Cho Jae-2014-west-3400 (Law No. 22, 2016)

The valuation profit and loss should be added to the profit and loss from foreign exchange transactions and derivatives transactions.

Article 4(1)5 of the Enforcement Decree of the Education Tax Act amended in 2015 is a confirmatory provision, and Article 4(1)5 of the Education Tax Act is a revenue tax that uses transaction marginal profits as tax base rather than transaction tax that uses the entire transaction amount as tax base. In light of the fact that evaluation marginal profits and losses include both the evaluation marginal profits and the evaluation marginal profits and losses, and the evaluation marginal profits and losses should be

Article 5 of the Education Tax Act, Article 4 of the Education Tax Act

2016Guhap63422 Revocation of revocation of disposition of imposing education tax

CAA

BB Director of the Tax Office

March 23, 2017

May 11, 2017

1. The Defendant’s imposition of KRW 420,335,870 (including additional taxes) of the three-year education tax on the Plaintiff on March 14, 2016, and KRW 14,483,480 (including additional taxes) of the two-year education tax on the Plaintiff on February 2013, 201, and each imposition of KRW 179,369,49,490 (including additional taxes) of the education tax on November 13, 2013, and KRW 704,678,00 (including additional taxes) of the education tax on March 2011, and each imposition of KRW 39,487,820 (including additional taxes) of the education tax on April 2012 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

1. The primary purport of the claim

Paragraph (1) shall apply.

2. Preliminary purport of claim

The Defendant’s imposition of KRW 420,335,870 (including additional taxes), and each imposition of KRW 14,483,480 (including additional taxes) of the education tax for the second term of education for the second term of March 14, 2016 on the Plaintiff on March 14, 2016, and the imposition of KRW 375,760,240 (including additional taxes) of the education tax for the second term of February 13, 2013 on November 13, 2013, and the imposition of KRW 179,369,49,490 (including additional taxes) of the education tax for the first term of January 201, 201, and the imposition of KRW 704,678,00 (including additional taxes) of the education tax for the third term of March 201, including the education tax for the second term of March 5, 2012, and the imposition of KRW 3784,298

1. Details of the disposition;

A. The Plaintiff is a business office of a foreign bank established for the purpose of banking business, and is dealing with derivatives such as a monetary forward contract and a currency swap contract.

B. Article 42(1)2 of the Corporate Tax Act and Article 76(1)2 of the Enforcement Decree of the Corporate Tax Act provide that the amount assessed as of the date of concluding a contract (a) or the end of each business year (b) shall be reflected in assets or liabilities with respect to the currency forward and currency swap products held by financial companies, etc., and the Plaintiff shall calculate the currency forward and currency swap contract as of the end of each business year from 2010 to 2013 and include the valuation profit and loss of the currency forward and currency swap contract as of the end of each business year (hereinafter referred to as the “assessment profit and loss of this case”) in the income tax base of corporate tax in calculating the currency forward and currency swap contract as of the end of each business year in accordance with Article 76(1)2(b) of the Enforcement Decree of

C. After conducting the consolidated investigation of corporate tax against the Plaintiff, the Director of theCC issued a notice of taxation data stating that “The Plaintiff included the assessed profit or loss in the tax base of corporate tax at the time of filing a corporate tax return on the instant valuation profit or loss, the assessment profit or loss of the instant valuation profit or loss shall be deemed as other profit or loss under Article 4(1)8 of the Enforcement Decree of the Education Tax Act, and shall be included in the tax base of education tax.” On November 13, 2013 based on the above taxation data, the Defendant issued a notice of correction and notice of education tax as stated in the column of “the first disposition of education tax” (hereinafter referred to as “the first disposition”).

D. On February 22, 2016, the Plaintiff filed an objection to the initial disposition and filed an appeal with the Tax Tribunal. On February 22, 2016, the Tax Tribunal decided to the effect that “the Defendant shall calculate the profit and loss from the currency forward and swap transaction, which the Plaintiff initially calculated, by deducting the amount assessed by applying the standard transaction rate as of the end of the immediately preceding taxable period, from the amount received in cash.”

E. Upon the decision of the Tax Tribunal on March 14, 2016, the Defendant rendered an increase or decrease in each education tax for the three-year period of March 2010 and the two-term education tax for the two-year period of February 2013, as indicated in the column of “an increase or decrease in the amount of education tax” among the details of imposition of education tax in attached Table 1; ② the two-year period of February 2010, the first three-year period of January 201, the three-year period of March 2011, the three-year period of March 2012, and the fourth period of April 2012, the Defendant rendered a decision of partial revocation or reduction in each education tax refund (hereinafter “instant disposition”).

