The early appellate court 2014 Mine1367

No grace period for small and medium enterprises shall be applicable.

Before Article 2(5) of the former Enforcement Decree of the Restriction of Special Taxation Act enters into force, the application of the grace period is excluded because a company, which was a small or medium enterprise, does not fall under a small or medium enterprise prior to the enforcement of Article 2(5) of the former Enforcement Decree of the Restriction of Special Taxation Act.

Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act

Article 5 of the Restriction of Special Taxation Act, Article 7 of the same Act, Article 10 of the same Act, Articles 2 and 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, Article 3 of the same Act.

Revocation of Corporate Tax Imposition Disposition

AA

The director of Gwangju Tax Office

October 29, 2015

November 12, 2015

1. The plaintiff's claim is dismissed.

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

Cheong-gu Office

The Defendant’s disposition of imposition of KRW 446,859,246 of corporate tax for the year 2012 against the Plaintiff on November 15, 2013 is revoked.

1. Details of the disposition;

A. The status of the Plaintiff and the BBB

The Plaintiff is a construction company established on May 20, 2003 and settled accounts on December 31 each year. As of December 31, 201 and December 31, 2012, the Plaintiff holds 40% of the shares of BB (hereinafter “BB”) as of December 31, 201, and the sales of the Plaintiff and BB for the business year from 2010 to 2012 are as listed in the following table, and the Plaintiff is subject to external audit pursuant to Article 2 of the Act on External Audit of Stock Companies as of December 2012.

corporate name, 2010 business year 2011 business year 2012

1,028 billion won 88.1 billion won 1,03.6 billion won

BB50 million won 1.2 billion won 11 billion won

B. Plaintiff’s report of corporate tax for 2012 business year

On the other hand, the Plaintiff’s tax privilege exceeding KRW 100 billion for the first time in 2010.

In accordance with the proviso of Article 2(1) of the Enforcement Decree of the Restriction Act (amended by Presidential Decree No. 22583, Dec. 30, 2010) (amended by Presidential Decree No. 23590, Feb. 2, 2012), small and medium enterprises are not small and medium enterprises.

However, the plaintiff filed a corporate tax return for 2012 business year, and the former Enforcement Decree of the Restriction of Special Taxation Act

Pursuant to the main sentence of Article 2(2) of the former Restriction of Special Taxation Act (amended by Act No. 11614, Jan. 1, 2013; hereinafter referred to as the "former Restriction of Special Taxation Act") Article 7, 7-2, and 10 of the former Restriction of Special Taxation Act (amended by Act No. 11614, Jan. 1, 2013; hereinafter referred to as the "former Restriction of

C. Defendant’s imposition of corporate tax

On November 15, 2013, the Defendant: (a) owned at least 30% of the BB shares as of the end of the business year 2012 for external audit; (b) constitutes a related company under Article 2 subparag. 3 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 24638, Jun. 28, 2013; hereinafter referred to as the “former Enforcement Decree of the Framework Act on Small and Medium Enterprises”); and (c) the total turnover of 2012 business year exceeds KRW 10,000,000; and (d) accordingly, the Defendant issued a notice of correction of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; hereinafter referred to as the “former Enforcement Decree of the Restriction of Special Taxation Act”) and the Plaintiff could not be subject to the corporate tax or the additional tax for the business year (hereinafter referred to as “the instant disposition”).

(d) Procedures of the previous trial; and

The Plaintiff dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on February 11, 2014.

However, the Tax Tribunal dismissed the plaintiff's request on February 9, 2015.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, Eul evidence 1, 2, 3, and 5 (including each number), the purport of the whole pleadings

2. The plaintiff's assertion and relevant Acts and subordinate statutes;

A. The plaintiff's assertion

The instant disposition should be revoked on the grounds that it is unlawful for the following reasons.

1) A violation of Article 23(1) of the Administrative Procedures Act

Article 23(1) of the Administrative Procedures Act provides that an administrative agency shall present the basis and reason to the parties when rendering a disposition. However, the Defendant issued the instant disposition in a manner that delivers a notice of payment to the parties, and it is difficult to ascertain whether the Defendant issued the instant disposition on the ground of any provision, as the grounds for the instant disposition is not specified in the notice of payment, etc.

2) The Plaintiff constitutes a small-medium enterprise under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act.

In full view of Article 2(1)3 of the Enforcement Decree of the Restriction of Special Taxation Act and Article 3(1)2(c) of the Enforcement Decree of the former Framework Act on Small and Medium Enterprises, the special tax reduction for small and medium enterprises under the

Article 3 (1) 2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises provides that "the actual independence of a small and medium enterprise shall be appropriate for subparagraph 2 of Article 3 (1) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, i.e., the number of full-time employees calculated pursuant to Article 7-4 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises shall be at least 100 billion won in equity capital, sales shall be at least 100 billion won, or the total assets shall not be at least 50 billion won," and Article 3-3 of the former Enforcement Decree of the Framework Act provides that "the determination of whether a parent company falls under a small and medium enterprise under Article 3 of the same Act shall be based on the number of regular employees of the Plaintiff and BB for the business year immediately preceding the pertinent business year of the Framework Act on Small and Medium Enterprises shall be based on the sales of the Plaintiff for the pertinent business year of 2011 and the sales of BB for the pertinent business year of 201 billion won or more in total.

