Whether the instant goodwill constitutes a merger evaluation marginal profit under the Corporate Tax Act

In the case of a merger of corporations, in order to taxable the value of business rights as a merger evaluation marginal profit, the merged corporation should be deemed as an intangible property value in which the trade name, etc. of the merged corporation can be acquired in excess of the future, and evaluated the value of the business value and paid

Articles 12, 15 and 24 of the Enforcement Decree of the Corporate Tax Act

Daejeon District Court-2015-Gu Partnership-103059 Revocation of Disposition of Imposing Corporate Tax

AAAA

The Director of the National Tax Service

2018.20

November 01, 201

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 1,285,90,460 (including additional taxes) of corporate tax for the business year 2008 against the Plaintiff on March 21, 2014 shall be revoked.

1. Details of the disposition;

A. The Plaintiff (around September 2008, changed the trade name from “ABB” to “ABB” and changed the trade name from “AB” to “AB” around March 2016, the Plaintiff is a KOSDAQ-listed corporation that runs the business of manufacturing and selling construction materials, such as piping materials, and around December 5, 2007, obtained 70% of the shares of BB-listed corporation (hereinafter “BB”) that runs the business of recycling non-ferrous metal products, such as recycling gold, silver, copper, electronic scoops, etc. Accordingly, BB became a subsidiary subject to preparation of the Plaintiff’s consolidated financial statements from the fiscal year 2007.

B. On July 15, 2008, the Plaintiff entered into a merger contract on the same day through a resolution by the board of directors for merger in order to absorb BB. On September 1, 2008, following the general meeting of shareholders on September 1, 2008, the Plaintiff made a merger on October 7, 2008 (hereinafter “instant merger”) and completed the registration of merger around that time.

C. Under Article 84-7(1) of the former Enforcement Decree of the Securities and Exchange Act (amended by Presidential Decree No. 20947, Jul. 29, 2008; hereinafter referred to as the "former Enforcement Decree of the Securities and Exchange Act") and Article 36-12(1) and (2) of the former Enforcement Rule of the Securities and Exchange Act (amended by Ordinance of the Prime Minister No. 885, Aug. 4, 2008; hereinafter referred to as the "former Enforcement Rule of the Securities and Exchange Act"), the base price was calculated as the merged value (2,792 won per share); BBB, an unlisted corporation, was calculated as an weighted average value of asset value and profit-making value under Articles 5 through 8 of the Enforcement Rule of the Securities and Exchange Act (amended by Presidential Decree No. 20947, Jul. 29, 2008; hereinafter referred to as the "former Enforcement Rule of the Securities and Exchange Act"). The merger ratio between the Plaintiff and BB was determined as the above merged value.

D. According to the above merger ratio, the Plaintiff granted 2.9215616 common shares (amounting to 500 won) to the shareholders of BB per common share (amounting to 500 won) of BB (amounting to 500 won) 2.9270,558 shares (=2,270,00 shares x 2.9215616 shares x 2.929616 shares x 1 share of less than one share (payment in cash).

E. As to the instant merger, the Plaintiff entered into accounting by means of a purchase method pursuant to Article 4 of the Accounting Rules on Corporate Merger, etc. (hereinafter “The Accounting Rules”), and entered into accounting by succeeding to the book value of consolidated financial statements pursuant to Article 17 of the said Accounting Rules. As a result, KRW 3,208,765,661, which is the difference between the fair value of net assets of BB and the cost of the merger, was included in the account book as an intangible asset business right (hereinafter “the instant business right”).

F. The Plaintiff, applying the service life of 10 years to the instant goodwill, redeems the instant goodwill by straight line method, and appropriates the depreciation costs of 80,219,140 won, 320,876,556 won as depreciation costs, respectively, in 208 and 2009. The Plaintiff filed a tax return by treating the instant goodwill as deductible expenses, but did not include it in the gross income.

