[1] Whether a foreign corporation’s brokerage commission revenue, etc. with a domestic branch office located in the Republic of Korea that runs the business of brokering the sale and purchase of fishery products captured by deep-sea fishing vessels constitutes domestic source income (affirmative), and whether a tax may be imposed on all income accrued therefrom (affirmative)

[2] In a case where a reduction or a correction disposition was made, but the remaining part remains without being revoked at the time of the correction, the subject of the appeal litigation

[3] In a case where a tax authority simultaneously made an increase and a decrease in a number of items at the same time after the tax base and the amount of tax are determined and thereby the total amount of tax is corrected, whether there is objection to the decision of correction (negative)

[1] The term "domestic source income of a foreign corporation" means income listed in Article 5 (1) of the former Corporate Tax Act (amended by Act No. 4020 of Dec. 26, 1988), which is the source of which income is generated in the Republic of Korea, and so long as the "place of income occurs" is a domestic source, it shall not be immediately conducted or distinguished through the head office or branch office of a foreign country without going through a domestic branch, and Article 6 (2) of the "Convention on the Abstention of Abstention of Taxation and the Prevention of Evasion of Tax Evasion between the Republic of Korea and Japan" provides that if a resident or a corporation of a Contracting State has a permanent establishment in the other Contracting State, the other Contracting State may impose tax on all income accruing from the source in the other Contracting State if it is a domestic source income of a foreign corporation which has established a permanent establishment in the Republic of Korea, regardless of the ratio attributable to the head office or branch office of such corporation.

[2] The correction disposition does not include the initial return or imposition disposition and the separate independent taxation disposition, but the substance is a change in the original return or imposition disposition and thereby brings a favorable effect to taxpayers as to partial revocation of the amount of tax. Thus, in a case where the part that remains not yet revoked is illegal, the subject of an appeal litigation is the remaining part that is not revoked by the decision of correction among the initial return or imposition disposition and the decision of correction is not the subject of an appeal litigation.

[3] In a tax by the method of return and payment, a taxpayer did not dispute a disposition rejecting the correction of a tax authority's tax base and amount of tax for the return of reduction, and thereafter the tax base and amount of tax are finalized as stated in the original tax return. After the tax authority's ex officio decision of correction, if the tax amount has been reduced as a result of the increase of some items and reduction of other items at the same time, the taxpayer cannot seek

[1] Article 5 (1) of the former Corporate Tax Act (amended by Act No. 4020 of Dec. 26, 1988); Article 6 (2) of the Convention on the Abstention of Double Taxation and the Prevention of Tax Evasion with Respect to Income between the Republic of Korea and Japan / [2] Article 19 of the Administrative Litigation Act; Article 55 of the Framework Act on National Taxes / [3] Article 19 of the Administrative Litigation Act; Article 55 of the Framework Act on National Taxes

[1] Supreme Court Decision 88Nu978 delivered on August 8, 1989 (Gong1989, 1376), Supreme Court Decision 90Nu646 delivered on December 26, 1990 (Gong1991, 658), Supreme Court Decision 91Nu8852 delivered on June 23, 1992 (Gong1992, 2303) / [2] Supreme Court Decision 85Nu599 delivered on December 22, 1987 (Gong198, 353), Supreme Court Decision 93Nu989 delivered on November 9, 1993 (Gong194, 110), Supreme Court Decision 95Nu135195 delivered on August 11, 1995 (Gong19539, 195).

Mushesheshe Co., Ltd. (Attorney Cho Jong-soo, Counsel for the plaintiff-appellant)

The director of the tax office

Seoul High Court Decision 89Gu10908 delivered on May 18, 1995

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The Plaintiff’s attorney’s ground of appeal is examined.