3) The Plaintiff’s grace period under Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act

small and medium enterprises;

Even if the Plaintiff does not fall under a small or medium enterprise under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act, the Plaintiff was more than sales amounting to KRW 100 billion in the business year 2010, but was subject to the grace period up to 2013 pursuant to the main sentence of Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act. The proviso of Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act applies only to the determination of the first grace period requirement for the small or medium enterprise. As such, even during the grace period, even if it falls under any of the subparagraphs of Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act during the grace period, the Plaintiff shall

4) The Plaintiff constitutes a case where Article 2(5) of the former Enforcement Decree of the Restriction of Special Taxation Act applies.

Article 2 (1) 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises does not constitute a small and medium enterprise under Article 2 (1) 3 of the former Enforcement Decree of the Restriction of Special Taxation Act, or Article 2 (5) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that when applying Article 3 (1) 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises and Article 3 (1) 1 and attached Table 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, if a company falls under a new small and medium enterprise, it shall be deemed a small and medium enterprise, and if the company falls under a small and medium enterprise, it shall be deemed a small and medium enterprise from the taxable year to which the date of the occurrence of the cause falls, and it shall be deemed a small and medium enterprise for the taxable year to which the date of occurrence falls and for the following three years until the following three years, it shall be deemed that Article 3 subparagraph 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises was amended by Presidential Decree No. 21368 of January 1, 201.

It is as shown in the attached Table related statutes.

3. Determination

A. Whether Article 23(1) of the Administrative Procedures Act is violated

Article 3 (2) of the Administrative Procedures Act shall apply to matters falling under any of the following subparagraphs:

Article 3(2)9 of the Enforcement Decree of the Administrative Procedures Act provides that "any matters prescribed by Presidential Decree, such as conscription and call-up under the Military Service Act, entry and departure of foreigners, recognition of refugee status, naturalization, disciplinary action and other measures under the Acts and subordinate statutes related to public officials' personnel affairs, which are deemed difficult or unnecessary due to the nature of the administrative action concerned such as mediation, conciliation, arbitration, finance and other measures, and which are prescribed by Presidential Decree as matters similar to administrative procedures, shall be excluded from the application of the Administrative Procedures Act." Article 2 of the Enforcement Decree of the Administrative Procedures Act based on delegation provides that "matters prescribed by Presidential Decree" means matters falling under any of the following subparagraphs, and subparagraph 5 provides that "matters concerning the imposition and collection of taxes under the tax-related Acts and subordinate statutes."

Considering the overall purport of the arguments in Gap evidence Nos. 2 and 3, the Gwangju Regional Tax Office shall take into account the overall purport of the arguments.

9. On 24. 24. The Plaintiff is an investor holding 40% of BB shares, who fails to meet the standards for small and medium enterprises, and thus, sent a notice of pre-taxation to the effect that the Plaintiff would rectify and notify under-reported corporate tax reduction and exemption. Article 81-15(1)2 of the Framework Act on National Taxes and Article 63-14(2) of the Enforcement Decree of the Framework Act on National Taxes provide that a person who received the notice of pre-taxation may file a request for pre-assessment review, which is an examination of legality of the content notified, with the head of a tax office or the director of a regional tax office who received the notice within 30 days from the date of receipt of the notice. Thus, it is reasonable to deem that the instant disposition is a disposition of imposition and collection of tax that goes through the procedures corresponding to administrative procedures, and the

Therefore, the plaintiff's assertion on this part on the premise that the Administrative Procedures Act applies to the disposition of this case.

shall not be justified.

B. Whether the Plaintiff constitutes a small or medium enterprise under Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act

1) Determination as to whether the relevant company is a related company

The former Restriction of Special Taxation Act provides for special taxation for small and medium enterprises in Section 1 of Chapter II, etc.

Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "The actual independence requirement among those requirements shall meet Article 3(1)2 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises". Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "in applying Article 3(1)2(c) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall not meet the standards under attached Table 1 or shall meet the standards under the proviso of Article 2(1)1 of the former Enforcement Decree of the Restriction of Special Taxation Act". The above provision provides that "If a company is a related company, the number of full-time workers calculated pursuant to Article 7-4 of the former Enforcement Decree of the Restriction of Special Taxation Act shall be less than 100,00 won, total assets shall be less than 10 billion won, total assets shall be less than 20,000,000 won, and it shall be less than 30% of the former Enforcement Decree of the Restriction of Special Taxation Act."