G. In around 2010, the Daejeon regional tax office pointed out that the Plaintiff’s business right is depreciated by deeming the instant business right as depreciable assets without any tax adjustment in gross income and thus, it is unfair to arbitrarily reduce corporate tax burden and thus, it does not constitute depreciable assets. As such, the Plaintiff’s business right does not constitute depreciable assets. Accordingly, it is deemed that the Plaintiff’s corporate tax is excluded from deductible expenses each amount paid in each business year of May 14, 2010 and 2009.

A fixed return was made, and the remaining amount of 2,807,669,695 won (=3,208,765,661 won - 80,219,140 won - 320,876,556 won) was included in the calculation of losses in the business year 2010, and was reported as non-deductible losses and other losses.

H. As a result of a written analysis of the Plaintiff’s report of corporate tax for the business year 2008, the director of the Daejeon Regional Tax Office: (a) the instant goodwill is depreciable assets as provided by Article 24(4) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22184, Jun. 8, 2010; hereinafter “former Enforcement Decree

As a goodwill, the Defendant deemed that it falls under the category of “merger marginal profit” under the proviso of Article 17(1)3 of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008; hereinafter referred to as the “former Corporate Tax Act”) and notified the Defendant to impose corporate tax after inclusion in the calculation of earnings for the business year 2008. Accordingly, on March 26, 2014, the Defendant notified the Plaintiff of the correction and notification of the amount of KRW 1,285,90,460 (including additional tax for underreporting, KRW 88,735,280, additional tax for underreporting, KRW 465,937,03, and additional tax for underreporting, KRW 554,672,313 (hereinafter referred to as the “instant disposition”).

[Reasons for Recognition] Facts without a partial dispute, Gap evidence 1 to 8, Eul evidence 1, 2, 4 to 6 (including each number; hereinafter the same shall apply)

2. Summary of the plaintiff's assertion

A. The instant goodwill, not by evaluating and succeeding to the intangible business value of BB, is not a difference between the price determined by the merger ratio and the fair value of net assets of the merged corporation according to the merger accounting rules, and merely is an amount generated in the technical process of accounting management, and thus does not constitute a merger evaluation marginal profit. Therefore, the instant disposition based on the premise that the instant goodwill falls under the merger evaluation marginal profit, should be revoked in an unlawful manner.

B. Even if the instant goodwill is subject to taxation, the position of the Supreme Court on May 11, 2018 was not arranged as to whether the fiscal goodwill appropriated by the merged corporation can be imposed by deeming it as an operating right under the tax law in the instant case. The Daejeon regional tax office and the Defendant’s intellectual property registration office that the instant goodwill does not constitute depreciable assets and filed a revised return in 2010, and no problem was pointed out by the tax authorities. As such, the instant disposition constitutes a case where there is a justifiable reason for failure to perform its obligations due to the conflict of opinion due to the intent of interpretation of the tax law. Accordingly, the penalty tax in the instant case ought to be revoked by unlawful means.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination as to the illegality of the instant disposition

A. Whether the instant goodwill constitutes a merger evaluation marginal profit under the Corporate Tax Act

(1) Relevant legal principles

Where a merged corporation succeeds to the evaluation of assets from a merged corporation, the former Corporate Tax Act shall impose tax on the portion exceeding the book value of the merged corporation as a merger evaluation marginal profit (proviso of Article 17 (1) 3 and Articles 15 (2) and 12 (1) 1 of the former Enforcement Decree of the Corporate Tax Act).

In the case of a merger, the business rights appropriated by the merged corporation shall be depreciable assets only if the merged corporation succeeds to the evaluation of the assets of the merged corporation and has paid compensation for business value with the trade name, transaction relationship, and other trade secrets, etc. of the merged corporation (hereinafter referred to as "trade name, etc.").

