Jeonju District Court-2017-Guhap-685 ( October 26, 2017)

High Court 2016 Mine4261 ( October 27, 2017),

In calculating dividend income from collective investment schemes, a disposition that does not include profits and losses from investment to the redemption date is legitimate.

The plaintiff asserts that the investment profit and loss should be added up for the period from the date of investment in the collective investment scheme to the date of settlement of accounts, but according to Article 17 of the Income Tax Act, etc., the profit from the collective investment scheme is taxed by the end from the time of investment to the date of settlement and distribution

Article 17 [Dividend Income] of the Income Tax Act

Gwangju High Court-2017-Nu-1822 ( October 21, 2018)

Park AA

O Head of tax office

Jeonju District Court-2017-Guhap-685 ( October 26, 2017)

2018.04.09

2018.21

1. The plaintiff's appeal is dismissed.

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

The judgment of the first instance shall be revoked. On May 9, 2016, the imposition of global income tax of KRW 4,895,290 against the Plaintiff for the year 2013 shall be revoked.

1. Quotation of judgment of the first instance;

The reasoning of this Court concerning this case is that the reasoning of the judgment of the court of first instance is the same as that of the judgment of the court of first instance, except for adding the judgment on the plaintiff's assertion under Paragraph (2) below, and thus, the judgment of the court of first instance is cited in accordance with Article 8 (2)

2. Additional determination

A. The plaintiff's assertion

The Defendant imposed the instant disposition on only the profits from the investment date of the instant beneficiary certificates to the settlement date, not from the settlement date to the settlement date, without deducting losses from the settlement date. This is against the principle of equality under the Constitution, in view of the fact that the Income Tax Act does not explicitly stipulate that where losses are incurred when repurchase of beneficiary certificates, they shall be excluded from the total amount.

B. Determination

1) On the ground that the Income Tax Act does not have a clear provision that any loss occurs in the event of redemption of beneficiary certificates, it shall not be deducted from the profits determined retroactively by the loss incurred between the date of redemption after the settlement of profits became final and conclusive based on the settlement period, etc. in violation of the provisions of the former Enforcement Decree and the Enforcement Rule of the Income Tax Act. Thus, the instant disposition cannot be deemed to

2) Taxes have various functions such as re-distribution of income, proper distribution of resources, and adjustment of the economy, as well as the original function of meeting the financial demand of the State. As such, in determining the citizens’ tax burden, the legislators need to make a comprehensive policy determination over the overall state of government, such as financial, economic, and social policies, and the different treatment on the grounds of a difference in the nature of income may be determined by considering the overall income system or legislative purpose, and other various economic situations. Therefore, the legislators may decide whether to impose a certain income subject to taxation or to deduct losses within any scope of income in calculating the amount of income from a collective investment scheme. Whether to allow profits and losses in calculating the amount of income from a collective investment scheme, and the scope thereof is a matter that can be determined by legislators with a considerable discretion (see Constitutional Court Decision 2016HunBa290, Jul. 27, 2017).

In the event a loss occurs between the date of investment and the date of settlement of accounts and the date of settlement of accounts, the loss from the date of investment to the date of settlement of accounts is deducted pursuant to Article 13 of the former Enforcement Rule of the Income Tax Act. It is reasonable to view that the above provision differently determines the method of calculating the tax base where profits are distributed from the collective investment scheme according to the settlement of accounts of the collective investment scheme and

In addition, Article 14(1) of the Corporate Tax Act provides that "the income of a domestic corporation for a business year shall be the amount calculated by deducting the total amount of losses incurred during the pertinent business year from the total amount of gross income accrued during the pertinent business year," and where a beneficiary certificate holder is a corporation, investment losses may be added in accordance with the aforementioned provision. As such, profits from a collective investment scheme are different from the corporate income that is allowed for inclusion of profits and losses in the income subject to income, realization of profit, and income source, etc. (see Constitutional Court Order 2016HunBa290, Jul. 27, 2017). Therefore, it is difficult to deem that Article 13 of the former Enforcement Rule of the Income Tax

Therefore, the instant disposition based on Article 13 of the former Enforcement Rule of the Income Tax Act cannot be deemed to violate the principle of taxation equity or the constitutional principle of equality.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and the judgment of the court of first instance is just and the plaintiff's appeal is without merit, and it is so dismissed as per Disposition.