2) Determination as to whether it constitutes a small and medium enterprise

A) In the case of the Plaintiff who is a related company, the sales calculated pursuant to Article 7-4 of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises shall be less than 100 billion won in order to constitute a small and medium enterprise subject to special tax reduction or exemption under the former Restriction of Special Taxation Act. The following is examined as to whether the standard for calculating sales as above will be the end of 2012 business year, which is the pertinent taxable year of the disposition of this case, or will be

B) According to Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act and Article 3(1) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, in order for related enterprises to become small and medium enterprises, the standards by type of business (in the case of construction business, the number of full-time workers of less than 300 or the capital of less than 3 billion won) and the upper limit (in the case of construction business, the number of regular workers of less than 100,000, less than 100,000 won, sales of less than 10,000,000 won, total assets of less than 50,000,000 won) set forth in attached Table 1 shall be satisfied

However, the former Enforcement Decree of the Framework Act on Small and Medium Enterprises only provides for the standards for each type of business subject to the policy to foster small and medium enterprises, but does not impose restrictions on the type of business itself, while the former Restriction of Special Taxation and its Enforcement Decree stipulate the requirements of small and medium enterprises under some provisions of the Framework Act on Small and Medium Enterprises and restrict the application of special taxation from tax policy consideration to a specific type of small and medium enterprises (main sentence of Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act). In addition, the former Restriction of Special Taxation and its Enforcement Decree separately stipulate a provision of suspending the application of special taxation for a certain period of time in cases where a small and medium enterprise becomes no longer a small and medium enterprise due to expansion of its size or modification of the statute (Article 2(2) and (5) of the former Enforcement Decree of the Restriction of Special Taxation Act), and the former Enforcement Decree of the Restriction of Special Taxation and its Enforcement Decree are different from those of the Framework Act on Small and Medium Enterprises (see, e.g., Supreme Court Decision 2013Du1458).

C) Therefore, the determination of whether the Plaintiff constitutes a small or medium enterprise subject to special tax reduction or exemption under the former Restriction of Special Taxation Act should be made pursuant to the former Enforcement Decree of the Restriction of Special Taxation Act, and it is not determined pursuant to Article 3-3 of the former Enforcement Decree of

However, Article 2 (4) of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the number of employees ordinarily employed under the proviso to paragraph (1) and subparagraph 1 of the same paragraph and the latter part of subparagraph 3 of the same paragraph shall be determined by Ordinance of the Ministry of Strategy and Finance," and Article 2 of the former Enforcement Rule of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 322 of Feb. 23, 2013; hereinafter the same shall apply) shall be the number of employees ordinarily employed under the proviso to Article 2 (1) of the former Enforcement Decree of the Restriction of Special Taxation Act, equity capital, sales, and total assets shall be less than 0 billion won after adding the number of employees as of the end of each month of the relevant taxable year to 00 billion won if it appears that the above provisions of the Framework Act on Small and Medium Enterprises stipulate that the above provisions of the former Enforcement Decree of the Restriction of Special Taxation Act shall be applied as of the end of the relevant taxable year."

D) According to Article 7-4 [Attachment 2] of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises, the Plaintiff is a subordinate company.

The Plaintiff’s total sales calculated by the method prescribed in the above [Attachment 2] are subject to direct control and formal control. The Plaintiff’s total sales amount as of the end of the business year 2012, which is the pertinent taxable year of the instant disposition, added up “the Plaintiff’s sales amount as of the end of the business year 2012, multiplied by the Plaintiff’s share ownership ratio to BB and the sales amount as of the end of the business year 2012 of BB,” approximately KRW 104 billion (=6 billion of the Plaintiff’s sales amount for the business year 2012 + approximately KRW 440 million of the sales amount for BB). Thus, it is apparent that the Plaintiff’s total sales amount exceeds KRW 100 billion and it does not meet the criteria prescribed in Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act at the time of the business year 2012.

E) Therefore, the Plaintiff’s assertion on this part is without merit.

C. The Plaintiff’s grace period under Article 2(2) of the Enforcement Decree of the Restriction of Special Taxation Act

whether it constitutes a small and medium enterprise

The plaintiff is a small and medium enterprise grace period under the main sentence of Article 2 (2) of the Enforcement Decree of the Restriction of Special Taxation

Article 2(2) of the Enforcement Decree of the Restriction of Special Taxation Act provides that if a small or medium enterprise falls under the requirements for exclusion from small or medium enterprise under the proviso to paragraph (1) due to expansion of its size, etc. or does not meet the standards for size of small or medium enterprise under paragraph (1) 1, the first taxable year to which the date on which such cause occurred belongs and the next three taxable years shall be deemed small or medium enterprise. The proviso provides that the grace period shall not apply to cases where a small or medium enterprise falls under the conditions for substantial independence under paragraph (1) 3, and that the former Enforcement Decree of the Restriction of Special Taxation Act and the Enforcement Decree of the Restriction of Special Taxation Act provide that the purpose of adopting the standards for a related enterprise shall not be deemed to be a small or medium enterprise actually and, in accordance with such legislative purpose, the benefit of tax reduction or exemption shall not be granted to a small or medium enterprise which is not deemed to be a small or medium enterprise. Accordingly, Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act does not apply to the case where an enterprise falls under the former Enforcement Decree of the Restriction of Special Taxation Act.