According to the provisions of the relevant statutes, in order to impose the value of business rights as a merger evaluation marginal profit in the case of a corporate merger, the merged corporation is deemed to have paid the consideration by evaluating its business value by recognizing the trade name, etc. of the merged corporation as an intangible property value capable of gaining excess profits. In such a case, whether the value of business value is appraised shall be objectively determined by comprehensively taking into account various circumstances, such as the process and motive of the merger, the current business status of the merged corporation and the merged corporation at the time of the merger, and the details of tax return after the merger, etc., and the business right is calculated in accordance with the corporate accounting standards. The detailed reasons are as follows (see, e.g., Supreme Court Decision 2017Du54791, May

㈎ 합병법인의 합병평가차익으로 과세하기 위해서는 논리적으로 먼저 합병법인의 자산으로 인정되어야 한다. 법인이 내부의 사업 활동으로 무형의 가치가 있는 영업권을 창출하였다고 하더라도 세법상 자산으로 인식되는 것은 아니며, 합병으로 피합병법인의 영업권을 취득하는 때에는 위 구 법인세법 시행령에서 정한 요건을 갖춘 경우에 한하여 세법상 합병법인의 자산으로 인정된다.

Tax law and corporate accounting have different purposes and purposes and separately provided for in the corporate tax law. In the event of a merger, the requirements for recognition of goodwill are also such cases. "Requirements for evaluation of the business value of goodwill" under the Enforcement Decree of the Corporate Tax Act was introduced to recognize business goodwill restricted at the time of the amendment of the Enforcement Decree of the Corporate Tax Act on December 31, 1998, and the framework for the merger taxation has been maintained to Article 80-3 (2) of the Enforcement Decree of the Corporate Tax Act amended on June 8, 2010.

㈏ 합병의 경우 영업권을 세법상 자산으로 인정하기 위한 요건 문제는, 구체적 평가방법의 적절성을 판단할 때 영업권 가액을 합병대가 중 순자산가액을 초과한 차액으로 계산하는 것이 적절한지라는 문제와는 논의 단계를 달리한다. 따라서 상호 등에 대한 사업상 가치 평가를 요구하는 것은 차액설에 따른 영업권 평가의 적절성을 수긍한 판례와 모순되는 것이 아니다.

㈐ 합병평가차익 과세는 피합병법인이 합병 전까지 보유하던 유ㆍ무형의 자산에서 발생한 이득을 합병을 계기로 일정한 요건에 따라 과세하는 것으로서, 구 법인세법 시행령 제15조 제2항이 그 계산법으로 같은 법 시행령 제12조 제1항 제1호를 인용하고 있을 뿐, 개념상 자본준비금(구 법인세법 제16조 제1항 제2호 가목) 등과는 아무런 관련이 없다. 합병법인이 피합병법인으로부터 인계받은 순자산가액과 합병신주 액면가액 사이의 단순 차액인 합병차익은 합병평가차익 과세의 요건이 될 수 없다.

(2) Specific determination

㈎ 앞서 든 증거들 및 을 제3, 7, 8호증의 각 기재에 변론 전체의 취지를 종합하면, 아래 사실을 인정할 수 있다.

① The Plaintiff was established on January 1, 1990 and supplied for supply of and demand for apartments and general homes, and heating for them.

PB pipe material is an enterprise that mainly produces pipelines, and PB pipeline material is a product that has much impact on the housing situation of a construction company because the demand for apartment and general home use is most high.

② On the other hand, BB, an affiliate of the Plaintiff, was established around February 1995 and engaged in non-ferrous metal recycling business, such as gold, silver, dynamics, recycling of electronic scoops, etc. as its main business; (i) the current asset ratio was 63.77% as of the end of 2006; (ii) 34.20% as of the end of 2007; and (iii) 53.09% as of October 7, 2008 as of the date of the instant merger; and (iv) was 10.42% as well as 15.35% as of the rapid growth of sales in the business year of 2007 and 208 (before the date of the instant merger); and (iii) the pertinent rate was 10.42% as of the annual earnings of 2006 and 2008.35% as of the annual earnings of 2008.38%, respectively.