[Ground of recognition] Unsatisfy, entry of Gap evidence 1 to 5 (including each number in the case of additional number) and the purport of whole pleadings

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

First, Article 4(1)5 of the Enforcement Decree of the Education Tax Act (amended by Presidential Decree No. 26076, Feb. 3, 2015) provides that the assessment profit or loss of this case shall be calculated by adding up the profit or loss from foreign exchange transactions, profit or loss from derivatives transactions, etc. This constitutes a confirmatory provision, and thus, even in the case of the disposition of this case for the taxable period prior to the above amendment, the amount of revenue, which is the education tax base, shall be calculated by applying

Second, even if the valuation profit or loss of this case can not be aggregated with the profit or loss of transactions such as derivatives, the valuation profit or loss of this case is merely the internal profit of the financial or insurance business entity, and shall not be included in the revenue amount serving as education tax base (preliminary claim)

(b) Relevant statutes and the history of amendment;

Attached Form 2 is as shown in the relevant statutes and the history of amendment.

C. Determination

1) Article 5(1) of the Enforcement Decree of the Education Tax Act provides that "the revenue amount of financial or insurance business entities shall be the base of education tax." Article 5(3) provides that "The revenue amount of financial or insurance business entities shall mean interest, dividend, commission, guarantee fee, profit from sale and redemption of securities, and other amount prescribed by Presidential Decree." Article 4(1) of the Enforcement Decree of the Education Tax Act provides that "the revenue amount of financial or insurance business entities shall be listed in the tax base of education tax," and "other profit and loss from exchange" (Article 4(1)5 of the Enforcement Decree of the Education Tax Act (Article 4(2) of the above Enforcement Decree of the same Act shall be excluded from the total revenue and loss from exchange transactions (excluding foreign exchange profit and loss)" (Article 4(1)6 of the above Enforcement Decree of the same Act) and the tax authorities shall be excluded from the total revenue and loss from exchange transactions (Article 20-7(1) of the same Enforcement Decree).

However, the above provision does not apply retroactively to the above provision of the revised education tax at the time of the amendment, and the provision that future application is made from the end date of the taxable period to the end date of the enforcement date of the Enforcement Decree of the Education Tax Act ( February 3, 2015), the tax base of the education tax at issue in this case is subject to the assessment profit of this case, including whether the assessment profit of this case is subject to the assessment profit of this case, the sum of the appraisal profit and foreign exchange transaction profit and loss, and the dispute between the plaintiff and the defendant still remains between the plaintiff and the defendant. In other words, the plaintiff falls under the confirmed provision of Article 4 (1) 5 of the Enforcement Decree of the Education Tax Act of this case, and even if it is not so, the assessment profit of this case is merely internal profit and loss of Article 4 (2) of the Enforcement Decree of the Education Tax Act, and thus, it cannot be applied to the assessment profit of this case as the education tax base of this case, and thus, it cannot be applied to the assessment profit of this case.

2) In full view of the following circumstances, Article 4(1)5 of the Enforcement Decree of the instant amended Education Tax Act is a confirmatory provision, and Article 4(1)8 of the former Enforcement Decree of the Education Tax Act prior to the amendment of February 18, 2010, the scope of “other business profits” under Article 4(1)8 of the former Enforcement Decree of the Education Tax Act should be construed within the scope of the above confirmative provision, and as a result, it should be construed to include both the appraised profits and losses of this case and the appraised losses of this case, together with the appraised profits and losses of this case, as well as the appraised profits and losses of foreign exchange, derivatives, etc.

A) As seen earlier, Article 4(1)5 of the Enforcement Decree of the Education Tax Act provides that "the foreign exchange earnings (excluding foreign exchange earnings)" was originally defined as "foreign exchange earnings," and such foreign exchange was interpreted as included in "foreign currency forward and swap in tax practice." As the amendment was made on February 18, 2010, Article 4(2)2 of the Enforcement Decree of the Education Tax Act provides that "internal profits shall not be included in the revenue amount that serves as the education tax base." In addition, on February 18, 2010, Article 4(2)2 of the Enforcement Decree of the Education Tax Act provides that "internal profits shall not be included in the revenue amount that serves as the education tax base, but the concept of internal profits excluded from the object of the education tax base at the time of the amendment is defined as "income from the assessment of assets and liabilities that are not considered as income pursuant to Article 42 of the Corporate Tax Act". If a systematic interpretation is made in full view of the language and relationship, and the developments of the amendment.

