Whether the German public offering fund is a beneficial owner under the Korea- Germany Tax Treaty

Since the Plaintiff, an asset management company, which received domestic dividend income, is the beneficial owner, the Plaintiff cannot be obliged to pay the secondary tax liability to the Plaintiff in the absence of the primary tax liability.

Article 10 of the Korea- Germany Tax Treaty

2014Guhap54189 Revocation of Disposition of Corporate Tax Imposition

AA Limited Liability Company

BB Head of the Tax Office

April 17, 2015

1. 1. On December 17, 2012, the Defendant revoked all the disposition of imposition of corporate tax, ooo, oo, ooo, oo, oo, oo, oo, 209, corporate tax withheld in the year 2009, oo, oo, oo, and oo, o, o, o, o, o, 2012, which was imposed by the Defendant on the Plaintiff on the December 17, 2012.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. Status of the parties

On November 29, 1966, the Plaintiff was established for the purpose of building rental business, etc. on October 11, 1999, and was dissolved on February 23, 2012 after the German limited liability company (hereinafter referred to as "DD fund") established for the purpose of operating an investment fund under the Investment Law of the Federal Republic of Germany (hereinafter referred to as " Germany"). DD (hereinafter referred to as "CC") was a listed and public model investment fund established under the German Investment Law on October 28, 2002.CC Co. (hereinafter referred to as "CC") was established for the purpose of building rental business, etc. on October 11, 1999, and was engaged in real estate rental business by acquiring a dong building located in oo-guodong on February 23, 2012.

The Plaintiff manages DD Funds and owns 100% of the saidCC’s shares in its own name.

the Commission.

B. Payment of dividend and taxation

During the period from September 2008 to June 2012,CC transferred o,o,o,o, andoo to the German bank account in the name of DD funds, excluding o,o,o,o,o, and oo, which are withheld by applying the limited tax rate of Article 10(2)(a) of the Convention between the Republic of Korea and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (hereinafter referred to as the “Korea- Germany Tax Treaty”).

On December 3, 2012, the defendant excluded the application of the limited tax rate of 5% under Article 10 (2) (a) of the Korea- Germany Tax Treaty, and applied the limited tax rate of 15% under Article 10 (2) (b) of the same Tax Treaty, and on December 3, 2012, the defendant designated the above amount of corporate tax for 2008, o,o,o,o,o, ando, the corporate tax for 2009, o,o, ando, o, o, o, o, o, 2012, the total amount of corporate tax for o, o, o, o, o, o, o, o 202, o, 10, 20, o, 20, o, 20, o, 20, o, 10, 2o o 2, 20, 10, o, 2o o, 30, o.

(c) Procedures of the previous trial;

On March 7, 2013, the Plaintiff, who was dissatisfied with the instant disposition, filed a request for adjudication with the Tax Tribunal on March 7, 2013, but did not receive notice of the decision of adjudication within 90 days, and filed the instant lawsuit on March 2, 2014.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1, 2, 3, 4 and 5 (including paper numbers; hereinafter the same shall apply)

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition is unlawful for the following reasons.

○ The Plaintiff, a corporation that is not a formal corporation, but a corporation that has a substance without the purpose of evading taxes, acquired the shares ofCC and received the instant dividend income, and thus, the beneficial owner of the instant dividend income under the Korea- Germany Tax Treaty is the Plaintiff. Therefore, regarding the instant dividend income, 5% of the limited tax rate should be applied by deeming that the requirements for share ratio of 25% under Article 10(2)(a) of the

○, even if the beneficial owner of the instant dividend income is a D fund, the purpose of tax evasion is not to avoid because the D fund was acquired in the name of the Plaintiff as it is impossible for the D fund to directly acquire the Magdong stocks due to the restriction under the German Investment Law. The meaning of 'direct possession' under Article 10(2)(a) of the Korea- Germany Tax Treaty does not necessarily mean that only the case where the shareholder is in the position. Accordingly, D funds meet the equity requirement of 25% under Article 10(2)(a) of the Korea- Germany Tax Treaty, and thus, 5% limited

○ The Defendant denied the Plaintiff’s status as the Plaintiff’s CC’s shareholder, and this case’s D Funds

Although tax was imposed by deeming the Plaintiff as the beneficial owner of the dividend income, the Plaintiff deemed the oligopolistic shareholder ofCC and imposed the secondary tax liability. Such Defendant’s attitude is in itself contradictory.