Article 2 (5) of the Enforcement Decree of the Restriction of Special Taxation Act ("Enforcement Decree of the Framework Act on Small and Medium Enterprises") 3

The amendment of Article 3 (1) 2 of the Enforcement Decree of the Restriction of Special Taxation Act provides that "if a person is not a small or medium enterprise due to the amendment of Article 2 (5) 2 of the former Enforcement Decree of the Restriction of Special Taxation Act, the term "shall be deemed a small or medium enterprise for the taxable year to which the date of the occurrence of the cause belongs and for the following three taxable years," and Article 1 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that "the date of its promulgation shall enter into force on the date of its promulgation." Thus, Article 3 (1) 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises under Article 2 (5) of the former Enforcement Decree of the Restriction of Special Taxation Act shall apply to cases where Article 3 (1) 2 of the Enforcement Decree of the Restriction of Special Taxation Act of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises enters into force on February 2, 2012 and it does not fall under a small or medium enterprise."

3. Since Article 3 subparag. 2(c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises amended by Presidential Decree No. 21368 and enforced January 1, 2011 does not constitute small and medium enterprises, Article 2(5) of the former Enforcement Decree of the Restriction of Special Taxation Act cannot be applied to the Plaintiff.

Therefore, the plaintiff's assertion that differs from this premise is without merit.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

Judges Park Jae-young

Chief Judge

Judges :

Related Acts and subordinate statutes

former Restriction of Special Taxation Act (Amended by Act No. 11614, Jan. 1, 2013)

Article 5 (Tax Credit for Investment in Small and Medium Enterprises)

(1) Where a national who runs a small or medium enterprise prescribed by Presidential Decree (hereinafter referred to as a "small or medium enterprise") invests (excluding any investment by used goods and by lease prescribed by Presidential Decree) in any of the following assets not later than December 31, 2012, an amount equivalent to 3/100 of the amount of such investment shall be included in the income tax [excluding the income accruing from the real estate rental business under Article 45 (2) of the Income Tax Act; hereinafter the same shall apply except for Articles 126-2 and 132) for the taxable year whereto belongs the date on which such investment is completed:

shall be deducted from taxes or corporate taxes (only applicable to taxes omitted).

Article 7 (Special Tax Abatement or Exemption for Small or Medium Enterprises)

(1) An amount equivalent to tax reduction or exemption calculated by multiplying income tax or corporate tax on income accrued from the relevant place of business by the ratio of reduction or exemption under subparagraph 2 until the taxable year ending on or before December 31, 2014, among small and medium enterprises that engage in the following types of business eligible for reduction or exemption shall be reduced or exempted: Provided, That where the head or principal office of a domestic corporation is located in the Seoul Metropolitan area, all the places of business shall be

1. Types of reduction and exemption;

(g) Construction business;

(2) A national who intends to be governed by paragraph (1) shall apply for reduction or exemption, as prescribed by Presidential Decree.

Article 7-2 (Tax Credit for Improving Corporate Bill System)

(1) Where a national operating a small or medium enterprise has any of the following amount (hereafter in this Article, referred to as the "amount paid for draft, etc.") out of the purchase price paid to a small or medium enterprise by no later than December 31, 2013 (including the purchase price paid to a small or medium enterprise by a national running a business, other than a small or medium enterprise; hereafter the same shall apply in this Article), the income tax (limited to the income tax on business income) or the corporate tax shall be reduced by an amount calculated pursuant to paragraph (2): Provided, That the tax credit shall not exceed 10/100, if the amount deducted exceeds 10/100 of the income tax or the corporate tax for the relevant taxable year

Article 10 (Tax Credit for Research and Human Resources Development Expenses)

(1) Where a national has a research and human resources development expenses for each taxable year, the total of the following amounts shall be deducted from income tax (limited to income tax on business income) or corporate tax for the relevant taxable year. In such cases, subparagraphs 1 and 2 shall apply only to the relevant research and human resources development expenses incurred until December 31, 2015:

1. With respect to research and development expenses for new growth engine industries prescribed by Presidential Decree (hereafter in this Article, referred to as "research and development expenses for new growth engine industries"), an amount calculated by multiplying the research and development expenses for new growth engine industries incurred in the relevant taxable year by 20/100 (30/100 in the case of a small or medium enterprise);

2. With respect to research and development expenses for acquiring source technology prescribed by Presidential Decree (hereafter in this Article, referred to as "research and development expenses for source technology"), an amount calculated by multiplying the research and development expenses for source technology incurred for the relevant taxable year by 20/100 (30/100 in the case of a small or medium enterprise).

