The Export-Import Bank of Korea (Law Firm LLC, Attorneys Cho Young-hee et al., Counsel for the plaintiff-appellant)

Head of Yeongdeungpo Tax Office

August 26, 2016

1. On June 17, 2014, the Defendant’s disposition of collecting corporate tax and disposition of imposing additional tax as stated in the separate sheet against the Plaintiff shall be revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. The plaintiff's status

The plaintiff is a non-profit corporation that provides finance necessary for economic cooperation such as export and import, overseas investment, overseas resources development, etc. established around July 1976.

B. Conclusion of a shipbuilding contract

1) The Jinse Shipbuilding Co., Ltd. (hereinafter “Jinse Shipbuilding”), the Sejong Heavy Industries Co., Ltd. (hereinafter “Slue Heavy Industries”), and the Samho Shipbuilding Co., Ltd. (hereinafter “Slue Shipbuilding”) were awarded a contract for the construction of vessels from the following foreign corporations (hereinafter “foreign vessel owners”).

Table 1

F. 1 Prik B. 00 2.07 S. 1. 40 S. 20, 100 S. 20, 200 J. 2031 2 Priaked on March 12, 2008 36,200, J. 2000 J. 200, 300 J. 2036. 3 Pavig 3 P. 40. 200, 000 J. 2032 3 Pavig 2008. 36, 00 J. 200, 200 J. 205, 200 J. 203

2) According to each shipbuilding contract of this case, a foreign vessel owner shall first pay part of the cost of the vessel to the domestic shipbuilding owner before the completion of the construction of the vessel, and where each shipbuilding contract of this case is terminated due to reasons such as breach of contract or cancellation, the domestic shipbuilding owner shall pay to the foreign vessel owner the cost of the vessel already received (hereinafter “advance”) and the interest calculated by applying a certain interest rate thereto.

C. Conclusion of a guarantee agreement between the Plaintiff and foreign vessel owners

The Plaintiff guaranteed to the foreign vessel owners the advance payment and the interest payment obligation of the domestic vessel owners as shown below the attached Table 2

Table 2: Table 2>

1 Prier B. 0. 0. 0. 0. 0. 0. 0. 0. 0. 6. 0. 0. 0. 0. 6. 0. 0. 6. 0. 0. 0. 0. 6. 0. 7. 0. 0. 6. 0. 0. 6. 0. 6. 0. 7. 0. 0. 7. 0. 0. 6. 0. 7. 0. 0. 6. 0. 7. 0. 0. 0. 6. 0. 7. 0. 13. 8. 2008. 6. 0. 7. 0. 7. 13. 0. 6. 0. 0. 7. 0. 7. 8. 13. 2008

D. Cancellation of each shipbuilding contract of this case

1) Prime Bulk Nvigti, Cityceest S.A., Pacific Dare S.A. rescinded the shipbuilding contract with Jinho Ship on the grounds of delay in delivery of the ship, respectively.

2) The Eright Dogon Inc. cancelled the shipbuilding agreement entered in the table 1 Serial No. 6 in consultation with the Sejong Heavy Industries. In addition, E rightsyh Draon Inc. cancelled the shipbuilding agreement with the Sejong Heavy Industries on the ground of delay in delivery of a ship.

3) On June 3, 201, Kamer Sheling Inc., Metping Inc., Lysias S.A., Isdios S.A., Starling S. A., Starulk Lt. respectively released a shipbuilding contract with Samho Shipbuilding on the ground that Samho Shipbuilding was in default upon the application for commencement of rehabilitation procedures to the Changwon District Court on June 3, 2011.

(e) Payment of each advance and interest;

Based on each of the instant shipbuilding contracts, foreign vessel owners filed a claim with the Plaintiff for the payment of advance payment and its interest on the grounds of the cancellation of each of the instant shipbuilding contracts, and the Plaintiff paid each of the instant advance payment and its interest (hereinafter referred to as “indeption advance”) to the foreign vessel owners as shown in Table 3.

