[1] Whether a foreign corporation which has no domestic place of business in Korea is subject to corporate tax (negative)

[2] Whether the amount of damages under the General Rule 6-1-2954 of the Corporate Tax Act is included in the domestic source income, which is provided in relation to assets in Korea (negative)

[1] It is clear that the compensation received by a foreign corporation that does not have a place of business in the Republic of Korea from a domestic corporation cannot be deemed as compensation for damages or economic benefits received in relation to its assets in the Republic of Korea. Therefore, the compensation such as estimated sales losses, etc. which the tax authorities consider as domestic source income of the foreign corporation, does not constitute any income under Article 122(7)1 or 8 of the Enforcement Decree of the Corporate Tax Act

[2] General Rule 6-1-2954 of the Corporate Tax Act does not have a legal effect as a guideline within the tax authority, and there is no basis to expand the scope of damages under the above basic rule as included in the domestic source income of a foreign corporation in the "compensation for damages provided in relation to assets in Korea" under Article 122 (7) 1 of the Enforcement Decree of the Corporate Tax Act.

[1] Article 5 (1) 11 of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994); Article 122 (7) 1 of the Enforcement Decree of the Corporate Tax Act / [2] Article 55 (1) 11 of the former Corporate Tax Act (amended by Act No. 4804 of Dec. 22, 1994); Article 122 (7) 1 of the Enforcement Decree of the Corporate Tax Act; Article 6-1-29-54 of the General Rules of the Corporate Tax Act; Article 6-1-29-54 of the Corporate

[1] Supreme Court Decision 85Nu880 delivered on June 9, 1987 (Gong1987, 1153) / [2] Supreme Court Decision 91Nu13670 delivered on September 8, 1992 (Gong1992, 2911) Supreme Court Decision 94Nu9283 delivered on May 23, 1995 (Gong195Ha, 2290)

[Judgment of the court below]

Head of Yeongdeungpo Tax Office

Seoul High Court Decision 95Gu13267 delivered on September 15, 1995

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

According to the reasoning of the judgment below, the court below, on behalf of the non-party et al., has its head office in the tex of the United States on December 3, 1986. The non-party 158,436,856 won was exported to the non-party ○○○○○○ (hereinafter referred to as "the non-party ○○○") which was a foreign corporation that did not have a place of business in Korea, but was found to be defective. The non-party ○○○ filed a lawsuit claiming damages against the plaintiff in Korea with the Seoul High Court on April 29, 1994 and received a total of 270,53,443 won from the plaintiff on June 3, 1994. The defendant did not withhold corporate tax under Article 158,436,856 won of the total estimated sales loss, interest interest, etc. of the above damages, which constituted the non-party 158,485 won of the Enforcement Decree of the Corporate Tax Act (amended by Act No. 12824, Dec. 124, 19, 19, 19994.).

Article 55 (1) of the Corporate Tax Act lists domestic source income which is liable to pay corporate tax by a foreign corporation and provides that "income prescribed by the Presidential Decree other than that provided for in subparagraphs 1 through 10" in subparagraph 11 of Article 122 of the Enforcement Decree of the Corporate Tax Act, which followed that "income prescribed by the Presidential Decree" referred to in Article 55 (1) 11 of the Corporate Tax Act refers to the income falling under any of the following subparagraphs, and subparagraph 1 of Article 5 of the Enforcement Decree of the Corporate Tax Act provides that "the amount of insurance money, compensation or damages received in connection with the real estate in Korea and other assets or the business operated in Korea," and subparagraph 8 provides that "the income from the economic interest that is provided in relation to the human services or assets provided in Korea other than those provided in subparagraphs 1 through 7."

As determined by the court below that the non-party ○○ does not have a place of business in Korea, it is clear that the above amount received by the corporation cannot be considered as damages or economic benefits provided with respect to assets in Korea. Thus, the defendant's compensation such as expected sales losses which the non-party ○○○'s domestic source income does not constitute any income provided for in Article 122 (7) 1 or 8 of the Enforcement Decree of the Corporate Tax Act (see Supreme Court Decision 85Nu880 delivered on June 9, 1987).

Meanwhile, General Rule 6-1-2954 of the Corporate Tax Act provides that "the scope of domestic source income under Article 122 (7) 1 of the Decree shall include compensation for delay or damages under the following subparagraphs, which is paid by a foreign corporation having no domestic place of business due to trading business (export). 1. Compensation for delay arising from a violation of the term of time for the delivery and designation of goods under the supply contract, which is paid pursuant to the said provision, shall be the compensation for delay 2. Commercial activities; however, it does not have a legal effect as a guidance within the tax authority; however, the above compensation under the basic common provisions shall not have a legal effect as a guidance within the tax authority, and there is no ground for further interpretation by expanding it to include the compensation provided in relation to assets in Korea under Article 122 (7) 1 of the Enforcement Decree of the Corporate Tax Act:

In the same purport, the judgment of the court below is just in holding that the damages paid by the plaintiff to the non-party ○○○ cannot be deemed domestic source income, and there is no error in the misapprehension of legal principles as to Article 122 (7) 1 or 8 of the Enforcement Decree of the Corporate Tax Act or in the incomplete hearing. There is no reason to

Therefore, the appeal is dismissed, and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-soo (Presiding Justice)