Where a factory located in the Seoul Metropolitan Area is relocated to B located in an area outside the Seoul Metropolitan Area, whether corporate tax should be reduced or exempted on all income accruing from the factory B.

After relocating a factory facility located in the Seoul Metropolitan area to outside of the Seoul Metropolitan Area, only the income accrued from the new commencement of the business in the relocated factory facility falls under the reduction or exemption of corporate tax, and the income accrued after the relocation of the factory facility installed and operated outside the Seoul Metropolitan Area of the Seoul Metropolitan Area before relocation to outside of the Seoul Metropolitan Area

Article 63 of the Restriction of Special Taxation Act for Small and Medium Enterprises Relocated to Outside of Overconcentration Control Zone

2017Guhap6726 Disposition of revocation of refusal to correct corporate tax

AA Corporation

○ Head of tax office

December 20, 2017

February 7, 2018

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s rejection of correction of KRW 781,974,615 of corporate tax for the business year 201, KRW 435,313,275 of corporate tax for the business year 2012, KRW 300,427,580 of corporate tax for the business year 2013, and KRW 342,489,89,891 of corporate tax for the business year 2014 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a small and medium enterprise that runs a special lecture manufacturing business, and the Plaintiff established and operated a factory with 00-00 ○○-dong, Seoul, ○○-dong, 000 (hereinafter referred to as “A factory”) and a factory with 00-0 ○-dong, Busan, ○○-dong (hereinafter referred to as “subindustrial complex”) from November 1, 2002 to 00-0 ○○-dong, 00 (hereinafter referred to as “B factory”).

B. The Plaintiff closed a A factory on June 22, 2007, sold a site for A factory on March 27, 2007, and removed a building of A factory on September 5, 2007. The Plaintiff later moved the head office to B factory on September 11, 2007, and completed the registration of modification on September 14, 2007.

C. On April 26, 2016, the Plaintiff filed an application for rectification with the Defendant on the premise that Article 63 of the former Restriction of Special Taxation Act (amended by Act No. 12853, Dec. 23, 2014; hereinafter “the Restriction of Special Taxation Act subsequent to the amendment”) applies, with respect to the corporate tax for the business year 201 and 2012, the Plaintiff sought rectification of the legitimate amount of tax reduced by 100% for the whole income accrued from the factory B, and with respect to the corporate tax for the business year 2013 and 2014, the Plaintiff filed an application for rectification with the Defendant for rectification of the amount of tax reduced by 50% for the entire income accrued from the factory B. However, the Defendant rejected the application for rectification on June 20, 2016 (hereinafter “instant rejection disposition”).

D. The Plaintiff appealed and filed an appeal on September 8, 2016. On April 20, 2017, the Tax Tribunal rendered a decision to accept part of the appeal to the effect that, by applying Article 63 of the former Restriction of Special Taxation Act (amended by Act No. 7839, Dec. 31, 2005; hereinafter referred to as “the former Restriction of Special Taxation Act”) to the effect that “the correction of corporate tax amount for the pertinent business year is made” was made to the effect that “the correction of corporate tax amount for the pertinent business year is made” was partly cited in the above appeal.

E. Accordingly, under the premise that only the portion calculated by applying 28.92%, which is the ratio of the sales of B factory products, to the total sales of B factory products and B factory products as of the business year 2006, constituted income subject to tax reduction, the Defendant determined to reduce the tax amount by 10% for the business year 2011 and the business year 2012, and to reduce the tax amount by 50% for the business year 2013 and the corporate tax amount by 2014.

[Reasons for Recognition] Facts without dispute, Gap's entries in Gap's Evidence Nos. 1, 2, 3, 4, 6, 7, 8, 10, 11, 12, 13, 14, Eul's Evidence No. 3, Eul's Evidence No. 4-1 through 4, and the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The parties' assertion

1) The plaintiff's assertion

According to Article 63(1) of the former Restriction of Special Taxation Act before and after the amendment, the entire income accrued from the factory after the relocation constitutes the amount of tax reduced or exempted. Since the Plaintiff transferred the entire factory from November 2002 to September 2007, the entire income accrued from the entire transfer of the factory constitutes the amount of tax reduced or exempted. Unlike this, the entire income accrued from the entire transfer of the factory before and after the entire transfer of the factory falls under the amount of tax reduced or exempted.

The restriction of income ratio is against the principle of no taxation without the law, under the premise that the part corresponding to the ratio of income generated is excluded from the reduction and exemption. It is against the principle of no taxation without the law, and it is against the principle of tax equality by treating the case of the relocation of a short-term factory and the case of the relocation of a medium- and long-term

Therefore, the rejection disposition of this case on June 20, 2016 was unlawful in the part that rejected reduction or correction of the difference between a legitimate tax amount that applied Article 63(1) of the former Restriction of Special Taxation Act before and after the amendment as stated in the purport of the claim and the corrected tax amount on May 2017.

