C&C Co., Ltd. (Law Firm Rate, Attorneys Choi Yong-hwan et al., Counsel for the plaintiff-appellant)

The Director of Gangnam District Office

June 20, 2013

1. The Defendant’s disposition of collecting the corporate tax of KRW 397,023,90 on the dividend income belonging to the business year 2003 against the Plaintiff on December 1, 2008 shall be revoked.

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 70% is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

The disposition of Paragraph (1) and the defendant on December 1, 2008, the part of the disposition of imposition of corporate tax (income from transfer of securities) accrued in the business year 2004 against the plaintiff in excess of KRW 285,750,215 of the disposition of imposition of corporate tax (income from transfer of securities) accrued in the business year 2004 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a corporation that runs film-related business, such as the establishment and operation of film centers and the screening, export, import, and distribution of movies.

B. The United Kingdom Order DVC Capital L.P. (hereinafter “CVC Asian”) established an investment fund recruited in the United Kingdom, the United Kingdom, the United States, and Asia, etc., and the Gyeonggi-do Incheon Metropolitan Group L.C. (hereinafter “AILC”) located in the United Kingdom and the 3i Gro Group P.L.C. (hereinafter “3i Group”) located in the United Kingdom and the 3i Gro Group P.L. (hereinafter “C.”) located in the United Kingdom, and established an Luxembourg in common investment form (hereinafter “Amm”) through Ams., and established the “foreign corporation of this case”).

C. Around September 2002, the foreign corporation of this case purchased the Plaintiff’s shares as a domestic corporation from the Perry Holdings B.V., a Australia-based corporation.

D. On September 19, 2003, the Plaintiff paid dividends to the foreign corporation of this case five times in total as shown below, and withheld corporate tax applying 10% of the limited tax rate under Article 10 of the Convention between the Republic of Korea and the Kingdom of the Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Korea-Ne Tax Treaty”) to the Defendant on the ground that the foreign corporation of this case is the Netherlands corporation (hereinafter “the dividend dividend income of this case”).

The dividends payment date of the table in the main sentence of March 25, 2003 5,050,000,0004,090,090. 459,090 September 19, 2003:3,200,000,000 290,909,0913. 4,090,090,982,870,870,371,907,534 on March 30, 204; 4,200,59,710,781,872,70,70,700,705 on September 24, 2005;

E. On December 15, 2004, the foreign corporation of this case sold the Plaintiff’s 1,963,919 shares to domestic institutional investors KRW 49,07,975,00 (hereinafter “the transfer income of securities of this case”) through the method of selling old shares through the opening of the company, but did not pay corporate tax on the transfer income of securities of this case in accordance with the non-taxation provisions on the transfer income of stocks of this case under Article 14(4) of the Korea-Ne Tax Treaty.

F. As a result of the tax investigation with respect to the Plaintiff, the head of the Seoul Regional Tax Office, as a result of the instant foreign corporation, did not fall under the “beneficial owner” subject to the Korea-Net Tax Treaty, and notified the Defendant of the taxation data that CVC Asia, AILC, 3i Group, etc. are beneficial owners of the said dividend income.

G. Accordingly, the Defendant applied the withholding tax rate based on the original domicile of CVC Asia, AILC, 3i Group, etc. to each of the above dividend incomes, and accordingly, issued a disposition to collect the corporate tax (collection) as indicated in the “additional Tax Amount” column (see evidence 2-1, 3, 4, and 5 of the evidence 2-3, 4, and 5; hereinafter the table below [Attachment] set forth in paragraph (2) of 2003 business year (hereinafter “instant disposition to collect corporate tax”).

The amount of tax additionally collected on March 25, 2003 5,05,05,000,000,000,000,09 on March 25, 2003:

H. In addition, on December 1, 2008, the Defendant imposed a disposition of imposition of KRW 4,125,21,860 on the Plaintiff, by applying 10% transfer tax rate to KRW 28,575,02,145, and KRW 285,750,215, and KRW 281,595,50,50, and KRW 981,211,860, as well as KRW 28,57,50,50, as well as KRW 285,750, and KRW 10,00, as well as KRW 285,750,50, as well as KRW 981,5,50, as well as KRW 25,211,860, which are accrued to the beneficial owner of the instant securities (see evidence 2-2 of this case, and in imposing penalty tax not submitted among them, hereinafter referred to as “instant disposition of imposition

