphs," and subparagraph 9 of the same Article provides that "matters concerning the imposition and collection of taxes under tax-related Acts and subordinate statutes" are excluded from the application of the Administrative Procedures Act, such as conscription, call-up under the Military Service Act, entry and departure of foreigners, recognition of refugee status, naturalization, disciplinary action under Acts and subordinate statutes related to public officials, and other dispositions or interests adjustment under Acts and subordinate statutes, and matters prescribed by Presidential Decree as those which are difficult or unnecessary to undergo administrative procedures due to the nature of the relevant administrative actions, such as mediation, conciliation, arbitration, finance and other dispositions, and matters prescribed by Presidential Decree as those which have undergone procedures equivalent to administrative procedures.

Considering the overall purport of the arguments in Gap evidence Nos. 2 and 3, the Gwangju Regional Tax Office shall take into account the overall purport of the arguments.

9. On 24. 24. The Plaintiff is an investor holding 40% of Dcultural shares and fails to meet the standards for small and medium enterprises, and thus, can be acknowledged that a notice of pre-taxation was sent to exclude the exemption of special taxation related to small and medium enterprises and to correct and notify under-reported corporate taxes. Article 81-15(1)2 of the Framework Act on National Taxes and Article 63-14(2) of the Enforcement Decree of the Framework Act on National Taxes provide that a person who received the notice of pre-taxation may file a request for pre-assessment review, which is a review of legality of the notification, with the head of a tax office or the director of a regional tax office who received the notice within 30 days from the date of receipt of the notice. Thus, the instant disposition of this case is a disposition of imposition and collection of tax that goes through the procedures corresponding to administrative procedures

Therefore, this part of the Plaintiff’s assertion, which is premised on the application of the Administrative Procedures Act, is without merit.

B. Whether the Plaintiff constitutes a small or medium enterprise under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act

(1) Determination as to whether a related company constitutes a related company

Article 2 (1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides for special taxation for small and medium enterprises in Section 1 of Chapter II, and Article 2 (1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "The actual independence of small and medium enterprises subject to such special taxation is in conformity with Article 3 (1) 2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises" in regard to the requirement of independence, and "Article 3 (1) 2 (c) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises is not in conformity with the criteria of attached Table 1 or any of the items of paragraph (1) 1 of Article 2 of the former Enforcement Decree of the Restriction of Special Taxation Act".

According to the above provisions, the enforcement of the former Framework Act on Small and Medium Enterprises

Article 2(8) of the Enforcement Rule of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 406 of Mar. 14, 2014) provides that the number of full-time workers calculated pursuant to Article 7-4 of the Decree shall be less than 100, the equity capital shall be less than 100 billion won, the total amount of assets shall be less than 50 billion won, and the total amount of assets shall be less than 50 billion won. According to Articles 2 subparag. 3 and 3-2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, where a parent company owns not less than 30% of the shares of the subsidiary company as of the end of the immediately preceding business year in which it becomes the largest investor, the relationship between the parent company and the subsidiary company shall be established and shall be deemed to belong to the related company. According to Article 2(3) of the former Enforcement Rule of the Framework Act on Small and Medium Enterprises (amended by Ordinance of the Ministry of Strategy and Finance as of March 14, 2014, 2014).

(2) Determination as to whether a small or medium enterprise constitutes a small or medium enterprise

(A) For the plaintiff belonging to a related company, the special tax amount for small and medium enterprise under the former Restriction of Special Taxation Act

In order to constitute a small or medium enterprise eligible for reduction or exemption, the sales amount calculated pursuant to Article 7-4 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises shall be less than 100 billion won. The following is examined as to whether the standard for calculating sales amount is the end of 2012 business year, which is the pertinent taxable year of the instant disposition, or the business year, which is the immediately preceding business year

