Samsung C&P Co., Ltd. (Attorney Jeong Byung-chul et al., Counsel for the defendant-appellant)

Head of Seosan Tax Office and one other (Law Firm LLC et al., Counsel for the plaintiff-appellant)

April 2, 2014

1. The plaintiff's claims against the defendants are all dismissed.

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

As indicated in the separate sheet against the Plaintiff, the imposition of KRW 6,880,98,210 on April 5, 201 by the head of Seosan Tax Office and KRW 28,579,30 on December 2, 2011 by a legal entity (won) and KRW 28,579,304,310 on December 2, 201, and the imposition of KRW 688,098,820 on May 9, 201 by the local income tax market on December 12, 2011 by the Defendant Seosan Tax Office shall be revoked in all of the imposition of KRW 591,81,370 on local income tax on December 12, 2011, and KRW 26,119,050 on local income tax on January 9, 2012.

1. Details of the disposition;

A. Status of the parties

Total Herings U.K. Limited (hereinafter referred to as “THUK”) is a limited liability company established under the laws of the United Kingdom in 1983, and THUK S.A. established under the French law is a parent company of THUK, and Total S.A. is a final parent company of the so-called “Total Group” established under the French law in 1924 and engages in a petroleum chemical-related business (the relationship between each company is as set forth below).

A person shall be appointed.

The Plaintiff is a corporation established pursuant to the law of the Republic of Korea on August 1, 2003, which is engaged in synthetic resin and petroleum products-related business, and Samsung General Chemical Co., Ltd (hereinafter “THUK”) and THUK hold 50% of the Plaintiff’s shares, respectively.

(b) Dividends;

From 2006 to 2010, the Plaintiff distributed the following amounts, and reported and paid corporate tax calculated by applying the 5% limited tax rate under Article 10(2)(a) of the Korea-UK’s Korea-UK as follows to the dividend amount for THUK:

Table (units: KRW 3,320, 847, 3752, 3735, 298, 169, 307, 269, 269, 351, 3513, 355, 317, 317, 689, 2026, 028 2008 2010 total sales 3,320, 847, 357, 357, 3845, 3548, 3584, 3545, 37548, 4537, 457, 4537, 4584, 3758, 4537, 37545, 37, 4584, 37, 457, 3758, 458, 37, 457, 385

C. Taxation

The Daejeon Regional Tax Office conducted a corporate tax investigation on the Plaintiff in 201, and denied the application of the 5% limited tax rate under Article 10(2) of the Korea-UK’s tax treaty on the premise that it is not a “beneficial owner” as provided by Article 10(2) of the Korea-UK Tax Treaty, and re-calculated the amount of withholding tax pursuant to the Korea-U.S. Tax Treaty, deeming the final parent company as a beneficial owner of dividend income, and then re-calculated the amount of withholding tax pursuant to the Korea-U.K. Tax Treaty, on the ground that TRU.A. did not own the Plaintiff’s stocks directly, the amount of withholding tax is not 9.09% (including 10% local income tax), but 13.63% (including 15% local income tax) of the total amount paid by the Plaintiff to THUK for the period from 2006 to 2010 (hereinafter “instant dividend income”).

Accordingly, as indicated in the separate sheet against the Plaintiff, the head of Seosan Tax Office imposed and notified the Plaintiff of KRW 6,880,98,210 of corporate tax on April 5, 201, and KRW 28,579,304,210 of corporate tax on December 2, 2011, and KRW 28,579,304,210 of corporate tax on December 2, 2011, and Defendant Seosan City imposed and notified the Plaintiff of KRW 688,098,820 of local income tax on May 9, 2011, and KRW 591,811,370 of local income tax on December 12, 201, and KRW 2,26,110,050 of local income tax on January 9, 201 (hereinafter “instant disposition”).

(d) Implementation of the preceding trial procedures;

The plaintiff filed an appeal with the National Tax Tribunal regarding each of the dispositions of this case, but all of the appeals were dismissed.

The corporate tax as of December 2, 201, July 1, 201, 201, which was July 1, 2011, as of the date of rejection of a request for a judgment on imposition of Table, contained in the main sentence, shall be the corporate tax on December 2, 201, which was July 2, 201, and as of May 9, 201, 201, the local income tax on the July 27, 201, as of December 27, 201, as of December 12, 2012, the local income tax on December 12, 2012, 201, as of December 12, 2012, the local income tax on the local income tax as of December 12, 2012.