3. Research and human resources development expenses of a national who does not fall under subparagraphs 1 and 2 or does not select subparagraphs 1 and 2;

(hereinafter referred to as "general research and human resources development expenses" in this Article) an amount that falls under any of the following items:

(a) Where general research and human resources development expenses incurred in the relevant taxable year exceed the general research and human resources development expenses incurred in the immediately preceding taxable year, an amount equivalent to 40/100 (50/100 in cases of a small or medium enterprise) of the excess amount;

(b) An amount calculated by multiplying the general research and human resources development expenses incurred for the relevant taxable year by the ratio classified as follows:

(a) In cases of small and medium enterprises: 25/100 (hereinafter referred to as "detailed");

The former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; Presidential Decree No. 24368, Feb. 15, 2013)

Article 2 (Scope of Small and Medium Enterprises)

(1) "Small and medium enterprises prescribed by Presidential Decree" in the main sentence of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises engaged in crop cultivation, livestock farming, fishery, mining, manufacturing (including businesses similar to manufacturing business, as prescribed by Ordinance of the Ministry of Strategy and Finance; hereinafter the same shall apply), and (m) public opinion poll business, which meet all the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the number of regular employees is at least 1,00, the equity capital is at least 100 billion won, and the sales amount is at least 100 billion won, or

1. The provisions of attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, which ordinarily employs, capital or sales by business type;

The size of small and medium enterprises (hereafter in this Article, referred to as the "standard for small and medium enterprises") shall not exceed the standard;

2. and 2. Deleted;

3. Actual independence shall meet Article 3 (1) 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises. In such cases, the ownership of stocks under Article 3 (1) 2 (b) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises shall include direct and indirect ownership (excluding indirect ownership through a collective investment scheme under the Financial Investment Services and Capital Markets Act), while Article 3 (1) 2 (c) of the same Decree shall not meet the standards in attached Table 1 or any of the items of paragraph (1) 1 shall not meet the standards in each subparagraph of Article 2 (1) of the Enforcement Decree of the Restriction of Special Taxation Act.

The criteria under the proviso to this paragraph shall be deemed met.

(2) In the application of the provisions of paragraph (1), where a small or medium enterprise falls under the proviso to the part other than the subparagraphs of the same paragraph due to a expansion of its size or becomes not a small or medium enterprise as a result of exceeding the standards under subparagraph 1 of the same paragraph, it shall be deemed that the first reason occurs to the small or medium enterprise and the next three taxable years shall be deemed the small or medium enterprise, and it shall be determined by the small or medium enterprise according to paragraph (1) for each taxable year after the period (hereafter referred to as the "period of grace" in this Article) expires: Provided, That where the small or medium enterprise is not a small or medium enterprise due to

1. Merger with an enterprise other than a small or medium enterprise under the Framework Act on Small and Medium Enterprises;

2. Merger with an enterprise under the grace period;

3. Cases falling under the enterprises other than those referred to in paragraph (1) 3.

4. Where the establishment date exceeds the standards for small and medium enterprises as of the end of the taxable year within two years.

(4) Matters necessary for the calculation of the number of employees, equity capital, capital, sales, total amount of assets, and the ratio of indirectly owned stocks under the proviso to the part other than each subparagraph and subparagraphs 1 and 3 of the same paragraph shall be prescribed by Ordinance of the Ministry of Strategy

(5) In applying paragraph (1), if a company becomes a new small or medium enterprise by amending the provisions of Article 3 (1) 2, attached Tables 1 and 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall be deemed a small or medium enterprise from the taxable year in which such cause occurs to the date it becomes a small or medium enterprise; and if it becomes a small or medium enterprise, it shall be

[Enforcement Date] Article 2 (1) 3 (former part) (limited to subparagraph 2 (c) of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises) and latter part of the Enforcement Date

Addenda No. 23590, 2012

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation: Provided, That the amended provisions of Articles 18, 80-2 (1), 104 (1) 2, 106-3 (5) 7, and 116-28 shall enter into force on March 2, 2012, and the amended provisions of Article 105 (1) shall enter into force on January 1, 2013.

Enforcement Decree of the Restriction of Special Taxation Act (Amended by Presidential Decree No. 22583, Dec. 30, 2010; Presidential Decree No. 23590, Feb. 2, 2012)

Article 2 (Scope of Small and Medium Enterprises)

(1) "Small and medium enterprises prescribed by Presidential Decree" in the main sentence of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises engaged in crop cultivation, livestock farming, fishery, mining, manufacturing (including businesses similar to manufacturing business, as prescribed by Ordinance of the Ministry of Strategy and Finance; hereinafter the same shall apply), and (m) public opinion poll business, which meet all the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the number of regular employees is at least 1,00, the equity capital is at least 100 billion won, and the sales amount is at least 100 billion won, or

3. Actual independence shall meet the provisions of subparagraph 2 (a) through (c) of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises.

