early 201 Jeon 2773 ( December 07, 2011)

The plaintiff and the subsidiary are those who are in a special relationship, and the acquisition of new shares is that the assets are purchased at a price higher than the market price.

The Plaintiff and its subsidiaries constitute a person with a special relationship with the Plaintiff, and the subsidiaries shall receive new stocks from the Plaintiff to repay the loan claims to the Plaintiff, and the Plaintiff shall be deemed to have purchased the assets at a price higher than the market price in the form of investment and securities disposal loss. If the Plaintiff purchased the assets at a price higher than the market price in the form of investment and securities disposal loss, the transaction type is objectively deemed to be unfair in terms of tax law because it disregards economic rationality.

2012Guhap609 Revocation of Disposition of Imposing Corporate Tax

XX Industry Corporation

The Director of the National Tax Service

September 26, 2012

November 7, 2012

1. The plaintiff's claim is dismissed.

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

The defendant's disposition of imposing corporate tax of 2008 against the plaintiff on July 1, 201 is revoked.

1. Details of the disposition;

A. On June 4, 2008, the Plaintiff acquired 150 new shares (hereinafter referred to as “instant new shares”) at KRW 000 by participating in the capital increase with 100% of its equity shares issued by the Plaintiff, a subsidiary company that it owns 100% of its equity shares, and transferred 175 shares, including the instant new shares, to the United StatesA on December 29, 2008, for KRW 000.

B. In filing a corporate tax return for the business year 2008, the Plaintiff included 000 won (=300 won of acquisition value + 000 won of acquisition value of new shares in this case + 000 won of acquisition value of shares previously held) - transfer value of 000 won of investment securities disposal loss in deductible expenses.

C. On July 1, 2011, the Defendant rendered a decision of correction to increase corporate tax of 000 won in the business year 2008 by excluding the portion of KRW 000 of the loss incurred by the Plaintiff from investing in the instant new shares on the ground that it constitutes wrongful calculation under Article 52(1) of the former Corporate Tax Act (amended by Act No. 9267, Dec. 26, 2008; hereinafter “Corporate Tax Act”). The Defendant notified the Plaintiff thereof.

D. On July 26, 201, the Plaintiff filed a request with the Tax Tribunal for a ruling of the above increase in tax amount. On December 7, 2011, the Tax Tribunal determined that the Plaintiff’s loss incurred by the Plaintiff’s investment in the instant new shares constituted wrongful calculation, but determined that the part related to the instant new shares among the 000 won that the Plaintiff included in the loss of investment securities was 00 won but 000 won, which was not 00 won in deductible expenses, should be included in deductible expenses. Accordingly, the Defendant rendered a decision of correction to reduce corporate tax 000 won on December 14, 201 (hereinafter referred to as “the disposition of imposition of corporate tax - KRW 000 on July 1, 2011 against the Plaintiff of the Defendant remaining after reduction according to the decision of the Tax Tribunal”).

[Ground of recognition] Facts without dispute, Gap evidence 1, 5, 6, Eul evidence 1 to 3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) In order to constitute “shareholders, etc.” under Article 87(1)2 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter referred to as “Enforcement Decree of the Corporate Tax Act”), they shall be the Plaintiff’s shareholders. However, in the instant case, the Plaintiff is only the Plaintiff’s shareholder, but is not the Plaintiff’s shareholder, and according to the changed legal principle by Supreme Court en banc Decision 2008Du150, Jul. 21, 201, Article XX does not constitute “a person with a special relationship” under Article 52(1) of the Corporate Tax Act.

2) The Defendant alleged that the reason for disposition changed and the reason for disposition corresponds to 'other affiliated companies belonging to the business group to which the Plaintiff belongs' under Article 87 (1) 7 of the Enforcement Decree of the Corporate Tax Act, and thus, it constitutes 'a person in a special relationship' under Article 52 (1) of the Corporate Tax Act. However, the above provision was a case belonging to 'large business group' before the amendment of December 31, 201, but the above provision was a case belonging to 'large business group'. However, in light of the fact that the National Tax Service imposed taxation under the above provision only when the amount equivalent to the said large business group before the amendment after the amendment was made by the National Tax Service, it cannot be deemed that the

3) Even if Guides XX constitutes “a person in a special relationship” under Article 52(1) of the Corporate Tax Act, the Plaintiff’s act of investing in the instant new shares and then transferring them again cannot be deemed to have unjustly reduced the tax burden on the corporation’s income as a transaction with economic rationality. Thus, the Plaintiff’s act does not constitute “unfair calculation”.

