Whether the loan of this case constitutes a provisional payment having no direct connection with the plaintiff's business activities

It is difficult to view that the instant loan was paid without connection with the Plaintiff’s business, and thus, the instant rejection disposition based on a different premise is unlawful.

Article 28 of the Corporate Tax Act; Article 53 of the Enforcement Decree of the Corporate Tax Act

Daejeon District Court-2017-Gu Partnership-10578 Revocation of Disposition Rejecting Corporate Tax Correction

AAAA

Daejeon Head of the District Tax Office

8.06.21

2018.09.06

1. The Defendant’s rejection of correction of KRW 115,539,249 of corporate tax against the Plaintiff on January 6, 2017 shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a corporation that operates a business of treating livestock excreta, treating sewage and wastewater, treating high concentration 25 (Oodong) in 1184-ooo-ro 25 (Membrae, liquid or gaseous specific ingredients, and selectively passing them to a liquid or solid string that makes it possible to separate mixtures. The Plaintiff is a corporation that operates a business of treating livestock excreta, treating sewage and wastewater, treating high concentration booms (Membrae, liquid or gaseous specific ingredients, and uses it for purifying contaminated water, purifying polluted water, purifying polluted water, and dializing seawater).

B. Around January 2008, the Plaintiff established a local corporation (mutual name: the former FIL-MAINC; hereinafter referred to as the “local corporation of this case”). At the time of the establishment of the instant local corporation, the Plaintiff was holding 100% of the shares of the said corporation, but the Plaintiff’s share was reduced to 53.85% since 201, and the Plaintiff’s share was reduced to 53.85%.

BB, the largest shareholder of the BB, has 41% of the outstanding shares, and executive officers and employees of the local subsidiary of this case hold the remainder shares.

C. From 2011 to 2015, the Plaintiff lent KRW 6,847,595,503 to the instant subsidiaries with facilities and operating funds (hereinafter “the instant loan”). From 2011 to 2015, the Plaintiff deemed the instant loan as a provisional payment irrelevant to business, and did not include the interest paid in the total loan amount equivalent to the percentage of the said loan in deductible expenses ( KRW 68,318,640 in the year 201, KRW 94,673,180 in the year 2012, KRW 94,673,180 in the year 2013, KRW 119,240,460 in the year 2014, KRW 129,696,50 in the year 2014, KRW 158,935,50 in the year 2015, KRW 570,3030 in the aggregate).

D. On October 20, 2016, the Plaintiff filed a claim for the correction of corporate tax with the purport that the Plaintiff would cancel the non-deductible interest payment on the ground that the instant loan was directly related to the Plaintiff’s business activities and does not constitute a provisional payment without business relations. On January 10, 2017, the Defendant rejected the correction on the ground that the instant loan was deemed to have no business relations (hereinafter “instant rejection disposition”).

【Ground for Recognition: Descriptions A’s Evidence Nos. 1 through 3, 20, 23 (including each number; hereinafter the same shall apply) and Evidence Nos. 1, 2, and 12)

2. Summary of the parties' arguments

A. The plaintiff's assertion

The subsidiary of this case is a foreign sales corporation that does not own original technology and does not own product production facilities, and only sells the plaintiff's product and receives fees. The above subsidiary is a corporation that sells the plaintiff's product and receives profits from the sales of the plaintiff's product. The above subsidiary is performing various activities for the increase of plaintiff's sales, such as sales of the plaintiff's product, promotion and demonstration of original technology, technology and business for potential customers, and the loan of this case was actually disbursed as expenses for these activities. The loan of this case contributed directly to the increase of plaintiff's sales, and it is expected that the loan of this case will contribute significantly to the future, such as entering into two MOU. Accordingly, since the loan of this case is directly related to the plaintiff's business activities, it does

B. The defendant's argument

Since the loan of this case does not directly contribute to the plaintiff's increase in the profit of the plaintiff as well as the aggravation of the plaintiff's capital soundness, and it is judged that the loan of this case was used as pure driving fund of the affiliated company receiving financial assistance, the rejection disposition of this case is legitimate in view of the provisional payment in office.

3. Relevant statutes;

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

4. Determination as to whether the rejection disposition of this case is illegal

(a) Facts of recognition;

The following facts are acknowledged in full view of the evidence evidence Nos. 5 through 19, 24 through 33, Eul’s written evidence Nos. 3 through 8, and the purport of the entire pleadings.

(1) On June 8, 2011, the Plaintiff entered into an agreement on technical use and sales with the instant subsidiary (Article 6, however, the sales commission that the initial subsidiary receives from the Plaintiff) as follows.

As to the royalties paid to the Plaintiff and the Plaintiff, each provision was amended on January 1, 2012 and January 1, 2013 by each additional contract, as follows:

(2) The Plaintiff filed an application for registration of a large number of patents with respect to environmental facilities, such as sewage purification equipment, to the United States, Europe, etc., and the instant subsidiary was a public institution or company located in the United States, which introduced and performed business activities such as introducing and explaining technologies related to environmental facilities owned by the Plaintiff.

(3) According to the current local subsidiary’s cash inflow and disbursement (Evidence 7) (Evidence 7), cash inflows from 2011 to 2015 is KRW 7,767,60,700 in total, including loans of KRW 5,883,893,893,00 in total and KRW 1,883,717,000 in total, and KRW 7,751,472,00 in cash disbursement during the above period is KRW 7,751,472,00 in total, and KRW 3,926,767,79,745,000 in total was paid as employee’s salary, and KRW 3,926,767,700 in total as expenses for project test, and the remaining cash is indicated as expenses for purchase of office, KRW 4 insurance expenses for employees, travel expenses, travel expenses, participation in exhibitions, welfare expenses, office management expenses, etc.