In such cases, the ownership of stocks under subparagraph 2 (b) of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises shall include direct and indirect ownership (excluding indirect ownership through a collective investment scheme under the Financial Investment Services and Capital Markets Act), and the ownership exceeding the standards under subparagraph 1 shall be deemed to meet the standards under the proviso to Article 2 (1) of the Enforcement Decree of the Restriction of Special Taxation Act in the application of subparagraph 2 (c) of Article 3 of the same Decree.

(2) In the application of paragraph (1), where a small or medium enterprise falls under the proviso to the part other than the said paragraph due to the expansion of its size, etc. or fails to fall under the small or medium enterprise as a result of exceeding the standards under subparagraph 1 of the said paragraph, it shall be deemed the first taxable year to which the date on which such cause occurred belongs and the three taxable years thereafter, and shall be determined by the relevant taxable year after the said period (hereafter referred to as the "period of grace" in this Article) expires: Provided, That the said period shall not apply where the small or medium enterprise is no longer a small or medium enterprise due to any of the following reasons, the said period shall not apply, and the grace period shall not apply to the enterprise under subparagraph 2 from the taxable year whereto belongs the date of merger:

1. Merger with an enterprise other than a small or medium enterprise under the Framework Act on Small and Medium Enterprises;

2. Where it merges with an enterprise under a grace period;

3. Where it falls under enterprises other than those referred to in paragraph (1) 3.

4. Where the establishment date exceeds the standards for small and medium enterprises as of the end of the taxable year within two years.

(5) In applying paragraph (1), if an enterprise becomes a new small or medium enterprise by amending subparagraph 2 (a) and (b) of Article 3 and attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall be deemed a small or medium enterprise from the taxable year to which the date on which such cause occurs belongs; and if it becomes a small or medium enterprise, it shall

Addenda Presidential Decree No. 22583, and Article 2250

Article 1 (Enforcement Date)

This Decree shall enter into force on January 1, 201: Provided, That the amended provisions of Article 106 (7) 49 shall enter into force on March 1, 201, the amended provisions of Articles 16-2 (2) and 108 (3) through (5) shall enter into force on April 1, 201, the amended provisions of Articles 69 (3) and 69-2 shall enter into force on July 1, 201, and the amended provisions of Article 2 (1) 3 (limited to the part referred to in subparagraph 2 (c) of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises) and the latter part of Article 2 (1) 3 (limited to the part referred to in subparagraph 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises)

January 1 shall enter into force on and after January 1.

Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010)

Article 2 (Scope of Small and Medium Enterprises)

(1) "Small and medium enterprises prescribed by Presidential Decree" in the part other than the subparagraphs of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises engaged in crop cultivation, livestock farming, fishery, mining, manufacturing (including business similar to manufacturing business, as prescribed by Ordinance of the Ministry of Strategy and Finance; hereinafter the same shall apply), and (m) construction business as their main business, which meet all the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the number of regular employees is at least one thousand, equity capital is at least one hundred billion won, and sales amount is at least one hundred billion won, or total assets are at least five hundred

3. Actual independence shall meet the provisions of subparagraph 2 of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises. In such cases, the ownership of stocks under subparagraph 2 (b) of Article 3 of the same Decree shall include direct and indirect ownership (excluding indirect ownership through a collective investment scheme under the Financial Investment Services and Capital Markets Act).

Enforcement Regulations of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 406 on March 14, 2014)

Article 2 (Scope of Small and Medium Enterprises)

(8) The determination of whether an enterprise is a related enterprise under Article 3 (1) 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises shall be based on the end of the taxable year.

Addenda (No. 406, March 14, 2014)

Article 1 (Enforcement Date)

These Rules shall enter into force on the date of their promulgation (hereinafter referred to as the "Rules").

Enforcement Regulations of the former Enforcement Rule of the Restriction of Special Taxation Act (amended by Ordinance of the Ministry of Strategy and Finance No. 322 on February 23, 2013)

Article 2 (Scope of Small and Medium Enterprises)

(2) The number of employees ordinarily employed by the relevant enterprise under the proviso to Article 2 (1) of the Decree and subparagraph 1 of the same paragraph shall be the number of workers [excluding executives who are shareholders, daily workers under Article 20 of the Enforcement Decree of the Income Tax Act, full-time researchers exclusively dedicated to research and development projects and departments exclusively dedicated to research and development projects under Article 14 (1) 2 of the Basic Research Promotion and Technology Development Support Act, and workers whose contractual monthly working hours are less than 60 hours among part-time workers under Article 2 (1) 8 of the Labor Standards Act (hereafter referred to as "part-time workers" in this paragraph] who are continuously employed by the relevant enterprise. In such cases, the number of employees and number of employees shall be calculated on the basis of the number calculated by dividing the current number of employees as of the end of each month of the relevant taxable year by the number of relevant months,

(3) The equity capital referred to in the proviso to Article 2 (1) of the Decree shall be the amount obtained by subtracting liabilities from assets on the balance sheet (hereafter in this Article, referred to as " balance sheet") prepared in accordance with corporate accounting standards as of the end of each

(4) The sales referred to in the proviso to the part other than the subparagraphs of Article 2 (1) and subparagraph 1 of the same paragraph of the Decree shall be the sales on the income statement prepared in accordance with the corporate accounting standards: Provided, That in cases of a business start-up, division, or merger, it means the amount calculated by converting the sales on the taxable year that falls on the day after the registration date

(5) The total assets defined in the proviso to Article 2 (1) of the Decree shall be the total assets on the balance sheet as of the end of each taxable year.