I. Meanwhile, the Plaintiff filed a lawsuit against the Defendant seeking revocation of the collection disposition indicated in the No. 2009Guhap16442, the [Attachment] No. 1] (hereinafter “related lawsuit”). On May 27, 2010, the court dismissed the Plaintiff’s claim on the ground that “The court dismissed the Plaintiff’s claim on the grounds that “The foreign corporation only engaged in the transactional office in the form of the purchase and sale of the Plaintiff’s stocks, and its actual subject is CVA, etc., and the disparity between such form and substance arose from the purpose of tax avoidance. As such, since CVC Asia, etc. was established in the K Gun Island, etc., the actual owner of the instant dividend income shall be deemed CVC Asia, etc., and the Korea-NC Asia Tax Treaty cannot be applied to the said dividend income, and the Plaintiff was aware that the actual owner of the said dividend income was CVA, etc.” The judgment was finalized through the appellate court (Seoul High Court Decision 2010Nu19371) and the Supreme Court Decision 2015Du31959.

[Ground of recognition] Unsatisfy facts, Gap evidence 1, Eul evidence 2-1 through 5, Gap evidence 3-1, 2, Gap evidence 4-11, Eul evidence 1 through 23, Eul evidence 24-1, 2, Eul evidence 25, Eul evidence 26, Eul evidence 27-1 and Eul evidence 27-2, the purport of the whole pleadings,

2. Whether the disposition of collecting corporate tax and imposing additional tax are legitimate

A. The plaintiff's assertion

1) Disposition of collecting the corporate tax of this case

The Plaintiff’s liability to pay corporate tax withheld on the dividend income of this case is established when it pays the amount of income pursuant to the provisions of law, not by the exercise of the taxation authority’s right to impose corporate tax, but by automatically confirmed without any special procedure, and thus, it does not apply the exclusion period of the right to impose corporate tax, and it is merely subject to the extinctive prescription of the right to impose corporate tax. Therefore, the Plaintiff’s liability to pay corporate tax withheld on the dividend income of this case is finalized at the same time as the Plaintiff paid the dividend income of this case to the foreign corporation of this case at the time of establishment on September 19, 2003. The payment period of the above corporate tax is October 10 of the same year pursuant to Article 73(1) of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008; hereinafter the same). Accordingly, the Plaintiff’s obligation to pay corporate tax of this case is apparent in the record that it had already been extinguished before the collection of corporate tax of this case.

2) The imposition of penalty tax in this case

According to the proviso of Article 162 and Article 162-2(1) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter the same), a payment statement may not be submitted on any income on which corporate tax is not imposed or exempted, and where a withholding agent has no tax amount payable, such as domestic source income that is exempt from corporate tax, and where the submission of a payment statement is deemed ineffective, such as where a withholding agent does not have any tax

However, since the transfer income of the securities of this case is reverted to the foreign corporation of this case and is exempt or exempt from taxation due to the application of the Korea-NC Tax Treaty, the Plaintiff’s submission of written evidence is exempted. Even if the actual owner of the transfer income of this case is the substantial investor of CVC Asian, etc., even if the actual owner of the transfer income of the securities of this case is the substantial investor of CVC Asian, etc., the Plaintiff’s transfer income of the securities of which amounting to 41.8% of the total amount is exempted or exempted from taxation, and thus, the Plaintiff’

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Whether the corporate tax collection disposition of this case is legitimate

A) A tax claim of the State or a local government is naturally established upon the fulfillment of the taxation requirements stipulated in law or municipal ordinances. A tax claim established is realized by the determination of the relevant tax amount in accordance with the procedures of tax law. A claim for the implementation of the finalized tax claim and forced pursuit of the realization of the claim is considered to be the right to impose the authority to specifically determine the tax claim so abstractly established, and is the right to collect the authority to claim the implementation of the finalized tax claim and to enforce it. Accordingly, the taxation authority has the right to impose tax on the abstract tax claim, that is, the right to impose the final tax claim, and that is, the right to collect the specific tax claim.