【Ground of recognition】 The facts without any dispute, Gap 3, 7, 8, Eul 1 through 13, 15, 16, 18 through 20, 22, 26 through 34, 36 through 39, Eul 1 through 6, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Illegality in determining the beneficial owner of the instant dividend income

THUK is a holding company established for the purpose of investing in an affiliate company, etc., and has been duly established and operated in accordance with English law since 20 years prior to the establishment of the Plaintiff, and has owned 35 U.K. subsidiaries directly and indirectly, and has paid corporate taxes equivalent to the U.K. government. It is not a so-called Do government company established for the purpose of evading Korean taxes by abusing the Korea-U.K. Tax Treaty without any business purpose. Accordingly, the instant disposition denying the application of the limited tax rate under the Korea-U.K. Tax Treaty on the premise that THUK is not a beneficial owner of the instant dividend income is unlawful.

2) Illegality of choice of the applicable tax rate under the Korea-F Tax Treaty

Preliminary, even if THUK is deemed to be the beneficial owner of the instant dividend, it shall be deemed that Total S.A. Company directly owns 50% of the Plaintiff’s equity interest in accordance with the economic substance consistently. Therefore, the limited tax rate of 10% should be applied in accordance with the Korea-FF Tax Treaty.

(b) Related treaties;

본문내 포함된 표 Convention between the Government of the Republic of Korea and the Government of the United Kingdom of Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains(소득 및 자본에 관한 조세의 이중과세회피 및 탈세방지를 위한 한·영협약, 이하 ‘한영 조세조약’이라 한다) Art. 10. Dividends (1) Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. (2) However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed : (a) 5 percent of the gross income amount of the dividends if the beneficial owned is a company(other than a partnership) which controls, directly or indirectly, at least 25 percent of the voting power in the company paying the dividends; (6) The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividend is paid to take advantage of this Article by means of that creation or assignment. 제10조【배당】 (1) 일방체약국의 거주자인 법인이 타방체약국의 거주자에게 지급하는 배당에 대하여는 동 타방체약국에서 과세할 수 있다. (2) 그러나, 그러한 배당에 대하여는 배당을 지급하는 법인이 거주자로 되어 있는 체약국에서도 동 체약국의 법에 따라 과세할 수 있다. 그러나 수취인이 배당의 수익적 소유자인 경우, 그렇게 부과되는 조세는 다음을 초과할 수 없다. (a) 수익적 소유자가 배당을 지급하는 법인 의결권의 최소한 25퍼센트를 직접 또는 간접으로 지배하는 법인(조합은 제외)인 경우에는 배당총액의 5퍼센트 (6) 이 조의 규정은, 배당의 지급원인이 되는 주식 또는 여타 권리의 창설 또는 양도를 통하여 이 조의 혜택을 누리는 것이 동 창설 또는 양도에 관련된 어떤 인의 주된 목적이거나 주된 목적 중의 하나인 경우에는 적용하지 아니한다. 한프 조세조약 Art. 10. (1) Dividends paid by a company which is a resident of a State to a resident of the other State may be taxed in that other State. (2) However, such dividends may be taxed in the State of which the company paying the dividends is a resident, and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed (a) 10 per ent of the gross amount of the dividends if the recipient is a company (excluding partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends; (b) in all other cases, 15 per cent of the gross amount of the dividends. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. (1) 일방국의 거주자인 법인이 타방국의 거주자에게 지급하는 배당에 대하여는 동 타방국에서 과세할 수 있다. (2) 그러나 이러한 배당은 동 배당을 지급하는 법인이 거주자로 되어 있는 국에서도 동국의 법에 따라 과세할 수 있다. 그러나 만약 수취인이 동 배당의 수익적 소유자인 경우에 그렇게 부과되는 조세는 다음을 초과해서는 아니 된다. (a) 수취인이 배당금을 지급하는 법인의 자본금의 최소한 10퍼센트 이상을 직접 소유하는 법인(조합은 제외)인 경우에는 총 배당액의 10퍼센트 (b) 기타의 경우는 총 배당액의 15퍼센트. 본항의 규정은 동 배당이 지급되는 이윤에 대한 법인의 과세에 영향을 미치지 아니한다.