The former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 24638, Jun. 28, 2013)

Article 2 (Definitions)

The terms used in this Decree shall be defined as follows:

3. The term "related corporation" means an enterprise subject to external audit under Article 2 of the Act on External Audit of Stock Companies;

(hereinafter referred to as "company subject to external audit") refers to a group of companies with a parent-subsidiary relationship by controlling other domestic companies pursuant to Article 3-2.

Article 3 (Scope of Small and Medium Enterprises)

(1) Small and medium enterprises under Article 2 (1) 1 of the Framework Act on Small and Medium Enterprises (hereinafter referred to as the "Act") shall meet all of the following standards:

1. A company whose main type of business and the number of regular workers, capital, or sales meet the criteria set forth in attached Table 1: Provided, That any of the following enterprises shall be excluded herefrom:

(a) An enterprise with at least 1,00 full-time workers;

(b) Enterprises whose total assets are not less than five hundred billion won.

(c) Enterprises whose equity capital is not less than one hundred billion won.

(d) An enterprise whose average sales during the immediately preceding three business years are not less than 1,50 billion won.

2. An enterprise whose substantial independence from its ownership and management does not fall under any of the following items:

(a) (Omission)

(b) (Omission)

Standard of scale of relevant type classification code

Construction F

Less than 300 full-time workers;

Not more than three billion won in capital or capital;

(c) In cases of an enterprise belonging to a related enterprise, the number of full-time workers, capital, sales, equity capital or total assets (hereinafter referred to as "full-time workers, etc.") calculated pursuant to Article 7-4 do not meet the standards referred to in attached Table 1 or falling under any item of paragraph (1) 1.

(1) "Parent-subsidiary relationship" means a relationship between a company and another domestic company (hereinafter referred to as a "parent company") as at the end of the immediately preceding business year, if the company controls another domestic company as at the end of the immediately preceding business year as if it falls under any of the following subparagraphs: Provided, That a stock-listed corporation under Article 9 (15) of the Financial Investment Services and Capital Markets Act, which is a stock-listed corporation under subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies and Article 1-3

An enterprise obligated to prepare financial statements and a domestic enterprise included in the consolidated financial statements shall be deemed a parent company and subsidiary company.

1. Where a parent company independently or jointly with a person who falls under any of the following items owns not less than 30/100 of the stocks, etc. of the subsidiary company and is the largest investor, the parent company shall be subject to Article 3-3:

(1) Determination as to whether a person is a small or medium enterprise under Article 3 shall be based on the number of regular workers, etc. of the immediately preceding business year, and the application period for whether a person is a small or medium enterprise shall be one year after three months

(2) Detailed matters concerning determination of whether small and medium enterprises are determined separately by the Administrator of the Small and Medium Business Administration.

Article 7-4 (Calculation of Number of Workers, etc. of Related Enterprises)

(1) The calculation of the number of regular workers, etc. of a parent company and a subsidiary company belonging to related enterprises shall be as specified in attached Table 2.

(3) The number of regular workers, etc. under paragraph (1) shall be the number of regular workers, etc. of parent companies and subordinate companies in the business year immediately preceding the business year in which an affiliated company comes to belong.

[Attachment 1]

The scale of the number of regular workers, capital, or sales of small and medium enterprises by type of business (related to Article 3 (1) 1);

[Attachment 2]

Standards for calculation of regular workers, etc. of related enterprises (related to Article 7-4 (1))

1. The definitions of terms used in this Table shall be as follows:

(a) The term "Formal control" means that a parent company owns less than 50/100 of the stocks, etc. of its subsidiary company;

(b) The term "actual control" means that a parent company owns at least 50 percent of the stocks, etc. of the subsidiary company;

(c) The term "direct control" means that a parent company directly owns the stocks, etc. of its subsidiary (referring to subsidiary companies of the parent company; hereafter the same shall apply in this Table) or grandchildren (referring to subsidiary companies of the subsidiary and including cases in which the parent company becomes subsidiary companies of the parent company; hereafter the same shall apply in this Table);

(d) The term "indirect control" means that a parent company directly owns the stocks, etc. of its subsidiary, which is a stockholder of the grandchild company;