[Attachment 3]

F. 50 63 4.0 50 64 6.10, 197, 197.30, 205 64.27.27, 199 2,064, 593 209.27.27, 262, 943, 999 2,149, 165, 305 97.29, 199.30, 1644. 97. 196, 197. 194, 205, 197. 194, 205, 194, 197. 196, 205, 194, 194, 1964, 205, 197, 194

F. The first disposition of this case and the procedure of the previous trial

1) On November 14, 2013, the Defendant: (a) issued a disposition of collecting corporate tax withheld at KRW 386,613,020 for the business year 209; (b) a disposition of collecting corporate tax withheld at KRW 407,30,870 for the business year 2009; and (c) a disposition of imposing additional tax at KRW 40,730,730 for additional tax withheld at KRW 40,730; and (d) a disposition of imposing additional tax for collecting corporate tax at KRW 40,730; and (e) a disposition of imposing additional tax for collecting corporate tax at KRW 40,730; and (e) a disposition of imposing additional tax at KRW 931,90 for the business year 209; and (e) a disposition of imposing additional tax at KRW 386,61,020 for the year 209 through KRW 40,730,180; and (iii) a disposition of imposing additional tax at KRW 9139,1.

2) On February 12, 2014, the Plaintiff filed an appeal against the instant first disposition, but the Tax Tribunal rendered a decision to dismiss the said appeal on February 2, 2015.

G. Correction of the increase in the first disposition of this case, the second disposition of this case, and the procedure of the previous trial

1) The Defendant calculated the amount before the tax deduction on the ground that the advance payment in the issue Nos. 3 and 4 and 5 Nos. 4 and 5 was the amount after the tax deduction, and corrected the corporate tax withheld for each business year and the additional payment for withholding tax accordingly on June 17, 2014, as indicated in the [Attachment Nos. 3 and 4].

2) The Defendant calculated the amount prior to the deduction of the tax in the same manner as in attached Table 1, 2, 3, 6, and 12, “The interest on the advance payment at issue also constitutes a foreign corporation’s domestic source income under Article 93 subparag. 11 (b) of the former Corporate Tax Act or Article 93 subparag. 10 (b) of the former Corporate Tax Act (amended by Act No. 11128, Dec. 31, 201; hereinafter “the former Corporate Tax Act”), and calculated the amount prior to the deduction of the tax in the same manner as in attached Table 1, 2, 6, and 10 as indicated in attached Table 1, 2, 109 through 2011, and additional tax on the additional payment for withholding tax, and on the additional tax for failing to submit a statement of payment for each business year (hereinafter “instant second disposition”).

3) In addition, the Defendant revised the increased additional tax on non-submission of the payment record for the business year 2009 (hereinafter the instant secondary disposition and the instant primary disposition, as seen earlier, as shown in the [Attachment 5] No. 5 on June 17, 2014 (hereinafter “each of the instant dispositions”).

4) On September 5, 2014, the Plaintiff filed an appeal against the instant secondary disposition, but the Tax Tribunal dismissed the said appeal on April 27, 2015.

(h) Addition of the reasons for the disposition;

1) On February 26, 2016, the Defendant added the reason for disposition to the effect that “the interest at issue falls under the domestic source income of a foreign corporation as other income provided for in Article 93 subparag. 11 (j) of the former Corporate Tax Act or Article 93 subparag. 10 (j) of the Corporate Tax Act by stating the preparatory brief as of February 24, 2016 on the third date for pleading.”

2) In addition, on August 26, 2016, the Defendant added the reason for disposition to the effect that “the interest at issue constitutes interest income falling under the foreign corporation’s domestic source income, which is the interest income under Article 93 subparag. 1 (a) of the former Corporate Tax Act or subparagraph 1 (a) of Article 93 of the Corporate Tax Act, by stating the preparatory brief as of August 26, 2016 on the fifth date for pleading.”

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 5, Eul evidence Nos. 1 and 2 (including relevant branch numbers), the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

(a) Relevant statutes;

The entries in the attached Table-related statutes are as follows.

B. Determination

(1) According to the main sentence of Article 98(1)3, the main sentence of subparagraph 1 (a) and subparagraph 1 (b) and (j) of Article 93, Article 132(10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010), which applies to the disposition of collecting corporate tax for 209 through 2010, (2) pursuant to the provisions of Article 98(1)3 of the former Corporate Tax Act, for income paid to a foreign corporation as penalty or indemnity prescribed by the Presidential Decree, i.e., the amount of money or other goods paid to the foreign corporation in excess of the original contract terms, regardless of its title or pretext; (3) The amount of income paid to the domestic place of business falling under Article 98(1)1 of the former Corporate Tax Act (including the amount of income paid to the foreign corporation under the condition that it actually receives the income generated from its domestic place of business or similar income under the conditions prescribed by the Presidential Decree.

