Future sett Capital Co., Ltd. (Law Firm Jeongyang, Attorneys Kim Song-Gyeong et al., Counsel for the defendant-appellant)

The director of the tax office

March 27, 2014

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposing corporate tax of KRW 1,678,25,740 for the year from April 1, 2008 to March 31, 2009 against the Plaintiff on August 6, 2012, which exceeds KRW 6,163,370, among the disposition of imposing corporate tax of KRW 1,678,25,740, shall be revoked.

1. Details of the disposition;

A. The Plaintiff was established on June 4, 1997 and invested in new technology enterprises. The Plaintiff registered new technology venture capital business with the Financial Services Commission on November 12, 1999 pursuant to Article 3(1) of the Specialized Credit Financial Business Act.

B. The Plaintiff holds shares of the future set-up securities company (hereinafter “US Securities”). The Plaintiff received dividends of KRW 22,128,973,500 from future set-up securities in 2007 and 2008.

7,83,726,50,500,5737,7887,468,468,57,468,47,540, 208 ( excessive amount of losses) 14,75,757,247,000,005,000,000,003,606, 207, 207, 207, 207, 207, 205, 1540 (over amount of losses) to be excluded from the gross income (in dispute amount) to be excluded from the gross income (in April 1, 2007, from March 31, 2008 to March 1, 2008, 14,75,247,005, 77,000,0057, 777,377,6237,606, 606, 3604,7787,56867

In accordance with the proviso of Article 18-2(1)4 of the former Corporate Tax Act (amended by Act No. 9267, Dec. 26, 2008; hereinafter “Act”), the Plaintiff calculated “a certain amount of the equity investment amount (hereinafter “re-investment amount”) in an affiliate company’s equity investment in the affiliate company shall not be included in the amount of non-inclusion of gross income, but in the amount of non-inclusion of gross income (hereinafter “contributed amount”), and reported corporate tax.

C. The director of the Seoul Regional Tax Office shall conduct an integrated investigation of corporate tax against the plaintiff, and the proviso to Article 18-2 (1) 4 of the Act cannot be applied because the plaintiff is a corporation that is not a holding company, and the amount of re-investment pursuant to Article 18-3 (1) 4 of the same Act shall be determined to be "amount of reduction", and the defendant shall be notified of the amount of non-Inclusion in gross income by re-Calculation of the amount of the issue on August 10, 2012. The defendant shall add the amount of August 10, 2012 to gross income, and the business year 2007 shall not have an excessive amount of the corporate tax, but shall have imposed corporate tax of KRW 1,678,25,740

D. On June 28, 2013, the Plaintiff appealed and filed an appeal, and received a decision of dismissal from the Tax Tribunal.

[Ground of recognition] The descriptions of Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 and 2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Article 18-3 (1) 4 of the Act (Article 18-3 (1) of the Act) shall apply mutatis mutandis to the provision on exclusion of import dividends for a holding company from gross income (Article 18-2 (1) 4 of the Act). Article 18-3 (1) 4 of the Act is not only the main sentence of Article 18-2 (1) 4 of the Act, but also the proviso to Article 18-2 (1) 4 of the Act, which does not deduct the amount of re-investment from gross income, shall also apply mutatis mutandis to the provision on exclusion of import dividends for a general corporation (Article 18-3 (1) 4 of the Act).

B. Relevant statutes

Attached Form. The entry in the relevant statutes is as follows.

(c) Fact of recognition;

1) The Monopoly Regulation and Fair Trade Act (hereinafter “Mono Regulation Act”) was amended by Act No. 5813 on February 5, 199, allowing the establishment of a holding company. In the case of a holding company, dividends received from its subsidiaries are its main revenues. In order to support the smooth establishment and operation of the holding company by adjusting and eliminating double taxation on the dividend income of the holding company, Article 18-2 (Non-Inclusion of Holding Company’s dividend income in the gross income amount) of the Act on December 28, 199 was newly established. Article 18-2 (1) 4 of the Monopoly Regulation and Fair Trade Act (hereinafter “Mono Regulation Act”) decided to deduct the amount of re-investment calculated by reflecting the re-investment ratio from the gross income amount in the case of re-investment by a holding company’s subsidiaries in order to restrain the vertical expansion by chain investments.

2) On December 29, 200, Article 18-3 (Non-Inclusion of the dividend amount of a general corporation in gross income) of the Act was newly established in order to promote the equity of taxation between the holding company and the general corporation by introducing the double taxation adjustment system with respect to the dividend received by the general corporation. There was no provision that deducts the amount of re-investment from the gross income at the time of its establishment.

