2020du396555 Revocation of revocation of revocation of corporate tax rectification

TS engineering Co., Ltd. (trade name before change: Recesser Co., Ltd.)

Law Firm LLC (LLC) LLC, Counsel for the defendant-appellant

Attorney Kim Dong-soo et al., Counsel for defendant

Head of Ansan Tax Office

Law Firm Baz, Counsel for the plaintiff-appellant

Attorney Seo-ho et al., Counsel for the defendant-appellant

Suwon High Court Decision 2019Nu11923 decided April 29, 2020

July 29, 2021

The judgment below is reversed, and the case is remanded to Suwon High Court.

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

1. Whether Article 11 subparag. 9-2(a) (hereinafter “instant Enforcement Decree provision”) of the former Enforcement Decree of the Corporate Tax Act (Amended by Presidential Decree No. 29529, Feb. 12, 2019) becomes invalid (ground of appeal No. 1)

A. A. An order of law is objectively determined by comparing not only the form and content of a directly delegated provision of law, but also the overall structure and purpose of the law, with the following statutory orders, which have established the scope of delegation or limits objectively, by taking into account not only the form and content of the directly delegated provision of law, and also the overall structure and purpose of the law. If the content of an order of law is deemed within the scope of delegation or where it is deemed clear that the content of the order is stipulated within the scope of delegation of law as above or is stipulated in detail, the order of law does not become null and void (see, e.g., Supreme Court en banc Decision 2016Du43411, Jun. 18, 2020). Furthermore, one of the important criteria for determining whether a provision of the Enforcement Decree goes beyond the scope of delegation of the mother law is predictability. This means that the pertinent provision of the Enforcement Decree already specifically delegated by the mother law itself belongs to the scope of prediction of the contents delegated by the mother law itself. Such predictability is not determined with only one of the pertinent provision, but ought to be determined systematically and systematically based on the legislative intent (see, etc.

B. Article 15 (1) of the former Corporate Tax Act (amended by Act No. 16008, Dec. 24, 2018; hereinafter the same shall apply) provides that "the amount of profit shall be the amount of profit generated from transactions which increase the net assets of the relevant corporation except as otherwise provided for in this Act, such as payment of capital or financing and the amount of profit," and Paragraph (2) of the same Article provides that "where securities are purchased from an individual who has a special relationship under Article 52 (1) at a price lower than the market price under paragraph (2) of the same Article, the amount equivalent to the difference between the market price and the purchase price thereof (only subparagraph 1)," "amount equivalent to the amount of foreign corporate tax under Article 57 (4) (only applicable to the case of tax credit)," "amount of income allocated pursuant to Article 100-18 (1) of the Restriction of Special Taxation Act (subparagraph 3)," and Paragraph (3) of the same Article provides that "necessary matters concerning the scope, classification, etc. of profit under paragraph (1) shall

Article 28(1)4(b) of the former Corporate Tax Act, which is not recovered as one of the profits pursuant to Article 15(1) of the former Corporate Tax Act until the special relationship under Article 87(1) becomes extinct, and interest thereon under the former Enforcement Decree of the same Act (referring to provisional payment, etc. prescribed by Presidential Decree, which is paid to a related party without connection with the business of the juristic person; hereinafter referred to as "provisional payment, etc."). However, there are extenuating circumstances prescribed by Ordinance of the Ministry of Strategy and Finance, such as where it is impossible to recover due to disputes over bonds and debts.

Meanwhile, Article 67 of the former Corporate Tax Act provides that "the amount included in the calculation of earnings when filing a report on the corporate tax base on the income for each business year pursuant to Article 60 or when determining or revising the corporate tax base pursuant to Article 66 or 69 shall be disposed of as bonus, dividend, other outflow, internal reservation, etc. to the person to whom such income belongs, as prescribed by Presidential Decree."

C. Examining the structure and content of the foregoing provision in light of the foregoing legal doctrine, it is difficult to deem that the instant provision exceeded the scope of delegation under Article 15(3) of the former Corporate Tax Act, thereby violating the principle of no taxation without law. The reasons are as follows.

(1) It is reasonable to view that the matters delegated by Article 15(3) of the former Corporate Tax Act include not only the gross income as stipulated in paragraph (1), but also the matters deemed as gross income on the grounds of tax policy for disposal of income.