C. As to the judgment on beneficial owner of the instant dividend income

1) Criteria for judgment

The principle of substantial taxation provided for in Article 14(1) of the Framework Act on National Taxes (amended by Act No. 2679 of Dec. 21, 1974, amended by Act No. 8830 of Dec. 31, 2007, and amended by Act No. 9911 of Jan. 1, 2010) refers to a person to whom the property substantially belongs, unlike the nominal owner, in relation to the subject of taxation, such as income, profit, property, transaction, etc., if there is a separate person to whom the nominal owner belongs, not the nominal owner, on the ground of form or appearance, should be a taxpayer. Thus, where the nominal owner is not capable of controlling and managing the property, and where the disparity between the nominal owner and the real owner arises from the purpose of tax evasion, the income from the property belongs to the person who actually controls and manages the property (hereinafter referred to as "actual owner") and the principle of taxation should be applied to the person liable for tax payment (see, e.g., Supreme Court Decision 2002Du194848).

Meanwhile, Article 3(2) of the Korea-U.S. Tax Treaty provides, “Unless the context otherwise requires, a Contracting State shall have the meaning under the law of that Contracting State with respect to taxes to which this Convention applies.” Thus, the meaning of “beneficial owner” under Article 10(2) that is not directly defined in the Korea-U.S. Tax Treaty must be determined in accordance with the law of the Republic of Korea. Article 10(6) of the Korea-U.S. Tax Treaty provides, “It shall not apply where the provisions of this Article are to enjoy the benefits of this Article through the creation or transfer of stocks or other rights which are the cause of the payment of dividends, or where it is the principal purpose or one of the main purposes of the creation or transfer.” In light of the meaning of “the Convention on Double Taxation” and the meaning of “the principle of substantial taxation” under Article 10(2) of the Korea-U.S. Tax Treaty, the term “the owner of the stocks or other rights,” which is the basis of interpretation of the international tax treaty, as well as the meaning of “the Convention on Double Taxation.”

Therefore, as in the case of a “person to whom dividends are to be paid” under Article 10(2) of the Korea-U.S. Tax Treaty, whether the person to whom the dividend income belongs falls shall be determined by comprehensively taking into account all the circumstances, such as the process and purpose of acquisition of the pertinent stocks or shares, the source of the acquisition fund, the process of management and disposal thereof, the ability of the person to whom the dividend income is to be attributed, and the control relationship with the person to whom the dividend income is to be attributed (see Supreme Court en banc Decision 2008Du2008, Jan. 19, 2012). In such a case, the nominal person shall not be deemed to have the ability to independently conduct business, and even if there is such ability, if the nominal person to whom the dividend income belongs has no intention or ability to control and manage it, and there is another person who actually controls and manages it, the person to whom the

(ii) the facts of recognition

Comprehensively taking account of the evidence adopted above, the following facts are recognized:

A) Corporate relations;

(1) THUK is a Korean corporation and an investment branch management company that invests only in a corporation located in the United Kingdom except in the case of the Plaintiff and the Austria, a corporation of the Republic of Korea.

② As a five major petroleum gas company in the world, at least 130 countries are operating in at least 130 countries, and as the highest decision-making body on group’s strategy, the Executive Committee (COMX, the Chairperson is CEO, and its Vice-Chairperson is Fancois CEO, the president of the chemical sector) and the Coordination Committee (Jan Bnaed Ltique is present as the representative of the chemical sector) have been established as the Management Committee. Total S.A. in 1999, TRF was a corporation established by merger between Fina, the chemical company of the Belgium and France, the oil source development company of France, and the ELF, the ELF company of France, and its largest decision-making body on group’s strategy, and the Vice-Chairperson was divided into a chemical affiliate of the AMF sector for more than 200 years and not more than 30 years from the date of merger.

③ The Plaintiff’s mission at the time of its initial establishment was Samsung Atofined and changed to Samsung C&T Co., Ltd. on October 4, 2004 as of October 4, 2004.

B) Joint venture with Samsung General Chemical and the Plaintiff’s establishment process

① In 2001, Samsung General Chemical (Total S.A. or Atofina) entered into negotiations on joint venture agreements with Samsung Total S.A. company (former modification, Total FINF S.A. or Atofina). The negotiations mainly took place in France. At the time of Total S.A. company, Samsung General Chemical Co., Ltd., the president of the petroleum chemical part at the time of Total S.A. company, and Latique finally made investment decisions with the approval of COEX, the highest decision-making body for Tot S.A.