③ In the merger contract, the merger report, and the half-yearly report in 2008, the Plaintiff sought entry into the non-ferrous metal renovation project through the merger in this case, and thus, the Plaintiff seeks to achieve maximize the value of shareholders by realizing the competitiveness and the efficiency of management through the expansion of sales through the expansion of a new business area and the growth by realizing the stable profit structure.

④ The Plaintiff not only included approximately KRW 32 billion, which is the difference between the merger cost and the net asset value succeeded from BB, in the account book, but also did not include it in the gross income when filing a corporate tax return for the business year 2008 and 2009, but also did not include it in the gross income. However, the Plaintiff appropriated it as the business right, which is an asset under tax law, as the deductible expenses, and disposed of the deductible expenses of KRW 80,219,140,320,876,556, respectively, as the deductible expenses. In 2010, the Plaintiff did not voluntarily file a revised return on the corporate tax until it was pointed out

㈏ 위와 같은 이 사건 합병의 경위와 동기, 이 사건 합병 무렵 합병법인과 피합병법인의 사업 현황, 이 사건 합병 이후 세무 신고 내용 등을 위 법리에 비추어 살펴보면, 원고는 당시 BBB이 가지고 있던 거래관계 등 무형의 재산에 전체로서 사업상 가치를 인정하여 대가를 지급하고 합병하였다고 봄이 상당하다. 특히 합병비율에 관하여는증권거래법 등 관련 규정을 따라야 하고, 무형적 자산에 대한 가치평가액을 전체 합병대가에서 순자산가액을 공제한 금액으로 적절히 정하는 것이 가능하므로, 세법상 영업권으로 인정하기 위해서 반드시 합병대가 산정 시 별도의 적극적인 초과수익력 계산과정이 수반되어야 하는 것은 아니다.

㈐ 따라서 이 사건 영업권은 법인세법상 익금에 산입되어야 하는 합병평가차익에 해당하므로, 이와 다른 전제에 서 있는 원고의 이 부분 주장은 이유 없다.

B. Whether there is a justifiable reason not to mislead the Plaintiff into neglecting his/her duty

(1) Under the Corporate Tax Act, an additional tax is a kind of administrative sanction that takes place when a taxpayer corporation imposes an obligation to return a faithful tax base and pay a tax amount in order to ensure the propriety of taxation, and if the taxpayer neglects to perform his/her duty as a means of securing the obligation. Such a sanction is a kind of administrative sanction, which takes place in cases where the taxpayer neglects to perform his/her duty as a means of securing the obligation. Such a sanction goes beyond a simple scope of land or misunderstanding under the interpretation of the tax law, and it is unreasonable for the taxpayer to be unaware of his/her duty due to the conflict of opinion due to the intention of suspicion, etc. in the interpretation of the tax law. As such, there is

(1) If there is a justifiable reason not to inquire about the fact that he/she neglected to do so, he/she shall not be subject to it (by representation).

Seoul High Court Decision 2002Du666 decided August 23, 2002; Supreme Court Decision 2008Du2330 Decided February 10, 201, etc.

(2) In light of the following circumstances, i.e., (i) whether the business right appropriated by the Plaintiff satisfies the requirements under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act, i.e., whether the merged corporation’s succession to the value of its business, such as trade name, etc., constitutes a merger evaluation under Article 12(1)1 of the Enforcement Decree of the same Act; and (ii) there is no conflict in the interpretation of the law regarding the fact that the business right meeting the above requirements is included in the merger evaluation under Article 12(1)1 of the same Enforcement Decree of the same Act; and (iii) as seen earlier, the Plaintiff was merged with the Plaintiff by recognizing the value of its business as an intangible property, such as the transaction relation with BB, and thus, the instant business right constitutes merger evaluation under the Corporate Tax Act; and (iii) there was no opinion expressed by the Defendant to the effect that the Plaintiff does not meet the above requirements, the evidence submitted by the Plaintiff alone is insufficient to acknowledge that there was a justifiable cause for failure

5. Conclusion

Therefore, the plaintiff's assertion is without merit, and it is so dismissed as per Disposition.