2) Whether the interest at issue at issue falls under the income accrued from the foreign vessel owners’ domestic source as other income, which is damages for losses (Article 93 subparag. 11 (b) of the former Corporate Tax Act or Article 93 subparag. 10 (b) of

A) If a penalty or compensation received due to breach or termination of a contract on a property right is merely a compensatory amount for the damages equivalent to the original payment or actual property damages, it shall not be deemed that it constitutes a new income or income. However, if a penalty or compensation has been paid in excess of this, it shall be subject to income tax (see, e.g., Supreme Court Decisions 2002Du3942, Apr. 9, 2004; 2008Hun-Ba79, Feb. 25, 2010). Such legal doctrine likewise applies to Article 21(1)10 of the former Income Tax Act (Amended by Act No. 9897, Dec. 31, 2009) or Article 21(1)10 of the former Enforcement Decree of the Income Tax Act (Amended by Presidential Decree No. 12852, Dec. 23, 2014; Presidential Decree No. 21301, Feb. 19, 2014).

B) The following facts can be acknowledged in light of the overall purport of Gap evidence Nos. 3-1 through 5, Gap evidence Nos. 4-1, 2, 5-1, and 5-2, and the whole arguments.

(1) The shipbuilding agreement between Jinse Vessel and Prime Bul Navigra, Oddre S.A. shall be refunded: (1) each foreign vessel owner may cancel the shipbuilding agreement in case where the delivery of the vessel is delayed for more than 180 days after the date of delivery; and (2) each foreign vessel owner shall allow each vessel owner to terminate, cancel, or terminate the shipbuilding agreement in accordance with the terms of the agreement which allows each vessel owner to terminate, cancel, or terminate the shipbuilding agreement, and the interest calculated at the rate of 7% per annum from the date of receipt to the date of refund; (3) the advance payment is not the method of compensation; (4) the obligation of the parties to the shipbuilding agreement to compensate for damages; and (5) the obligation of the parties to the shipbuilding agreement shall be exempted from the obligation of advance payment; and (4) the obligation of advance payment shall be exempted from the obligation of advance payment to the parties to the shipbuilding agreement.

(2) Each vessel building contract between the Speak Heavy Industries and E right Agency (E-Speon Nos. 1 6, 7) may be rescinded if the delay in delivery of a vessel continues to exist during the period exceeding 180 days from the date of delivery to the date of delivery, and the E-rights Doraon speling Co., Ltd. (2) When E-Rights Maragon Speon cancel a shipbuilding contract, the Speak Heavy Industries shall refund interest calculated at the rate of 6% per annum from the date of receipt to the date of refund. 3) With the exception of the above advance and advance refund obligation, the e-rights Doraon Ltd. shall not be liable for damages under the laws of the United Kingdom.

(3) Tysias S.A., each shipbuilding contract between Twit lines and Lysias S.A. (E. 10,11) shall be refunded: ① when each foreign vessel owner permits the termination, rescission, or termination of the shipbuilding contract pursuant to the terms and conditions of the contract that each foreign vessel owner permits the termination, termination, termination, or termination of the shipbuilding contract, Samho vessel shall pay interest calculated at the rate of 7% per annum from the date of payment to the date of refund; ② The payment of interest shall be made by means of an estimate for compensation for damages arising from the cancellation of the shipbuilding contract; ③ the refund of advance payment and advance payment to each foreign vessel owner shall be exempted from all obligations to the other parties; ④ the refund of advance payment shall be exempted from all obligations and legal liability to each other; ④ the refund of advance payment shall be made immediately if each foreign vessel owner is notified or notified to the creditors of bankruptcy law; and ④ the refund of advance payment shall be made in writing to the creditors of bankruptcy and bankruptcy law.

C) Legal nature of the interest on the instant advance payment

The aforementioned facts are as follows: ① the law applicable to the payment of the advance payment for each shipbuilding contract of this case and the refund of advance payment due to the cancellation of each shipbuilding contract of this case is the English law (see the main sentence of Article 25(1) and the proviso of Article 31 of the Private International Act); ② The legal nature of the advance payment for each shipbuilding contract of this case as stated in Table 1 No. 5, 10, and 11 is not the “reloitation” but the “lquated dars” which means the estimate of compensation for damages. ② Under each shipbuilding contract of this case, it is difficult for domestic shipbuilding to secure the legal nature of the advance payment for each shipbuilding contract of this case to recover the amount of advance payment for each shipbuilding contract of this case, and under each shipbuilding contract of this case, it is difficult for each shipbuilding owner to claim for the advance payment from each foreign vessel owner to recover the amount of advance payment for each shipbuilding contract of this case.