In Section 1 of Chapter II, the former Corporate Tax Act provides for the tax base of corporate tax for each business year of a domestic corporation and the calculation thereof. Section 1 (Common Provisions) provides for the tax base under Article 13, the income for each business year as an element constituting the tax base under Article 14, and Section 2 (Calculation of Gross Income) provides for the scope of earnings under Article 15, Articles 16 through 18-3, and the amount of profits generated from transactions that increase the net assets of the relevant corporation, but it specifically provides for the exclusion from earnings under Article 15(1) due to reasons for tax policy.

Of those stipulated under Article 15(2) of the former Corporate Tax Act, subparagraphs 1 and 3 fall under “the amount of profit arising from transactions which increase the net assets of the relevant corporation” but the time of attribution under the said provision appears to be the time of occurrence of the relevant cause under the said subparagraph. It is not clearly distinguishable from the gross income under paragraph (1). There is no ground to deem that the purpose of Article 15(2) of the former Corporate Tax Act is to limit the scope of gross income to the amount of gross income under the said provision even though it is not the gross income under paragraph (1). Furthermore, how to determine the scope of gross income can vary depending on various changes such as economic conditions or corporate policy of the State, such as financial market or real economic situation, so it is impossible or inappropriate to regulate the scope by all Acts enacted by the National Assembly.

Considering the regulatory structure and contents of the former Corporate Tax Act, and the need to delegate the scope of earnings to the administrative legislation, Article 15 of the former Corporate Tax Act comprehensively sets forth the scope of earnings, which serve as the basis for calculating income for each business year, which constitutes the corporate tax base, and Article 15 of the former Corporate Tax Act provides for the purport that paragraph (3) is to be flexibly set forth in the Presidential Decree, not only as well as as as as as as as as as as as as for

Before being amended by Act No. 5581 on December 28, 1998, Article 9(2) of the Corporate Tax Act provides that “The term “gross income” means the amount of profits generated from transactions which increase the net assets of the corporation, except as otherwise provided for in this Act, except for the payment of capital or financing and the amount of financing,” and provided for in Article 9(2) of the Corporate Tax Act, and there was a separate delegation provision under Article 15(3) only with the amendment that did not provide for delegation of the scope, etc. of the gross income. Even though the Corporate Tax Act adopts the so-called net asset increase theory, it is reasonable to set aside separate delegation provisions on the scope, etc. of the gross income as well as the gross income as provided for in paragraph (1) of this Article, even if it adopts the so-called net asset increase theory

Article 67 of the former Corporate Tax Act provides that the amount included in the calculation standard of corporate tax shall be disposed of to the person to whom the income is attributed when filing a report, determination, or correction on the tax base of corporate tax. Therefore, in cases where the tax authority disposes of the income of a corporation out of the company to the person to whom such income is attributed, the amount equivalent to such income should be included in the calculation of the corporation's gross income. However, in cases where such income does not fall under the original gross income under Article 15 (1) of the former Corporate Tax Act, it is necessary to include such income in the calculation of the corporation's gross income. As long as Article 15 of the former Corporate Tax Act is a general provision that comprehensively sets the scope of the gross income, it is sufficiently predicted that

(2) The instant provision is deemed to be within the scope of delegation under Article 15(3) of the former Corporate Tax Act.

The enforcement decree of this case is based on the premise that the corporation actually renounced its claim or exempted its obligation and the amount equivalent to the claim was out of the company, and the amount equivalent to the claim was included in the corporation's gross income in the case where the corporation did not recover the provisional payment or its interest related to the business from the date of termination of the special relationship without justifiable grounds.

Article 15(3) of the former Corporate Tax Act provides that a corporation’s provisional payment, etc., which is not recovered by the date of termination of special relationship without justifiable grounds, does not constitute gross income under Article 15(1) of the former Corporate Tax Act, but is deemed to be gross income on the grounds of tax policy for disposal of income, and is included in the scope of delegation under Article 15(3) of the former Corporate Tax Act. Therefore, this case’s enforcement decree can only be deemed to clearly state the delegated intent within the scope of delegation under

D. Nevertheless, the lower court determined that the instant provision was invalid beyond the scope of delegation under Article 15(3) of the former Corporate Tax Act. In so doing, the lower court erred by misapprehending the legal doctrine on the no taxation without representation, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment

2. Conclusion

The judgment of the court below is reversed without examining the remaining grounds of appeal, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Noh Jeong-hee

Justices Kim Jae-hyung

Justices Ansan-chul

Justices Lee Dong-gu