2) The defendant's assertion

A) The assertion on the common part of the instant refusal disposition

"Income generated from the factory after relocation" under Article 63 (1) of the former Restriction of Special Taxation Act before and after the amendment refers to the income generated from the relocated factory. Since a factory and a factory are operated independently, while the factory and a factory exist independently, the entire factory and a factory are transferred to B around September 2007, the entire income generated from the factory and the entire income generated from the factory after relocation falls under the reduction of tax amount.

B) Claim on the part of corporate tax for the business year 2014 in the disposition rejecting correction of the instant case

Since Article 63(1) of the former Restriction of Special Taxation Act after its amendment is not applicable to the portion of the taxable period before January 1, 2015, the enforcement date thereof, and thus, tax reduction or exemption pursuant to the above provision shall not apply to corporate tax for the business year 2014.

(b) Related statutes;

It is as shown in the attached Table related statutes.

C. Determination

1) Determination on the common ground of the instant disposition rejecting correction

A) Under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law, barring special circumstances, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of equity in taxation to strictly interpret that the provision of tax reduction and exemption is clearly preferential (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009).

Article 63 (1) of the former Restriction of Special Taxation Act provides that, in cases where a small or medium enterprise operating a business with factory facilities installed outside the Seoul Metropolitan area of the Seoul Metropolitan Area before and after the amendment starts its business by relocating the entire factory facilities to outside the Seoul Metropolitan Area of the Seoul Metropolitan Area as prescribed by Presidential Decree, the tax amount shall be reduced or exempted for the income accruing from the factory after the relocation (hereinafter referred to as the "instant reduction or exemption provision"). In this context, the "income accruing from the factory after the relocation of the Seoul Metropolitan Area of the Seoul Metropolitan Area" requires "the relocation of the entire factory facilities" and "the commencement of the business", the above provision requires the relocation of the factory facilities to outside the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the Seoul Metropolitan Area of the above.

B) In light of the above legal principles and regulations, first of all, it is reasonable to see that the income subject to the provisions of this case's reduction and exemption should be excluded from the entire income of the factory installed and operated before the relocation of the whole factory; first of all, the above 1.35.2% of the sales amount of the A factory and B factory in the preceding 2003, Gap evidence 2, Eul evidence 16-2, Eul evidence 16-2, and Eul evidence 1 and 2, the plaintiff asserted that the period of transfer of factory facilities to B factory in the A factory had been operated jointly with the A factory from November 2002 to September 207, 207, and it is reasonable to see that the above part of the A factory was excluded from the total sales amount of the B factory in the preceding 2003, and there was no significant change in the A factory's sales amount for 36% of the A factory in the preceding 204, and 36.4% of the A factory in the preceding 206.6% of the above sales amount.36% of the A factory.

C) Next, in calculating the income subject to the provision on reduction and exemption as described in the above B, health care provider: (a) calculated income subject to the provision on reduction and exemption in accordance with the authoritative interpretation, which is only an internal guideline, based on the Defendant’s calculation of income subject to the provision on reduction and exemption in accordance with the ratio of sales of A factory and B factory as of the business year 2006; (b) as seen in the above B, it is difficult to calculate the income subject to the provision on reduction and exemption in this case by excluding income generated from the previous B factory facilities; and (c) otherwise, the Plaintiff did not have claimed the legitimate amount of income; (b) in light of the fact that it is difficult to determine the amount of income subject to the provision on reduction and exemption in this case in proportion to sales of A factory and B factory sales as of the business year immediately preceding the business year 2007 when A factory facilities were wholly transferred to B, and there is no evidence to acknowledge that the amount has been calculated differently.

The plaintiff's assertion on this part is without merit.

2) Determination on the part of corporate tax for the business year 2014 in the disposition rejecting correction of the instant case

According to Article 12853 of the Addenda of the Restriction of Special Taxation Act (amended by December 23, 2014), the former Restriction of Special Taxation Act (amended by the former Restriction of Special Taxation Act) shall enter into force from January 1, 2015 (main sentence of Article 1), and the amended provisions concerning income tax and corporate tax under the same Act shall apply from the division of the taxable year that begins after the enforcement of the same Act (Article 2(1)), and Article 63(1) of the same Act shall apply to cases where factory facilities are relocated before the enforcement of the same Act (Article 20). Accordingly, the tax reduction or exemption under Article 63(1) of the former Restriction of Special Taxation Act shall apply from the division of the taxable year beginning after the enforcement date of the same Act, and it shall not be deemed that the same provision shall apply to the portion for the preceding taxable year before the enforcement date of the same Act. This part of the Plaintiff’s assertion is without merit.

3) Sub-decisions

The Plaintiff’s request for reduction or correction of the disposition rejecting correction of the instant case does not appear to have any appearance or reason, and the disposition rejecting correction of the instant case is lawful.

3. Conclusion

The plaintiff's claim is without merit, and all of them are dismissed. It is so decided as per Disposition.