D) Whether the interest at issue constitutes “money paid in excess of the damages to the payment itself under the present contract”

In light of the following circumstances, the aforementioned evidence and evidence, Gap evidence Nos. 7 and 8, and Gap evidence Nos. 9-1 through 5, which can be seen as being added to the entire arguments, i.e., the foreign vessel owners: (a) borrowed an amount equivalent to the advance payment at issue from financial institutions, etc. to pay the advance payment; (b) it appears that the foreign vessel owners would not have a big difference between the financial expenses and the interest on the advance payment at issue, which are presumed to have been borne by the foreign vessel owners; and (c) the foreign vessel owners could have paid all expenses in addition to the above financial expenses in the process of concluding and implementing each shipbuilding contract at issue; (d) the foreign vessel owners could incur damages due to delayed conclusion or implementation of each shipbuilding contract at issue with the shipper or charterer; and (d) the details of property damages suffered by the foreign vessel owners as seen earlier, it is difficult to view that the foreign vessel owners actually suffered damages beyond the reasonable scope of damages from advance payment due to the fact that the foreign vessel owners actually suffered damages from the foreign vessel owners.

E) Therefore, the interest at issue does not constitute a domestic source income of a foreign corporation under Article 93 subparag. 11 (b) of the former Corporate Tax Act or Article 93 subparag. 10 (b) of the Corporate Tax Act.

3) Whether the interest at issue falls under the income generated from the economic interest accrued from assets in Korea and other income generated from the foreign vessel owners (Article 93 subparag. 11 (j) of the former Corporate Tax Act or Article 93 subparag. 10 (b) of the Corporate Tax Act)

Each foreign vessel owner is not carrying on any business in the Republic of Korea, and there is no evidence to deem that each foreign vessel owner provided human services to domestic vessel owners or to other persons related to shipbuilding in the Republic of Korea. Moreover, a vessel built by a domestic shipbuilding owner is owned by a domestic shipbuilding owner, and thus cannot be deemed as an assets of a foreign vessel owner, and thus, the interest at issue cannot be deemed as an “economic benefits provided in relation to assets in the Republic of Korea” and the interest at issue cannot be deemed as an income similar to the interest at issue.

Therefore, the interest at issue does not constitute the domestic source income of foreign corporations under Article 93 subparag. 11 (j) of the former Corporate Tax Act or Article 93 subparag. 10 (b) of the Corporate Tax Act.

4) Whether the interest at issue falls under a domestic source income of foreign vessel owners as interest income (Article 93 subparag. 1 (a) of the former Corporate Tax Act or Article 93 subparag. 1 (a) of the Corporate Tax Act)

Article 16(1) of the former Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) or Article 16(1) of the Income Tax Act (amended by Act No. 9897 of Dec. 31, 2009) referred to in subparagraph 1 (a) of Article 93 of the former Corporate Tax Act or subparagraph 1 (a) of Article 93 of the Corporate Tax Act provides that “any income similar to the income referred to in subparagraphs 1 through 12 (or subparagraph 12), which is in the nature of consideration for the use of money, shall also be included in interest income, and thus, includes “any other income in the nature of consideration for the use of money” under subparagraph 13 (a) of Article 93 of the former Corporate Tax Act or subparagraph 1 (a) of Article 93 of the Corporate Tax Act. In order to fall under such interest income, such income must be similar to the income listed above, the nature of consideration for the use of

The key advance payment is that a foreign vessel owner paid part of the ship price in advance, taking into account the cost necessary for the construction of a ship, and the interest on the key interest is merely compensation following the cancellation of each shipbuilding contract of this case. Therefore, the interest on the key interest is not premised on the transaction seeking the profit of operating money, such as a lending of money. Therefore, it cannot be deemed that it constitutes a domestic source income of a foreign corporation stipulated in Article 93 subparagraph 1 (a) of the former Corporate Tax Act or subparagraph 1 (a) of Article 93

5) Sub-decisions

The interest on the instant advance payment does not constitute a domestic source income of foreign vessel owners, a foreign corporation which has no domestic place of business. Each of the instant dispositions based on the premise shall be revoked in its entirety as it is unlawful.

3. Conclusion

The plaintiff's claim of this case is justified, and all of them are accepted, and the costs of lawsuit are assessed against the losing defendant. It is so decided as per Disposition.

[Attachment Omission]

Judges and decorations (Presiding Judge) and Lee Jin-gu decorations