Therefore, the collection disposition of the instant case on a different premise is unlawful, and the instant disposition of this case, which was conducted accordingly, is also unlawful.

B. Relevant statutes and the articles of incorporation

As shown in the attached Form (including the German Investment Law, the German Corporate Tax Law, the Korea- Germany Tax Treaty).

(c) Fact of recognition;

1) The Plaintiff, as a asset management company, manages real estate funds or infrastructure funds, etc. and provides investment advisory services related thereto. The size of assets as of December 31, 2010 is equivalent to 66,712,110 U.S. (including stocks and non-determined interest rates) and the profits from which a corporate tax return was filed in 2010 are 219,345,939.

2) AD Fund is exempted from corporate tax and business tax on its income in accordance with the German Investment Law, and distributes profits generated by managing its assets to investors. On the other hand, DD Fund was certified as a resident of Germany on November 30, 201 that it constitutes a German resident under Article 4 of the Korea- Germany Tax Treaty.

3) As to the instant dividend income, DF reported the instant dividend income to the German tax authorities.

4) The instant dividend income was deposited into the account in the name of the D Fund. The said account is the Plaintiff’s account that was opened by the Plaintiff on behalf of the D Fund on September 25, 2002. On the other hand, Magdong stated “the amount received” column as “the Plaintiff who was represented by the D Fund” when transferring it to the said account.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 7 through 17 (including virtual number), the purport of the whole pleadings

D. Determination of illegality of the instant collection disposition and disposition

1) Relevant statutes

A foreign corporation is liable to pay corporate tax only if there is a domestic source income (Article 2(1)2 of the Corporate Tax Act), and a person who pays a certain amount of domestic source income to a foreign corporation is liable to withhold the relevant corporate tax (Article 2(5) and Article 98(1) of the Corporate Tax Act). Meanwhile, according to the Korea- Germany Tax Treaty, a corporation which is a resident of a Contracting State may impose a tax on dividends paid by a resident of the other Contracting State to a resident of the other Contracting State (Article 10(1) of the Korea- Germany Tax Treaty), and a tax may be imposed on such dividends in accordance with the laws of the other Contracting State which is a resident (Article 10(2) of the Korea- Germany Tax Treaty). However, if a corporation which pays dividends is a resident of the other Contracting State directly holding at least 25% of the capital of the corporation that pays dividends, it may not be imposed more than 5% of the total amount of dividends (Article 2(2)(a)) and in all other cases, it cannot

2) Determination

A) Concept of beneficial owner

In order to apply 5% of the limited tax rates under Article 10(2)(a) of the Korea-Japan Tax Treaty, the beneficial owner shall meet certain equity requirements, and there is no definition provision in the Korea- Germany Tax Treaty or domestic law, etc. with respect to the meaning of the beneficial owner: Provided, That the concept of the beneficial owner is explained in the main text of the "Tax Treaty on Income and Capital" established by the Organization for Economic Cooperation and Development (hereinafter referred to as the " OECD") and the "Tax Treaty" model on Income and the "Tax Treaty on Income and Capital" (hereinafter referred to as the "Tax Treaty"), and the OECD Model Treaty note does not generally recognize international law.

It is the standard of interpretation that recognizes international authority on the tax treaty concluded between Korea and Germany, and the Korea- Germany Tax Treaty was also concluded by referring to the OECD Model Treaty, so it can also be referred to in interpreting the concept of beneficial owner as defined in the Korea- Germany Tax Treaty.