1. On the first and second grounds for appeal

A. According to the reasoning of the judgment below, the court below determined that, when the Plaintiff Company established its head office in Japan and engaged in the trade business, brokerage business, etc. enters into and enters into a contract with the Korea Fisheries Company under the name of "fishery products sales contract" for the catch caught by the above fishery company in deep-sea, Japanese wholesalers, who are ultimate buyers of fishery products, have already been determined before the catch arrives in Japan, and the price is determined by referring to the price in the Japanese fishery market at that time after the catch was unloaded in the Japanese port after the loading and unloading into the Japanese port, and the price is determined by taking account of the quantity and faith inspection in the presence of the Korea Fisheries Company, and only upon the determination of the price, the Plaintiff Company receives the transaction commission equivalent to a certain ratio of the net sales price after deducting the import duty from the Korea Fisheries Company. In light of the fact that the Plaintiff Company constantly bears all the expenses incurred during the period of storage, loading and unloading the Korea Fisheries Company, the Plaintiff Company's trade agent's price was determined by the Korea Fisheries Company's trading intermediary and its actual sales agent's price after the business year.

Examining the relevant evidence in comparison with the records, the above recognition and judgment of the court below is just, and there is no error of law such as violation of the rules of evidence, violation of the reasoning, misunderstanding of legal principles, and incomplete hearing. There is no reason to argue.

B. The term "domestic source income of a foreign corporation" means income listed in Article 5 (1) of the Corporate Tax Act (amended by Act No. 4020 of Dec. 26, 1988), which means that the source of income is domestically located, and at least 'the source of income' has occurred at home, 'the source of income has not been realized at a domestic branch office or through the head office or branch office of a foreign country immediately without going through a domestic branch office (see, e.g., Supreme Court Decisions 88Nu978, Aug. 8, 1989; 91Nu3703, Jan. 21, 1992). Article 6 (2) of the Convention between the Republic of Korea and Japan provides that if a resident or a corporation of a Contracting State has a permanent establishment in the other Contracting State, it can be taxed by the head office or local branch office of the foreign country, regardless of the ratio of income from the domestic source in the other Contracting State.

As determined by the court below, in the instant trade of fishery products, the Korea Fisheries Company obtains information from the Seoul Branch of the Plaintiff Company on fishing ground information, the demand trends and inventory of the Japanese fishery market, etc., and solves the problem of insurance management of human life accidents through the Plaintiff Company Seoul Branch of the Seoul Branch. If the price of fishery products is determined, the Plaintiff’s headquarters notifies the Korea Fisheries Company through Seoul Branch of the amount obtained by deducting the above price from the commission, etc. as the L/C purchase amount, and it notifies the Korea Fisheries Company of the amount calculated by deducting the commission, etc., and issued an order to issue a cargo receipt based on the amount in Seoul and issued the Seoul Branch issued the cargo receipt and paid the price. Accordingly, if the Plaintiff Company Seoul Branch issued the cargo receipt and paid the payment, the brokerage service, which is the cause of the commission received from the Korea Fisheries Company in connection with the instant trade of fishery products, was conducted within Korea, and even if part was made by the Plaintiff’s headquarters, it constitutes income generated within Korea due to the commission revenue, and thus, it can be taxed on all income regardless of the ratio attributable

The judgment of the court below to the same purport is just, and there is no error in the misapprehension of legal principles as to domestic source income such as theory of lawsuit or its distribution. There is no ground for discussion.

C. In order to establish a non-taxable practice under Article 18(3) of the Framework Act on National Taxes, there must be an objective fact that has not been imposed over a considerable period of time, and there must be an explicit or implied opinion that the tax authority will not impose tax due to any special circumstance even though the tax authority knew that there may impose tax on the matter. In order to establish an implied indication, there must be circumstances that the tax authority expressed its intention not to impose tax unlike a mere omission of taxation (see, e.g., Supreme Court Decisions 90Nu8947, May 28, 1991; 90Nu9360, Oct. 22, 1991). Thus, as in the theory of lawsuit, it cannot be viewed that the Defendant did not express its intention to impose corporate tax on the income of the commission under the fee rate publicly notified by the Commissioner of the National Tax Service at the time of filing the corporate tax return for the business year of 1983, but the Defendant paid corporate tax on the income of the Plaintiff, which should be included in the tax base four years after the date of report.