Samsung General Chemical concluded an MOU on December 2, 2002 with Total S.A. History and Korea, and LaBC signed the said MOU with the delegation by Total S.A. CEO and re-issuance by CFO.

② After the conclusion of a MOU, Samsung General Chemical Officers were going to work for the preparation of a joint agreement with the person in charge of Samsung General S.A. on a business trip in France. From December 2002 to February 2003, the agents of Samsung General Chemical S.A. inspected Samsung General Chemical Site and reported the results of the actual inspection to Samsung Total S.A. Company.

③ On May 27, 2003, the joint venture contract was concluded between the two companies in French Total S.A. On May 27, 2003, Fucois Cnelis signed the said contract, and at the time THUK was first presented as a contracting party.

At the time, Total S.A. at the time, the board of directors of the Group examined the joint venture with Samsung General Chemical, and on August 2003, specified that the Plaintiff was established jointly with Samsung General Chemical for the Asian Market.

④ The above joint venture contract defines the "law" as the Korean law or French law ("Lw", "LW", shall's Shall's Domte, Norm, Annorm, Annormation, Korea, as so called "K"). It is related to the payment of tax with the account of the UK corporation in France ("THUK" as it is defined as English corporation. 3.3.3. (c) the Civil Office is required to conduct tax investigation, and there is no provision that "LW", "LW", "Norm," "Norm," "Norm," "Norm," "No Norm," "No Norm," "No Norm," and "No Norm. 3.555.3.3.3.3.3. 3. 3. 3. 3. 3. 3. 1. 1. . . . . . . . . . . . . . . . . . . . . . . ... . .... . ..... ........ .. .... .. . ........ ..... ....... ..... ........

(5) A copy of the relevant contract, including a joint venture contract, shall be submitted to Total S.A.

6. The sales and marketing contract under the joint venture contract is to be entered into between shareholders and joint ventures, and the marketing contract was entered into with the Total S.A. company on August 1, 2003.

7. From the time of the joint venture, the employees in charge of Samsung General Chemical was aware of French Total S.A. Joint Ventures or Shareholders, and there was no fact that the work has been conducted with THUK.

C) Details of publication, public relations and press reports

① On December 2, 2003 and April 1, 2010, the Plaintiff publicly announced that “The Party is a corporation established under a joint venture agreement between Samsung Group and France,” and that “The Party was launched on August 1, 2003 as a joint venture corporation of Samsung Group and Total Corporation, by transferring 50% of the shares of the Dong company at the time of its establishment, etc. to the Sotal S.A. company of France.”

② The Plaintiff indicated the French Total S.A. as a shareholder of 50% in its own website, public relations library, and public relations book, and introduced the joint venture agreement with the French Yellow Group as a major history.

③ At the time of the Plaintiff’s joint venture establishment, the report was made on the investment or joint venture case in Samsung General Chemical and French Total S.A. (or Atofina).

D) Plaintiff’s management intervention and business report

① The Plaintiff made a monthly financial report on the financial status of Tal S.A. (or Total Tal Controls, a subsidiary), and reported the long-term management plan and the mid- and long-term growth strategies, etc. every year. Such a report was made in line with the date requested by France.

(2) The officer dust of Total S.A. company attended the Plaintiff’s inaugural general meeting of shareholders, and around 2005, the president of Total S.A. company (Chriop de gerie, Fancois Cnelis, etc.) visited the Plaintiff regularly at least once or two times a year, including that the Plaintiff visited the Plaintiff. In this case, the employee in charge of the Plaintiff was aware of and carried out as a shareholder company and reported the performance of the business.

On the other hand, there is no fact that the employees of the Plaintiff have made financial reports, business reports, etc. or contacted with THUK from the time of the joint venture to the date.

(3) A joint venture (shareholders) has the right to nominate and appoint three of the board of directors (Article 4 (Management of Joint Ventures) and Article 5 (Board of Directors) of the Joint Venture Contract), and has been dispatched from Total S.A. history until now.

④ The Plaintiff held a general meeting of shareholders and the board of directors in France or Belgium, or proceeded with the board of directors through Total S.A. History and video conference. While the officers in charge of finance of Total S.A. are fit to attend the board of directors, the Plaintiff did not hold a general meeting of shareholders and the board of directors in England or proceed with THUK and video conference.

(e) financing;

Investor's money was remitted from SOFAX QUE FRCE, a financial subsidiary of Total S.A.