(4) The sales revenue of the instant subsidiary includes facility rents and sales commission paid by the Plaintiff for the sale of the Plaintiff’s products at the request of public institutions or companies located in the United States and other customers including public institutions or companies for which the said subsidiary received facilities of the Plaintiff at the customer’s place of business or outside of the customer’s place of business and quality tests.

(5) The Plaintiff’s sales from 2010 to 2016 and the current status of sales of products sold after concluding a direct contract with a company located in the United States as a result of the instant subsidiary’s business activities are as follows, respectively:

(6) The amount of each annual loan that the Plaintiff lent to the local subsidiary of this case is as follows.

B. Determination

(1) Relevant legal principles

Article 28(1)4(b) of the Corporate Tax Act provides that an amount calculated under the conditions as prescribed by the Presidential Decree among interest on loans (limited to interest on loans equivalent to the relevant asset value among loans) shall not be included in the calculation of income amount for each business year. The legislative purpose is to prevent the aggravation of the financial structure of an enterprise through corporate expansion dependent on capital by restricting abnormal acts of lending loans to a related party, such as an affiliate, without using loans in a production part, and to induce the sound economic activities of an enterprise through the production and management of corporate funds (see, e.g., Supreme Court Decisions 2006Du1647, Sept. 20, 2007; 2006Du16475, Apr. 15, 2005). Whether such provisional payments are related should be objectively determined based on the purpose of business or business contents of the relevant corporation (see, e.g., Supreme Court Decision 2005Du16475, Apr. 14, 2005).

(2) Determination as to the business relevance of the instant loan

Examining the aforementioned facts, the evidence, and the following circumstances recognized by the evidence Nos. 22 and 23, in light of the provisions and legal principles of the above Acts and subordinate statutes, it is difficult to view that the instant loan was paid without connection with the Plaintiff’s business, and thus, the instant refusal disposition based on a different premise is unlawful.

㈎ 원고는 환경설비업, 환경설비기기 제작판매업, 오수정화처리업 등을, 이 사건 현지법인은 환경설비업을 각각 목적사업으로 하여 설립되었다. 이 사건 현지법인은 원고가 자본금 100%를 출자하여 설립한 회사로서, 미국에서 원고 제품의 판매를 위한 영업활동을 수행하고, 판매 전 단계에서 미국 소재 공공기관이나 회사 등의 의뢰에 따라 당해 사업장 내부 또는 외부에 원고의 설비를 설치하고 품질을 시험하는 용역을 제공하며, 원고 제품의 판매에 따라 원고로부터 판매수수료를 지급받는 사업 등을 영위하고 있다. 이 사건 현지법인의 매출액 규모나 지출 내역을 보면, 위 법인이 자체 원천기술이나 제품 생산설비를 보유하여 독자적인 영업활동을 하고 있다거나, 그 외 원고의 제품 판매와 무관한 별도의 수익사업을 영위하고 있는 것으로 보이지는 않는다.

㈏ 이 사건 대여금은 이 사건 현지법인의 인건비 등 운영자금으로 대부분 사용되었고, 특히 지출내역에서 인건비가 가장 많은 비중을 차지하고 있는데, 이는 이 사건 현지법인이 자체 원천기술이나 제품 생산설비를 이용한 독자적인 사업이 아닌 판매를 위한 영업활동을 주된 사업으로 영위하고 있고, 환경설비업과 같은 기술영업의 특성상 환경공학 관련 석, 박사 이상의 학력을 갖춘 임직원에게 지급되는 급여수준이 높은 데기인한 것으로 보인다. 따라서 원고가 이 사건 현지법인에게 인건비 등의 명목으로 이 사건 대여금을 대여하였고, 이 사건 현지법인이 앞서 본 바와 같이 원고 제품의 판매를 위하여 일정한 사업을 시행한 사정에 비추어 보면, 이 사건 대여금이 원고의 목적사업 수행과 무관하다고 보기 어렵다.

㈐ 한편 원고가 하는 환경설비업은 대규모 장치산업으로서 해외시장을 개척하여 판매에 이르기까지는 일정한 시간과 비용이 소요될 수밖에 없다. 따라서 설령 5년간 영업활동의 결과 판매로 인한 원고의 매출액이 미미하였고, 이에 따라 이 사건 현지법인의 영업손실이 증가하여 그 당시 회수가 어려운 상황이었다 하더라도 그것만으로 원고가 판매법인인 이 사건 현지법인에게 지속적으로 인건비 등 운영자금을 대여한 것이 원고의 업무와 무관하다고 단정할 수는 없다.

㈐ 이 사건 대여금의 액수가 약 68억 원에 이르는 상당한 금액이나, 원고의 2009년부터 2015년까지의 누적 당기순이익(약 148억 원)과 영업활동으로 인한 현금흐름(약366억 원)을 볼 때, 이 사건 대여금의 대여로 원고의 재무구조를 곧바로 악화시켰다고보기 어렵다. 그리고 이 사건 현지법인 설립 후 2011년경까지는 원고에게 원고 제품의미국 판매로 인한 매출이 전혀 발생하지 않았다가, 2012년경부터는 꾸준히 매출액이 발생하고 있고, 판매에 이르기 전 단계로서 MOU를 체결하는 등 영업활동으로 인한 성과가 없었다고 보기도 어려우므로, 이 사건 대여금의 대여가 경제적 합리성이 전혀 없는 것으로서 원고의 목적 사업과 무관한 다른 목적으로 이루어진 것이라고 단정할 수도 없다.

5. Conclusion

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