3) Upon amendment on December 29, 200, Article 18-2(1)4 of the Act, in consideration of the granting of holding of a second-tier company under the Financial Holding Companies Act, exclusion from gross income was allowed in cases where a subsidiary of a financial holding company re-invested to a second-tier company. Moreover, on December 31, 2001, in cases where a subsidiary of a financial holding company is an institutional investor, exclusion from gross income was allowed in cases where a subsidiary of a financial holding company is an institutional investor. On December 30, 2003, exclusion from gross income was allowed even in cases where a subsidiary under the Monopoly Regulation Act made an investment in a

4) As amended on December 31, 2005, Article 18-3(1) of the Act, Article 18-3(1)4 of the Act, which deducts the amount of re-investment from the amount of gross income when a subsidiary of a general corporation re-investment in an affiliate company, was newly established.

5) In order to repeal a regulation unrelated to the original purpose of the system for the exclusion of double taxation for non-taxation, a corporate dividend for imports, which was revised on December 26, 2008, all of Articles 18-2(1)4 and 18-3(1)4 of the Act, which had to deduct re-investment amounts when calculating the amount of non-investment for imports dividends, were deleted.

[Ground of recognition] The entry of Gap evidence No. 3 and the purport of the whole argument

D. Determination

Considering the following circumstances, the proviso to Article 18-2 (1) 4 of the Act cannot be deemed as being applied mutatis mutandis to Article 18-3 (1) 4 of the Act.

1) The proviso to Article 18-2 (1) 4 (a) of the Act excludes from the deduction of the amount of re-investment in cases where a subsidiary under Article 2 (1) 1-3 of the Monopoly Regulation Act has invested in a second-tier subsidiary as determined by the Fair Trade Commission. Article 2 (1) 1-3 of the Monopoly Regulation Act and Article 2 (3) of the Enforcement Decree of the same Act stipulate that a subsidiary is an affiliated company of a holding company, whose largest shareholder is equal to or greater than the shares held by the holding company among related parties, and whose business is controlled by the holding company. Article 2 (1) 1-4 of the Monopoly Regulation Act, Article 2 (4) of the Enforcement Decree of the same Act is defined as a domestic company whose business has been controlled by the holding company. A second-tier subsidiary is an affiliated company of a subsidiary, whose shares are equal to or greater than those held by the

The proviso of Article 18-2 (1) 4 (b) of the Act provides that “Where a subsidiary under Article 2 (1) 2 of the Financial Holding Companies Act has invested in a second-tier subsidiary under subparagraph 3 of the same paragraph, such subsidiary shall be excluded from the deduction of the amount of re-investment in gross income.” Article 2 (1) 2 of the former Financial Holding Companies Act (amended by Act No. 9788, Jul. 31, 2009) defines “subsidiary” means a company controlled by a financial holding company, and subparagraph 3 of the same Article means a company controlled by a second-tier subsidiary.

Article 18 (1) 4 (proviso) (c) of the Act excludes from the deduction of the amount of re-investment in deductible expenses, “Where a subsidiary under the provisions of Article 2 (1) 2 of the Financial Holding Companies Act falls under an institutional investor prescribed by the Presidential Decree”. Article 17-2 (8) of the Enforcement Decree of the Act provides that securities finance companies, etc. which obtained permission under the Securities and Exchange

As such, the proviso of Article 18-2(1)4(a), (b), and (c) of the Act stipulate that a subsidiary company under the Monopoly Regulation Act and the Financial Holding Companies Act shall be excluded from deducting the amount of re-investment from the amount of gross income, only in cases where it is an institutional investor.

2) The term “applicable mutatis mutandis under the legislative method is to apply mutatis mutandis where necessary in the manner described in the legislative technology. Article 18-3(1)4 of the Act is to apply mutatis mutandis to the provisions concerning subsidiaries of a general corporation, and there is no room for application of the proviso to Article 18-2(1)4 of the Act, the Monopoly Regulation Act, the Monopoly Regulation Act, and the Financial Holding Companies Act, the provisions pertaining to subsidiaries under the Financial Holding Companies Act.

3) As revealed in the amendment history, the proviso of Article 18-2(1)4(a), (b), and (c) of the Act are as follows: (a) as the Financial Holding Companies Act and the Monopoly Regulation and Fair Trade Act allow re-investment, the provisions of Article 18-2(1)4(a) and (c) of the Act include the amount of re-investment in gross income on the grounds that there is no reason to deduct the amount of re-investment from the amount of non-Inclusion in gross income. As regards a general corporation’

4) Article 18-3(1)4 of the Act provides that “the provisions of Article 18-2(1)4 shall apply mutatis mutandis to “the provisions of Article 18-2(1)4” shall apply mutatis mutandis to the calculation method of the amount of re-investment by a subsidiary, like Article 18-2(1)4, in consideration of the amount invested by the corresponding subsidiary in an affiliate.”

5) If the Plaintiff asserts that “if a general corporation’s subsidiary is an institutional investor,” it is intended to include only “if the subsidiary of the general corporation is an institutional investor,” the corresponding part is only an additional provision under the proviso of Article 18-3(1)4. There is no room to apply mutatis mutandis, and there is no reason to believe that the provisions of Article 18-2(1)4 that include both (b) and (b) shall apply mutatis mutandis.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Kim Jong-jin (Presiding Judge)