First of all, the OECD's 12.1 as amended on November 27, 1987, proposed that the concept of "beneficial owner" in Article 10 is not used in a narrow mechanical sense, but should be understood within the context and purpose of the Convention including the prevention of double taxation, the prevention of tax evasion and the avoidance of tax evasion, and the scope of "beneficial owner" in a simple authorized person or manager, and should be used in order to prevent abuse of a tax treaty. The OECD Model Treaty note amended in 2003, reflected the above report's position in Article 10 subparagraph 12, Article 11 subparagraph 8, and Article 12 subparagraph 4, and included the concept of "beneficial owner" in Article 10 in Section 12.1 of the Convention as an agent for the prevention of abuse of a treaty, and any person who has no additional authority to prevent the concept of "beneficial owner" in addition to the scope of "beneficial owner" in the Convention as an agent for the prevention of abuse of a treaty.

Meanwhile, the principle of substantial taxation under Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 11845, May 28, 2013) applies to the interpretation and application of a tax treaty having the same effect as that of the Act, unless there are special provisions excluding it (see, e.g., Supreme Court Decision 2010Du11948, Apr. 26, 2012).

Considering that the concept of “beneficial owner”, among the contents of the OECD Model Agreement note as seen above, was introduced to prevent tax avoidance and tax evasion, and the principle of substantial taxation under the Framework Act on National Taxes is also applied to the interpretation of the tax treaty, the actual subject of income under the principle of substantial taxation is the taxpayer, and the taxpayer is ultimately the beneficial owner under the tax treaty. Therefore, the beneficial owner under Article 10(2)(a) of the Korea-U.S. Tax Treaty refers to a legal entity, which is a resident, who is ultimately liable for comprehensive tax payment as the subject of actual income attribution. In particular, whether a German nationality organization is a beneficial owner, as a legal entity under the Korea-U.S. Tax Treaty, depends on whether it bears comprehensive tax liability such as corporate tax under the German tax law.

B) A beneficial owner of the instant dividend income

Considering the following circumstances that are recognized by comprehensively taking into account the purport of the entire pleadings, the beneficial owner of the instant dividend income is the Plaintiff. Therefore, the withholding tax rate for the instant dividend income falls under 5% pursuant to Article 10(2)(a) of the Korea- Germany Tax Treaty, and the instant collection disposition not premised on it is unlawful, and the instant disposition of imposition on the premise thereof is also unlawful.

According to the German Investment Law, the property belonging to the fund is owned by the asset management company.

An investor is jointly owned (Article 30), and an asset manager has the right to dispose of the property that belongs to his/her own name and exercise the right to exercise the right to property belonging to the Fund (Article 31). According to the Plaintiff’s articles of incorporation, the Plaintiff purchases and manage the property in its own name on behalf of the investors. The Plaintiff has the right to determine whether to sell the shares of a real estate company and to sell such property

○ As an asset management company established around 1966, the size of assets in the year 2010 is equivalent to 66,712,110, and among profits that had been reported as corporate tax in 2010, the asset management commission was 219,345,939.

The Plaintiff acquired the shares ofCC in the name of Dosan by using the assets of the DD Fund. According to the German Investment Law, DD Fund cannot acquire the shares ofCC in its name. In accordance with the German Investment Law and the articles of incorporation, the Plaintiff may dispose of and exercise the shares ofCC. The Plaintiff was paid dividends fromCC to the account in the name of the DD Fund, but there was a right to withdraw the account.

○ Meanwhile, the Defendant imposed the instant tax disposition on the premise that the Plaintiff is liable for the secondary tax liability as an oligopolistic shareholder ofCC. The secondary tax liability ought to be borne by the Plaintiff as of the date of establishment of the tax liability by exercising the rights to stocks owned as an oligopolistic shareholder or at the position of exercising such rights (see, e.g., Supreme Court Decision 2008Du983, Sept. 11, 2008). Since the instant tax collection disposition was conducted on the premise that the Plaintiff’s shareholder denies the actual attribution of dividends profits, the instant tax disposition and the instant tax collection disposition are inconsistent

Considering the above circumstances, it is difficult to deem that the Plaintiff acquired the shares ofCC in its own name and received the dividend in the account of DD Funds for the purpose of tax avoidance. The Plaintiff is the beneficial owner of the instant dividend income, as a shareholder ofCC, who actually belongs to the dividends.

3. Conclusion

Therefore, the plaintiff's claim of this case is accepted due to the reasons, and it is so decided as per Disposition.