(B) According to Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act and Article 3(1) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, in order for related enterprises to become small and medium enterprises, the standards by type of business (in the case of construction business, the number of full-time workers of less than 300 or the capital of less than 3 billion won) and the upper limit (less than the number of regular workers of less than 1,000, the equity capital of less than 1,50 billion won, sales of less than 1,50 billion won, and total assets of less than 50 billion won) set forth in attached Table 1 are all satisfied, but in the case of the former Enforcement Decree of the Restriction of Special Taxation Act, the upper limit (However, the upper limit of sales is less than 1,00 billion

However, while the former Enforcement Decree of the Framework Act on Small and Medium Enterprises only provides for the standards of small and medium enterprises subject to policy measures to foster small and medium enterprises, it does not impose restrictions on the type of business itself, the former Restriction of Special Taxation and its Enforcement Decree stipulate the requirements and scope of special taxation differently from the Ordinance of the Framework Act on Small and Medium Enterprises (main sentence of Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act), such as setting the requirements of small and medium enterprises under some of the Framework Act on Small and Medium Enterprises and limiting the application of special taxation from the consideration of tax policy to a specific type of small and medium enterprises (see, e.g., Article 2(2) and (5) of the former Enforcement Decree of the Restriction of Special Taxation Act). In addition, the former Restriction of Special Taxation and its Enforcement Decree separately provide for the deferment of small and medium enterprises for a certain period of time (see, e.g., Article 2(2) and (5) of the former Enforcement Decree of the Restriction of Special Taxation Act).

(C) Therefore, small and medium enterprises subject to special tax reduction and exemption under the former Restriction of Special Taxation Act

Whether it constitutes a business or not under the former Enforcement Decree of the Restriction of Special Taxation Act shall be determined in accordance with the former Enforcement Decree of the Restriction of Special Taxation Act, and as alleged by the Plaintiff, it shall not be determined in accordance with

However, Article 2 (4) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "other parts than each subparagraph of paragraph (1) shall be limited.

In addition, Article 2 of the Enforcement Rule of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 322, Feb. 23, 2013; hereinafter the same shall apply) provides that the number of full-time employees, equity capital, capital, total amount of assets, and total amount of assets under subparagraph 1 and the latter part of subparagraph 3 of the same paragraph shall be determined by Ordinance of the Ministry of Strategy and Finance. Article 2 of the former Enforcement Rule of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 322, Feb. 23, 2013; hereinafter the same shall apply) provides that the number of employees calculated by dividing the number of employees as of the end of each month of the relevant taxable year by the number of the relevant months (the number of employees, paragraph 2).

In the case of sales, there is no express provision that such sales shall be based on the end of the pertinent taxable year.

However, Article 2 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that the number of employees employed on a regular basis as a standard for determining whether a company is a small or medium enterprise, 'number of employees employed on an equal basis', 'equity capital', 'total amount of assets', 'total amount of assets', ② The purpose of the Framework Act on Small and Medium Enterprises is to support and foster the relevant company if the relevant company is judged as a small or medium enterprise, while the Restriction of Special Taxation Act aims to apply tax reduction or exemption by judging whether a company is a small or medium enterprise in calculating its tax base and tax amount for the relevant taxable year, which differs from the legislative purpose of the Framework Act on Small and Medium Enterprises, so that it is different in determining the scope of a small or medium enterprise for the application of the Framework Act on Small and Medium Enterprises and the scope of a small or medium enterprise for tax reduction or exemption. 3) In light of the legislative purpose of the former Restriction of Special Taxation Act, it would be more reasonable to determine whether a company is a small or medium enterprise as of the end of the relevant taxable year.

(D) According to Article 7-4 [Attachment 2] of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, the Plaintiff’s entire sales (Article 2(1) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises) calculated by the method prescribed in the above [Attachment 1] [Attachment 2] is included in the Plaintiff’s sales as of the end of 2012 taxable year of the disposition of this case by "the Plaintiff’s share ownership ratio to DD culture and sales calculated by multiplying the Plaintiff’s sales as of the end of 2012 taxable year of the disposition of this case by the Plaintiff’s sales as of the end of 2012 taxable year of the disposition of this case, the Plaintiff’s total sales (Article 104 billion won + 03.6 billion won + 0.4 billion won) and it is apparent that the amount exceeds 10 billion won, and thus, it is reasonable to deem that the Plaintiff does not constitute a special reduction or exemption under the Restriction of Special Taxation Act at the time of the business year 2012.