2. On the third ground for appeal

According to the reasoning of the judgment below, the court below found the following facts: if the captain of the deep-sea fishing vessel belonging to the Korea Fisheries Company notifies the Korea Fisheries Company of the particulars of the vessel supplies required by the captain of the deep-sea fishing vessel, the Korea Fisheries Company requests the plaintiff's main office to procure vessel supplies vessel supplies through the plaintiff's Seoul Branch; the plaintiff's main office is to supply vessel supplies vessel supplies to the contracting agency located in Singapore; the plaintiff's main office is notified to the Korea Fisheries Company through the Seoul Branch; the Korea Fisheries Company requests the plaintiff's main office through the Seoul Branch to pay the vessel supplies by subrogation; the plaintiff's main office is to pay the vessel supplies by subrogation at the plaintiff's main office through the Seoul Branch; and the vessel supplies by subrogation of the plaintiff's main office is deducted at the time of the settlement of the above vessel supplies by the plaintiff's main office. The above vessel supplies brokerage is an incidental transaction made by the plaintiff company and the Korea Fisheries Company to smoothly conduct the brokerage and good offices transactions between the plaintiff company and the Korea Fisheries Company, and the part performed by the plaintiff's main office can be taxed within Korea's income accrued.

Examining the relevant evidence and records in light of the legal principles as to domestic source income as seen earlier, the above recognition and judgment of the court below is just, and there is no error of law such as violation of the rules of evidence, violation of the reasoning and misapprehension of the legal principles, such as the theory of lawsuit.

3. On the fourth ground for appeal

According to the reasoning of the judgment below, the court below found that the plaintiff company provided price negotiations, shipping, etc. for the export of synthetic rubber products between the plaintiff company and the third party buyer via the Seoul branch and the third party branch, and received export brokerage fees from the Korean production company, and that the above fees under the contract concluded between the plaintiff company and the third party branch are distributed to the plaintiff's headquarters, Seoul branch and the third party branch. The plaintiff company's above fees are related to the export brokerage of products produced domestically by the Korean corporation and the domestic source income generated from the services provided domestically by the plaintiff's headquarters or the third party branch through the Seoul branch, and thus, the plaintiff company's above fees can also be imposed on the part distributed by the plaintiff's headquarters, regardless of the ratio attributable to the head office or branch office.

Examining the relevant evidence and records in light of the legal principles as to domestic source income as seen earlier, the above recognition and determination by the court below is justifiable, and there is no violation of the rules of evidence, such as theory of lawsuit, or misapprehension of legal principles. There is no reason to argue

4. On the fifth ground for appeal

A disposition of reduction or correction is not an original return or a separate tax disposition, but an original return or a separate tax disposition, and its substance is a disposition that leads to a change of tax base or a disposition of imposition, which leads to a favorable effect to taxpayers, and thus causes partial revocation of tax amount. Thus, in a case where the part remaining without revocation is unlawful, the object of an appeal litigation is the remaining part not revoked by the original return or a disposition of correction, and the decision of correction is not a subject of an appeal litigation (see, e.g., Supreme Court Decisions 85Nu599, Dec. 22, 1987; 95Nu351, Aug. 11, 1995). Whether a corrective disposition is disadvantageous or not should be determined on the basis of the increase of tax amount to be borne by taxpayers. In a tax by a tax return and payment method, the tax base and a tax amount on a tax return ex officio after the final and conclusive tax base and tax amount cannot be claimed for revocation of the entire disposition, and it does not affect the tax amount to taxpayers at the same time.

The judgment of the court below to the same purport is just, and there is no error in the misapprehension of legal principles, such as theory of lawsuit.

5. Therefore, the appeal is dismissed and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Chocheon-sung (Presiding Justice)