B) However, Article 26-2(1) of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010; hereinafter the same) provides for the exclusion period of the imposition by stipulating that “if a taxpayer evades, obtains a refund or deduction of national taxes by fraudulent or other unlawful means, ten years from the date on which the national tax is assessable (Article 10); if a taxpayer fails to file a tax base return within the statutory due date of return, seven years (Article 2), 1, and 2 from the date on which the national tax is assessable (Article 12-3(2)1 of the former Enforcement Decree of the Framework Act on National Taxes (amended by Presidential Decree No. 22038, Feb. 18, 2010; hereinafter the same shall apply), the exclusion period of the imposition by stipulating that “if a taxpayer fails to file a tax base return by the statutory due date of return within the statutory due date of return, it shall not be imposed after the expiration of five years from the date on which the national tax is assessable.”

In addition, Article 27(1) of the former Framework Act on National Taxes provides that “If the State’s right to collect national taxes is not exercised for five years from the time it can be exercised, the extinctive prescription expires if it is not exercised for five years from the time it can be exercised,” and Article 12-4(2)1 of the former Enforcement Decree of the Framework Act on National Taxes provides that “in the case of a national tax collected from a withholding agent or a taxpayers association, the date following the due date for payment by such notice for national tax

C) Based on the aforementioned legal principles and the contents of relevant Acts and subordinate statutes, it is distinguishable from the exercise of the right to impose tax on the original taxpayer, in light of the following: (a) corporate tax withheld from the original taxpayer is established when the amount of income or revenue is paid; and (b) when the tax liability is established, it is a automatically determined amount of tax without any special procedure (Articles 21(2)1 and 22(2)3 of the former Framework Act on National Taxes); and (c) in the case of nonperformance of withholding tax, the payment notice given by the State to the withholding agent for the collection of the amount of tax constitutes a notice of collection seeking the performance of automatically finalized tax liability (see, e.g., Supreme Court Decision 93Nu2234, Sept. 9, 194). Therefore, in light of the following, the Plaintiff’s obligation to withhold and pay the amount of tax on the dividend income of this case is not a tax liability based on the right to impose, but a tax obligation based on the right to collect taxes.

D) Article 27(1) of the former Framework Act on National Taxes provides that the extinctive prescription of the State’s right to collect national taxes shall expire if it is not exercised for five years from the time it is possible to exercise such right. In the case of national taxes collected by a withholding agent under Article 12-4(2)1 of the former Enforcement Decree of the Framework Act on National Taxes, with respect to the amount of withholding tax collected by the withholding agent, the day following the due date for payment of the tax payment notice shall be the initial date of the extinctive prescription. Article 98(1) of the former Corporate Tax Act provides that a person who pays a foreign corporation domestic source income which is not substantially related to the domestic place of business or not belonging to the domestic place of business shall withhold corporate tax on the income of the corporation for each business year and pay it to the competent withholding agent by the 10th day of the month following the month in which the date of withholding falls. According to the above recognized facts, it is clear that the Plaintiff’s obligation to pay corporate tax withheld on the dividend income of this case becomes final and conclusive at the same time when it comes into force.

2) Imposition of additional tax on failure to submit the instant statement of payment

A) Article 93 Subparag. 2 of the former Corporate Tax Act provides that one of the domestic source incomes of a foreign corporation shall be “income accruing from the transfer of stocks, investment certificates, and other securities issued by a domestic corporation.” Article 120-2(1) provides that “any person who pays domestic source income under Article 93 to a foreign corporation shall submit a payment record to the head of the tax office having jurisdiction over the place of tax payment by the end of February of the year following the year in which the date of payment falls.” Article 162-2(1) of the former Enforcement Decree of the Corporate Tax Act provides that “any person who pays domestic source income under Article 93 of the Act to a foreign corporation shall submit a payment record to the head of the district tax office having jurisdiction over the place of tax payment pursuant to Article 120-2(1) of the Act.” Article 76(7) of the former Corporate Tax Act provides that “Where a domestic corporation fails to submit a payment record under Article 120-2 within the deadline or where the payment record submitted is unclear, the amount shall be collected as 2/10% of the unpaid amount or unclear amount.”

B) In full view of the following circumstances, the Plaintiff’s failure to submit a statement of payment on the transfer income of securities of this case, based on the content of the relevant laws and regulations, it is difficult to view that the Plaintiff’s submission of a statement of payment was justifiable, and thus, the imposition of the penalty tax of this case based on Articles 76(7) and 120-2(1) of the former Corporate Tax Act is lawful.