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Determination as to whether XX constitutes “a person in a special relationship with the Plaintiff” under Article 52 of the Corporate Tax Act and Article 87(1)7 of the Enforcement Decree of the Corporate Tax Act

At the time of the instant disposition, the fact that the Defendant determined XX as “a person in a special relationship under Article 87(1)2 of the Enforcement Decree of the Corporate Tax Act” does not conflict between the parties, and according to the changed Supreme Court precedents, as alleged by the Plaintiff, the subject matter of the instant disposition lawsuit cannot be recognized as “a person in a special relationship under the above Enforcement Decree.” However, since the subject matter of the instant lawsuit is objective existence of the tax amount determined by the tax authority, the tax authority may submit new data that can support the legitimacy of the tax base and tax amount recognized in the relevant disposition until the closing of argument at the fact-finding court during the lawsuit and exchange the reasons within the scope of maintaining the identity of the disposition (see, e.g., Supreme Court Decision 2001Du1994, Oct. 11, 2002). As such, the Defendant can modify the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, which constitutes “a person in a special relationship under Article 52 of the Corporate Tax Act” within the scope of maintaining the identity of the judgment.

However, Article 2 subparagraph 2 (a) of the Monopoly Regulation and Fair Trade Act defines "enterprise group" as "groups of one or more companies under the control of the same person where the same person and the same person are companies," and Article 2 subparagraph 3 of the same Act provides that "if two or more companies belong to the same enterprise group, they shall be affiliated companies of each other." Article 3 subparagraph 1 of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act provides that "a company de facto controlling its business according to the criteria prescribed by Presidential Decree." Article 3 subparagraph 1 of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act provides that "the same person owns 30/100 or more of the total number of issued and outstanding shares of the company in question alone at the time of acquiring the new shares of this case on June 4, 2008, the plaintiff and XX constitute "enterprise group under Article 2 subparagraph 2 (a) of the Monopoly Regulation and Fair Trade Act" and therefore, it is reasonable that the plaintiff and the plaintiff constitute an affiliated company of the other party.

As to this, the Plaintiff: (a) the Defendant imposed tax on a business group (a business group belonging to a business group subject to the limitations on mutual investment, etc.) only when the size of the business group is corresponding to the business group; (b) there was a non-taxable practice that does not impose tax on a business group that does not reach the business group; (c) on the grounds of the above provision, the Defendant alleged that the disposition in this case goes against Article 18(3) of the Framework Act on National Taxes; (d) but in order to establish a non-taxable practice under Article 18(3) of the Framework Act on National Taxes, there is an objective fact that has not been imposed for a considerable period of time; and (e) there is an intention that the tax authorities should not impose tax on the business group; and (e) the above public opinion or opinion should be expressed explicitly or implicitly, but in order to find that there is an implied expression of tax evasion, it is difficult to find that the tax authorities imposed tax exemption under Article 18(1)7 of the Enforcement Decree of the Corporate Tax Act, and there is no other evidence as stated otherwise.

2) Determination as to whether the Plaintiff’s act constitutes wrongful calculation under Article 52 of the Corporate Tax Act and Article 88(1)1 of the Enforcement Decree of the Corporate Tax Act

Article 52 (1) of the Corporate Tax Act provides that "the head of the district tax office having jurisdiction over the place of tax payment or the head of the district tax office having jurisdiction over the place of tax payment may calculate the amount of income for each business year of the corporation regardless of the amount of the corporation's act or transaction with a person with a special relationship prescribed by the Presidential Decree where it is deemed that the tax burden on the corporation's income has been unjustly reduced". "Where it is deemed that the corporation's tax burden on the corporation's income has been unjustly reduced" means the case where it is recognized that the transaction type of the corporation's income is objectively deemed to be unfair in terms of tax law because it disregards economic rationality (see Supreme Court Decision 2005Du10767, Nov. 29, 2007

6. In light of the following circumstances, i.e.,: (i) net losses incurred for three consecutive years from around 2005 to around 207; (ii) the Plaintiff was in capital erosion around June 4, 2008; and (iii) the value of shares at the time of sale was 0 won when it was based on the supplementary valuation methods under the Inheritance Tax and Gift Tax Act; (iv) the Plaintiff acquired the instant new shares at KRW 100 per share of KRW 10,00,000,000,000 from 0,000,000,000 KRW 20,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 won.

Therefore, the plaintiff's above assertion is without merit.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.