(E) Therefore, the Plaintiff’s assertion on this part is without merit.

C. Whether the Plaintiff constitutes a small or medium enterprise with the grace period under Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act

(1) The former Restriction of Special Taxation Act provides for special taxation for small and medium enterprises in Section 1 of Chapter II, etc.

Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; hereinafter the same) provides for the requirements of business type, size, independence, etc. of small and medium enterprises subject to the delegation of Article 5 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; hereinafter the same). Article 2(2) provides for the period of grace to be regarded as a small and medium enterprise for the taxable year including the date on which the first reason arises and for the following three taxable years, where a small and medium enterprise ceases to be a small and medium enterprise due to a expansion of size, etc. as if its sales are above KRW 100 billion.

Meanwhile, Article 2(1)3 of the former Enforcement Decree of the Restriction of Special Taxation Act provides for "an enterprise belonging to a related enterprise" under Article 3(1)2(c) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 25302, Apr. 14, 2014) and considers that the scope of total sales, etc. of "an enterprise belonging to a related enterprise" is a small and medium enterprise suitable for the above item(c).

In light of the purpose and history of the system, it is reasonable to interpret the system as the statutory text, barring any special circumstance, whether the grace period has expired for a company already under grace period is invalid, even in cases where it does not constitute a small or medium enterprise due to the expansion of the scale of a small or medium enterprise or revision of statutory standards.

However, the former Enforcement Decree of the Restriction of Special Taxation Act has a provision for "an enterprise belonging to the related enterprise".

Even if the requirements of small and medium enterprises are newly recognized as the requirements of the small and medium enterprises, there is no provision on whether the grace period expires when the enterprises already under the grace period do not meet the requirements of the small and medium enterprises.

In addition, Article 2 (2) (proviso) and (2) of the former Enforcement Decree of the Restriction of Special Taxation Act separately uses 'small and medium enterprise' and 'enterprise in the grace period', and the above proviso stipulates that 'small and medium enterprise' does not fall under 'small and medium enterprise' due to any of the causes in each subparagraph except for the above subparagraph 2, it is difficult to interpret 'reasons for not applying the grace period' as 'reasons for not applying the grace period' in light of such language. Therefore, it is difficult to interpret 'reasons for not applying the grace period except for the reasons in subparagraph 2.

Examining the relevant provisions of the Restriction of Special Taxation Act as seen earlier in light of such circumstances:

Small and medium enterprises that are not subject to the grace period under the proviso to Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act do not include a "enterprise already in the grace period" (see Supreme Court Decision 2016Du33902, Aug. 29, 2016).

(2) Examining the facts of the instant case in light of the aforementioned provisions and legal principles, the Plaintiff had already been examined.

Since a company whose turnover in 2010 business year exceeds KRW 100 billion and has been subject to the grace period from 2013 to 2013, the grace period is still applicable even if it falls under "a related company that is excluded from the scope of small and medium enterprises from January 1, 2012 due to the enforcement of the former Enforcement Decree of the Restriction of Special Taxation Act."

Therefore, Article 2(1)3 and the proviso of Article 2(2)3 of the former Enforcement Decree of the Restriction of Special Taxation Act

Thus, the disposition of this case based on the premise that the grace period for small and medium enterprises, which had been previously applied to the plaintiff, has expired shall be deemed unlawful.

4. Conclusion

Therefore, the plaintiff's claim is accepted for reasons without any further review, and the judgment of the court of first instance is unfair, so the judgment of the court of first instance is revoked and the defendant decided to revoke the disposition of this case against the plaintiff on November 15, 2013 and it is so decided as per Disposition.