(1) The foreign corporation of this case is merely performing the role of the trading party in the form of the purchase and sale of the shares of this case, and its actual subject is CVC Asian, etc., and the disparity between such form and substance was derived from the purpose of tax avoidance, and thus, the Korea-NV Tax Treaty cannot be applied to the transfer income of the securities of this case (in the related lawsuit, the judgment to the same effect has become final and conclusive).

⑵ 구 법인세법 제98조의4 는 ‘ 제93조 의 규정에 의한 국내원천소득( 동조 제5호 및 제6호 의 소득은 제외한다)에 대하여 조세조약에 따라 비과세 또는 면제를 받고자 하는 외국 법인은 대통령령이 정하는 바에 따라 납세지 관할 세무서장에게 그 비과세 또는 면제에 관한 신청을 하여야 한다’라고 규정하고 있고, 구 법인세법 시행령 제138조의4 제1항 은 ‘ 법 제98조의4 에 따라 비과세 또는 면제 신청을 하려는 외국 법인은 비과세·면제 신청서를 소득지급자에게 제출하고 해당 소득지급자는 소득을 최초로 지급하는 날의 다음 달 9일까지 소득지급자의 납세지 관할 세무서장에게 제출하여야 한다’고 규정하고 있으며, 제5항 은 ‘유가증권 양도에 관하여 투자매매업자, 투자중개업자 또는 주식발행법인이 원천징수하는 경우에는 해당 투자매매업자, 투자중개업자 또는 주식 발행 법인과 외국 법인 간에 대리 또는 위임의 관계가 있는 것으로 보아 제1항 의 규정을 적용한다’라고 규정하고 있다. 그리고 구 법인세법 제120조의2 제1항 단서는 제98조의4 의 규정에 의하여 비과세·면제 대상임이 확인되는 소득 등 대통령령이 정하는 소득을 지급하는 경우에는 지급명세서 제출의무를 면제하고 있다. 위와 같은 관련 법령의 규정 취지와 내용 등에 비추어 볼 때, 이 사건 외국 법인 또는 CVC 아시아 등이 한·네 조세조약에 따라 이 사건 유가증권 양도소득에 대하여 비과세 또는 면제를 받기 위해서는 직접 비과세·면제에 관한 신청을 하거나 이 사건 주식의 발행 법인으로서 구 법인세법 시행령 제138조의4 제5항 에 따라 이 사건 외국 법인 또는 CVC 아시아 등과 사이에 대리 또는 위임의 관계에 있는 것으로 간주되는 원고가 위와 같은 신청을 하여야 하고, 그 경우에 한하여 원고가 구 법인세법 제120조의2 제1항 단서에 따라 지급명세서 제출의무가 면제된다고 할 것인데, 이 사건 외국 법인이나 원고가 그와 같은 절차를 거친 바가 없다.

Article 22(1) of the Tax Treaty provides that an investment corporation, including CVC Asian, whose capital gains from the transfer of the securities of this case actually accrued, shall be exempt from corporate tax or exempted pursuant to the relevant tax treaty. However, in such a case, the said investor or the Plaintiff shall file an application for non-taxation or exemption in accordance with the procedures prescribed by the relevant tax treaty, and the Plaintiff may be exempted from the obligation to submit the statement of payment only in the case mentioned earlier.

In addition, the proviso of Article 162-2 (1) of the former Enforcement Decree of the Corporate Tax Act is exempt from the obligation to submit a statement of payment with respect to the domestic source income on which the corporate tax is not imposed or exempted under the former Corporate Tax Act and the Restriction of Special Taxation Act (Article 162-2 (1)), the domestic source income under Article 93 (10) of the former Corporate Tax Act, which is in fact related to the domestic place of business under Article 94 of the same Act or reverts to the domestic place of business (Article 94 (2) 2), and other income (Article 8), but it is difficult to

(v)an additional tax under tax law is an administrative sanction imposed in accordance with the law in cases where a taxpayer violates a report, tax liability, etc. prescribed by the law without justifiable grounds in order to facilitate the exercise of the right to impose taxes and the realization of a tax claim (see, e.g., Supreme Court Decision 2013Du1829, May 23, 2013).

C) Therefore, the Plaintiff’s above assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim that the corporate tax collection disposition on the dividend income as of December 1, 2008 among the plaintiff's claim of this case was unlawful is justified, and the remainder is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Jin Chang-ho (Presiding Judge)