2. Where a parent company directly controls a subsidiary company and controls it formally, the number of regular workers, etc. to be deemed the number of regular workers, etc. of a parent company or subsidiary company (hereinafter referred to as "total number of regular workers, etc.") shall be calculated according to the following items:

(a) The number of regular workers, etc. of a parent company shall be calculated by adding up the number of regular workers, etc. of the parent company to the number of regular workers of the parent company and the number of regular workers of the subsidiary company;

Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 21368, Mar. 25, 2009; Presidential Decree No. 21368, Nov. 19, 2009>

Amended by Act No. 21831

Article 3 (Scope of Small and Medium Enterprises)

Small and medium enterprises under Article 2 (1) of the Framework Act on Small and Medium Enterprises (hereinafter referred to as the "Act") shall meet all of the following standards:

2. An enterprise whose substantial independence of its ownership and management falls under all of the following items:

(a) A company shall not belong to an enterprise group subject to limitations on mutual investment under Article 14 (1) of the Monopoly Regulation and Fair Trade Act;

(b) The corporation referred to in subparagraph 1 (b) shall not hold directly or indirectly 30 percent or more of the total number of outstanding shares (excluding non-voting shares referred to in Article 370 of the Commercial Act). In such cases, Article 2 (2) of the Enforcement Decree of the Adjustment of International Taxes Act shall apply mutatis mutandis to the ratio of indirectly owned shares;

(c) In cases of an enterprise belonging to an affiliated company, the number of regular workers, capital stock, sales amount, equity capital or total assets (hereinafter referred to as "regular workers, etc.") calculated under Article 7-2 shall not exceed the standards under subparagraph 1.

Enforcement Decree No. 21368, Mar. 25, 2009

Article 1 (Enforcement Date)

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This Decree shall enter into force on March 27, 2009: Provided, That the following amended provisions shall enter into force on the date specified in the following subparagraphs, respectively:

1. The amended provisions of subparagraph 3 of Article 2, subparagraph 2 (c) of Article 3, Article 3-2, Article 7-2, and attached Table 2: January 1, 201;

2. The amended provisions of Article 3 subparagraph 1 (c) and (d) and subparagraph 3 of Article 9: January 1, 2012;

Article 2 (Transitional Measures)

Where an enterprise falling under a small or medium enterprise becomes no longer a small or medium enterprise due to the enforcement of this Decree as at the time this Decree enters into force, it shall be deemed a small or medium enterprise until December 31, 201: Provided, That subparagraph 3 of Article 2 and subparagraph 2 of Article 3

(c) The same shall not apply to the case where it is no longer a small or medium enterprise under the amended provisions of Articles 3-2 and 7-2.

Administrative Procedures Act

Article 3 (Scope of Application)

(1) Except as otherwise expressly provided for in other Acts, the procedures for dispositions, reports, administrative pre-announcement of legislation, pre-announcement of legislation, and administrative guidance (hereinafter referred to as "administrative procedures") shall be governed by this Act.

(2) This Act shall not apply to any of the following matters:

9. Enlistment and call-up under the Military Service Act, entry and departure of foreigners, recognition of refugees, naturalization, and disciplinary action under statutes related to the personnel management of public officials;

Matters prescribed by Presidential Decree, which are deemed difficult or unnecessary to complete administrative procedures due to the nature of the relevant administrative action, such as mediation, conciliation, arbitration, arbitration, and other dispositions under the Acts and subordinate statutes aimed at mediating and mediating interests, and other procedures equivalent to administrative procedures, which are prescribed by Presidential Decree.

Enforcement Decree of the Administrative Procedures Act

Article 2 (Exclusion from Application)

"Matters prescribed by Presidential Decree" in Article 3 (2) 9 of the Act means any of the following matters:

5. Matters concerning the imposition and collection of taxes pursuant to tax-related Acts and subordinate statutes;

Basic Act

Article 81-15 (Pre-assessment Review)

(1) A person in receipt of any of the following notices may request a review on legality of the details notified to the director of a regional tax office or the director of a regional tax office who has given such notice (hereafter referred to as "written review on propriety" in this Article) within 30 days from receipt of such notice: Provided, That he/she may request the Commissioner of the National Tax Service for matters prescribed by Presidential Decree, such as

1. Written notice of audit results under Article 81-9;

2. Other advance notice of taxation prescribed by Presidential Decree.

Enforcement Decree of the Framework Act

Article 63-14 (Scope of and Procedures for Requesting Pre-Assessment Review)

(2) "Advance notice of taxation prescribed by Presidential Decree" in Article 81-15 (1) 2 of the Act means any of the following:

1. Pre-announcement of taxation conducted by the director of a regional tax office or the director of a regional tax office according to the result of business audit by the director of a regional tax office or the Commissioner of the National Tax Service; and

2. Notice of pre-announcement of taxation issued by the head of a tax office or the director of a regional tax office based on taxation data and on on-site investigation.

3. Pre-announcement of taxation in excess of one million won of the amount intended for tax payment notice.