In a case where English Order Kamando limited partnership Eul, Eul, Eul, Eul, Eul, Eul, Eul, 100% investment of 10% of the Belgiumn country corporation, Byung established a corporation of Belgiumn country, and Byung received dividends from other investors and domestic corporations, and the tax authority imposed corporate tax on Gap on the withholding agent by deeming Gap as the actual owner of dividend income, the case affirming the judgment below that the above dividend income is actual owner of Gap, and Gap constitutes a foreign corporation under the former Corporate Tax Act and becomes subject to corporate tax.

The case affirming the judgment below which held that, in the case where Gap, a limited partnership of the United Kingdomndo, is a corporation Eul, Eul, a corporation of Luxembourg, Eul, a corporation of 100% of Belgium, Byung, a corporation of Belgium established by investing 100% of Belgium, and Byung established a domestic corporation's business through joint venture with other investors and takes over the business part of other domestic corporations, and it paid dividends to Belgium by applying the limited tax rate stipulated in the Convention between the Republic of Korea and Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, on the ground that Belgium was a corporation of Belgium, and the tax authorities imposed corporate tax on non-corporate tax on Gap by applying the domestic withholding tax rate on dividend income under the tax law on the ground that Belgium is a corporation with actual attribution of dividend income, and the above dividend income is merely a nominal corporation and substantial attribution of Gap, and Gap is not a partner of the corporation's own investment and investment limited liability for 20% of the former Corporate Tax Act, and it is not a partner or partner of the investment limited Liability.

Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007); Articles 10 and 13(3) of the Convention between the Republic of Korea and Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income; Article 119 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005); Article 93 of the former Corporate Tax Act (amended by Act No. 7838 of Dec. 31, 2005)

Indonesdo Co., Ltd. (Attorneys Son Ji-yol et al., Counsel for the defendant-appellant)

The Director of the National Tax Service

Daejeon High Court Decision 2010Nu755 decided October 28, 2010

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the grounds of appeal Nos. 1, 2, and 4

A. The substance over form principle under Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007) refers to the person to whom the property belongs, not the nominal owner on the ground of type or appearance, if there is a person to whom the income, profit, property, transaction, etc. belongs differently from the nominal owner, and thus, the nominal owner of the property is not the person to whom the property belongs, but the person to whom the property belongs actually controls and manages it through the control, etc. over the nominal owner, and where the disparity between the nominal owner and the real owner arises from the purpose of tax evasion, the income on the property shall be deemed to have been reverted to the person who actually controls and manages the property and shall be the person to whom the property belongs (see Supreme Court en banc Decision 2008Du8499, Jan. 19, 2012). This principle applies to the interpretation and application of a tax treaty having the same effect as this Act, unless there is any special provision (see, 2012.4.108Du.

B. The court below found the following facts based on the adopted evidence.

① In the future, a research and analysis of each country’s tax system, tax treaties, etc. to maximize the benefits of non-taxation, tax exemption, or exemption from investment profits in Korea, and to maximize the profits therefrom, which is a limited partnership in the UK-gun Islands (hereinafter “CVC Asian”), MHN Lxemburg S.R.L. (hereinafter “MHN Luxembur”), which is a 100% invested 10%, and MHN Luxemburg. (hereinafter “MHN Luxembur”), and MHN Luxemburg, which is a Luxembourg-based corporation, established a Belgium (hereinafter “Belgium”) on October 18, 199 by investing 10% in 10%, and MHN MHN Lxemburg.

② After that, Mando Holdings constituted a consortium with UBS Capital B.V., PPMV No. Domins LLC., on October 26, 199, constituted the Plaintiff, a domestic corporation, by taking over the part of the Ado Machinery Business Headquarters (hereinafter “instant business section”). During that process, Nonparty 1, who is an investment manager of CVC Asia, signed various reports and contracts related to the acquisition of the instant business part, signed by the CVC Capital Capital B.V., PPMV No. Domins, and signed a contract with the Party to the instant underwriting contract, and concluded the acquisition agreement with the Party to the instant underwriting contract, and subsequently, it was concluded that CVA entered into the acquisition agreement with the Party to the instant underwriting contract, and that it was finalized immediately before the acquisition of the terms and conditions.

③ At the time of acquisition of the business part of the instant case, the CVC Asian Asian offered the investors’ share amount.

④ CVC Asia ordered the Plaintiff to immediately transmit dividends from the e-mail drawn up on May 2001 to the account of Manddo Hrings to the account of CVC Asian. However, on October 201, 2001, Nonparty 2, a law firm of Belgium, directly transfers dividends to the account of CVC Asian, but it is effective for Nonparty 2, an attorney-delivery affiliated with theO, to directly transfer dividends to the account of CVC Asian, but, on the other hand, Manddo H holding was likely to be treated as a Doc Asian company, consulted to do so via the account of Manddo Hrings.

⑤ Directors of Mando Hrings consisting of Nonparty 3, 4, and 53. However, Nonparty 3 is a director who exercises overall control over investment in Japan and Asian regions under the jurisdiction of the Investment Advisory Company located in Hong Kong. Nonparty 4 is a director of CVC Luxbourgs, and Nonparty 5 is a managing director of CVC Capital Capital N.V.

6) The address of Manddo Hrings is the non-party 6's telephone number, who is an employee of the CVC Capital Capital Part N.V. (Berux) and was recorded in the D&B inquiry data of Manddo Hrings. The telephone number is also the non-party 6's telephone number, who is the employee of the N.V.. In addition, the assets of Manddo Hrings are most the Plaintiff's shares, and there is no fact that the labor cost and the business cost necessary for the operation of the business have been paid.