F) The dividend payment route

The Plaintiff’s dividend was paid in the first place to THUK’s account, but it was immediately transferred to COMFAX QUE or otal Tesury, a financial subsidiary of Total Group.

G) Tax relationship related to the instant dividend income

(1) Taxation at the source country

As seen above, the application of the Korea-UK’s limited tax rate of 5% at the time of the application of the Korea-UK tax treaty on the dividend income of this case under the premise that THUK, which is the English nationality, is a shareholder, is governed by the 15% tax rate, such as the disposition of this case.

(2) Resident taxation;

The French corporate tax rate is higher than the corporate tax rate in the UK, and since July 1, 2009, with the adoption of the share exemption rule to prevent double taxation in the UK, the dividends in this case were excluded from the corporate tax assessment in the UK.

(3) The dividend income tax on THUK S.A. Company shall be levied.

In the event THUK distributes profits to Total S.A., the tax shall be exempted in accordance with the UK and France Tax Treaty [11.1. (c) 2. 1. dividends. . d. d. d. d. d. d. d. d. d. d. d. d. d. d. d. d. d. d. d. e. d. d. d. d. d. hal. e. d. d. d. d. d. e. h. e. h. e. e. e. e. c. d. d. d. d. d. d. d. d.)

H) Other circumstances

(1) A HUK is a pure holding company that does not perform other business activities, and there is no fact that it has employed or maintained human facilities, nor has no physical facilities, such as a fixed place of business.

② At around 2003 when the Plaintiff was jointly established, 34 subsidiaries belonging to THUK had the English nationality, and there is no other circumstance that THUK had taken charge of the Asian region, etc. of the THUK group.

③ Nonparty 4, the president of the Plaintiff, was awarded the Order of Lesongdo Bathy by the French Government with respect to the instant joint venture agreement.

3) In the instant case, “beneficial owner”

In full view of the above facts, in acquiring the Plaintiff’s share, which is the cause of the payment of the instant dividend income, and managing and managing the Plaintiff’s management and management, only the role of the transaction party or agent was performed without any fact showing the intent or ability to control and manage the Plaintiff’s share, and it can be recognized that TRUK, which is the actual subject of the act behind it, has actually been performing its role as a shareholder and the acquisition of shares and the performance of its role as a shareholder. In addition, as TRUK’s share is 100% in fact, TRUK’s interest belongs to TRUK’s interest as a result, TRUK’s possession of the Plaintiff’s share formally, and thus, it is also recognized that there was a circumstance in which TRUK could avoid taxes in a considerable amount through the application of the limited tax rate of the Korea-UK tax treaty. On the contrary, TRUK’s acquisition and management of shares in the name of TRUK that has no human and material resources.

If so, THUK is the so-called Do government company or the transaction party in form, and the beneficial owner of the dividend income of this case shall be the Do government company or the beneficial owner of the dividend income of this case.

Ultimately, the disposition of this case denying the application of the limited tax rate provisions under the Korea-U.S. Tax Treaty is just, and this part of the Plaintiff’s assertion is without merit

D. As to the choice of the applicable tax rate under the Korea-FF Tax Treaty

Since Total S.A. Company is the beneficial owner of the dividend income of this case, the taxation of the dividend income of this case is governed by the Korea-U.S. Tax Treaty.

In the Korea-F Tax Treaty, where an addressee is the beneficial owner of a dividend, if the addressee owns 10% or more of the capital of the relevant corporation, 10% or more of the total dividend amount shall be determined as the limited tax rate, and where not, 15% of the total dividend amount shall be determined as the limited tax rate. As long as the aforementioned treaty separates the “beneficial owner” from the “direct owner” of the stocks under the said treaty, whether the beneficial owner is the beneficial owner ought to be determined by the legal substance.

In light of this, the legal title holder of the Plaintiff’s shares is THUK, and Total S.A. is indirectly acquiring and holding the said shares through THUK as seen above. Therefore, even if the company is a beneficial owner of the said shares, it cannot be deemed as “direct owner” even if it is the beneficial owner of the said shares. Accordingly, the instant disposition applying the 15% limited tax rate on this premise cannot be deemed unlawful, and therefore, the Plaintiff’s assertion on this part is without merit.

3. Conclusion

Therefore, since the plaintiff's respective claims against the defendants are without merit, they are all dismissed. It is so decided as per Disposition.

[Attachment]

Judges Kim Byung-sik (Presiding Judge)