On the other hand, Articles 18 subparag. 1 and 22 of the Corporate Tax Act provide that the valuation profit of assets and the valuation loss of assets shall be subject to exclusion from taxable income or exclusion from deductible expenses in principle. This means that when the valuation profit is realized at the time of disposing of assets or redemption of liabilities, it shall be deemed that the corporation's gross income or deductible expenses are included only when the valuation profit is realized. However, the proviso of Article 18 subparag. 1 and the proviso of Article 22 of the Corporate Tax Act stipulate that the valuation profit due to the inventory assets and liabilities as prescribed by the Presidential Decree, such as inventory assets under Article 42(1)2 of the Corporate Tax Act, shall be included in the calculation of gross income or deductible expenses, and Article 73 subparag. 4 of the Enforcement Decree of the Corporate Tax Act provides that one of them shall be the currency forward and swap among the currency derivatives held by the financial companies, etc., and Article 76(1) subparag. 2 of the Enforcement Decree of the Corporate Tax Act provides for the currency forward and swap among the currency derivatives held by the financial companies, etc.

Among the methods of assessing at a quasi-ratio, it shall be evaluated by the method reported by a taxpayer. In the case of a currency forward and swap, it is impossible to recognize the profit and loss at the time of settlement, and there is uncertainty in which the taxpayer's tax burden rapidly changes, so that financial companies, etc. may choose one of the cost method and the market price method for the currency forward and swap to resolve this problem. As a result, depending on whether financial companies, etc. choose one of the two methods, the profit and loss in currency forward and swap should be included in the gross income or deductible expenses under the Corporate Tax Act. However, as seen earlier, the Corporate Tax Act reflects not only the profit and loss in the corporate tax base, but also the loss in the currency forward and swap as well as the loss in the corporate tax base. As such, since such profit and loss is ultimately reflected in the tax base by adding it to the final profit and loss in the currency forward and swap, it does not cause a big difference in the total amount of corporate tax.

However, Article 4 of the Enforcement Decree of the Education Tax Act (amended by Presidential Decree No. 2015, Feb. 3, 2015) did not provide for the same purport as the proviso of Article 22 of the Corporate Tax Act, which regards the loss of the evaluation as losses, by citing the provisions and purport of the Corporate Tax Act as the income tax base for education tax. On the ground of this, the defendant does not add the evaluation profit of this case, but removes only the evaluation profit of this case from the evaluation profit by applying the provisions of Article 4(1)8 of the Enforcement Decree of the Education Tax Act, which is separate from the evaluation profit, and imposes an excessive tax burden on taxpayers because the evaluation loss was not entirely reflected in the tax base of the education tax. For instance, even though the exchange rate was reduced for several taxable periods, where the exchange rate was reduced at the time of the final settlement, and if the evaluation loss was not reflected in the final tax base of the education tax, there is a concern that some of the evaluation profit or the entire evaluation loss would violate the education tax base.

B) Article 5(3) of the Education Tax Act provides that “The revenue amount serving as the tax base of education tax” means interest, dividend, commission, guarantee fee, securities sales profit and redemption profit, and other amount prescribed by Presidential Decree received by the financial or insurance business entities.” The above provision appears to refer to the actual and realistic profit of both the financial or insurance business entities. In particular, in the case of sales profit of securities, the term “sale profit” refers to not only the “sale price, but also the “profit amount after the acquisition cost, etc., from the sale price,” and the “profit amount” refers to the transaction profit and loss as the tax base of the education tax. Furthermore, the above valuation profit and loss in this case is stipulated in the Enforcement Decree of the Education Tax Act delegated by the parent corporate tax law, and the essence of the acquisition tax rate prescribed by the mother corporate tax law is not changed by adding up the valuation profit and loss to the calculation profit and loss in this case, which is subject to education tax as the basis of the total calculation profit and loss in the currency swap, and thus, it does not conform to the purpose of the Corporate Tax Act.

C) In full view of the above circumstances, Article 4(1)5 of the Enforcement Decree of the amended Education Tax Act explicitly provides that the valuation profit and loss of this case is to be included in the transaction profit and loss, such as derivatives, not because of the change in the legislative policy, but because of the change in the legislative policy, it can be deemed that the deficiency in the provisions of the existing laws and regulations has been supplemented in order to clarify the unclear taxable object or method, and such purport also appears in the grounds for the amendment of this case (see subparagraph (1)7) expressed in the Ministry of Strategy and Finance (see, e

(d) The calculation of a legitimate tax amount;

If the plaintiff's primary argument is reasonable and accepted, and the reasonable amount of education tax for the period of the taxable period of this case is calculated, it shall be as stated in the annexed Form 3'5, and the appraised profit, loss, and revocation tax amount.

E. Sub-committee

The instant disposition is unlawful, and as long as the Plaintiff’s primary assertion is accepted, it should not be separately examined.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is decided as per Disposition.