7) The Plaintiff paid 5,601,960,00 won as dividends in 2004 as dividends in 200, and 3,781,323,000 won as dividends in 205 (hereinafter “each dividend income in this case”) and paid 527,534,223 won as corporate tax on each dividend income in this case by applying the limited tax rates under Article 10 of the Convention between the Republic of Korea and the Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income on the grounds that Manddo is a corporation located in Belgium (hereinafter “Korea-Belgium Tax Treaty”).

④ Meanwhile, on November 25, 2005, Manddo Holdings acquired the instant capital gains by transferring the Plaintiff’s stocks (hereinafter “instant stocks”) held by 40,185,000,000, which are domestic corporations, to KRW 40,185,000. However, on the grounds that income from the transfer of stocks pursuant to Article 13(3) of the Korea-Belgium Tax Treaty was imposed only on the country of residence of the transferor, Mando Holdings did not withhold corporate tax when paying the instant stocks to Mado Holdings solely on the ground that the transferor’s income from the transfer of stocks was taxable only in the country of residence. Thereafter, Mando Holdings was merged with the Plaintiff on February 7, 2006.

9) Accordingly, on July 12, 2007, the Defendant: (a) was merely a nominal company established for the purpose of tax avoidance; (b) the instant dividend income and capital gains, which is a Belgium-based corporation and Luxembourg-based Luxembourg-based Luxembourg-based corporation, cannot be the actual owner of each of the instant dividend income and capital gains; and (c) as a limited partner in Belgium-gun-do, established for the purpose of tax avoidance, is the actual owner of each of the instant income; and (c) the Korea-Belgium-based Tax Treaty cannot be applied in relation to each of the instant income; (b) on the grounds that the Korea-Belgium-based Tax Treaty cannot be applied to the Plaintiff, each of the instant dividend income belonging to the Plaintiff for the business year 2004 as the corporate tax withheld at source; and (c) as the corporate tax withheld at source 4,018,500,520,000 won reverted to the Plaintiff, each of the instant tax notice was issued to the Plaintiff.

C. Based on the aforementioned factual basis, the lower court: (a) premised on the premise that the principle of substantial taxation may be used as the criteria for interpreting and applying the provisions of the tax treaty; and (b) determined that Mando Holdings, a Belgium-based corporation, performed only the role of the transaction parties in the form of the acquisition of the instant business portion and the transfer of the instant stocks; (c) the actual entity is CVA; and (d) MHN Lxembourg, a Luxembourg-based corporation, is merely a nominal company; and (e) the disparity between such form and substance arises solely from the purpose of tax avoidance; (b) thus, the actual owner of each of the instant dividend income and capital gains or the beneficial owner of Article 10 of the Korea-Belgium Tax Treaty on each of the instant dividend income shall be deemed CVC Asia; and (c) as long as the said company was established in KB only, the Korea-Belgium

D. Examining the above legal principles, relevant regulations, and records, the judgment of the court below is just and acceptable, and there is no error in the misapprehension of legal principles as to the principle of substantial taxation or the interpretation and application of the Korea-Belgium Tax Treaty or the concept of beneficial owner under Article 10 of the Korea-Belgium Tax Treaty, as otherwise alleged in the ground of appeal.

2. As to the third ground for appeal

A. In a case where an unincorporated association, foundation, or other foreign organization obtains domestic source income as provided in Article 119 of the former Income Tax Act (amended by Act No. 7837 of Dec. 31, 2005) or Article 93 of the former Corporate Tax Act (amended by Act No. 7838 of Dec. 31, 2005), and distributes it to individuals who are partners, if it can be deemed a foreign corporation under the former Corporate Tax Act, the organization shall be liable to pay corporate tax on domestic source income. If it can not be deemed a foreign corporation under the former Corporate Tax Act, a foreign corporation shall be liable to pay corporate tax on the income distributed to each of its members. In this context, as to whether the organization can be deemed a foreign corporation under the former Corporate Tax Act, the income tax shall be imposed on the income amount distributed to each of its members, as well as the location of the head office or main office of the foreign corporation under the former Corporate Tax Act (amended by Act No. 7838 of Dec. 31, 2005).

B. The lower court acknowledged the facts as indicated in its reasoning based on its adopted evidence, and determined that CVC Asia constitutes a foreign corporation under the former Corporate Tax Act and thus is a general partner with unlimited liability and a passive investor with unlimited liability and unlimited liability, who are not actively involved in the fund management, and is responsible only within the investment limit, and is a profit-making organization with a property separate from its members and carries out its own business activities with its own investment purpose, rather than a human combination with strong personal identity of its members, and thus, it is reasonable to deem that it constitutes a foreign corporation under the former Corporate Tax Act and is subject to corporate tax.

C. Examining the reasoning of the judgment below in light of the aforementioned legal principles and records, we affirm the judgment below as just, and there is no error in the misapprehension of legal principles as to the legal nature of limited partnerships, as otherwise alleged in the ground of appeal.

In addition, as long as CVC Asia is a foreign corporation and falls under the actual owner of each of the instant dividend income and capital gains, it is reasonable to impose corporate tax on each of the above income as a taxpayer. Therefore, the argument in the grounds of appeal that CVC Asia should impose income tax on investors, who are members of CVC Asia, as a taxpayer cannot be accepted on different premise.

3. Conclusion

Therefore, the appeal is dismissed, and the 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 Yong-deok (Presiding Justice)