Among the arm's length price calculation methods under Article 5 (1) of the Adjustment of International Taxes Act, "other methods deemed reasonable in light of the substance and practice of transactions" under Article 4 (3) of the former Enforcement Decree of the Adjustment of International Taxes Act shall apply.

Article 5(1) of the Adjustment of International Taxes Act, Articles 4 and 5(1) of the former Enforcement Decree of the Adjustment of International Taxes Act (amended by Presidential Decree No. 18628, Dec. 31, 2004)

[Plaintiff-Appellant-Appellee] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Park Jong-soo et al., Counsel for plaintiff-appellant-appellant-appellee)

The reorganization company, a corporation, the party taking over the lawsuit of the director of the Madyke Park Park, the reorganization company, the party taking over the lawsuit of the Madyke Park, the party taking over the lawsuit of the Madyke Park

Head of Ansan Tax Office

Seoul High Court Decision 2003Nu14842 delivered on April 2, 2004

The appeal is dismissed. The costs of appeal are assessed against the defendant.

1. Regarding ground of appeal No. 1

In light of the records, the court below acknowledged the facts as stated in its decision, and determined that the investigation price at the Seoul Customs office, which the defendant used as the ground for the disposition of this case, cannot be determined as the arm's length price as the "non-intercluent third party price" of the plaintiff's electronic component import price for the defense industry of this case, and that the defendant did not make every effort to collect the "non-intercluent third party price", or that it is not easy to obtain the third party's price data, shall not be deemed the arm's length price. There is no error of law such as incomplete deliberation

2. Regarding ground of appeal No. 2

Article 5(1) of the Adjustment of International Taxes Act (hereinafter “the Adjustment of International Taxes Act”) provides that the arm’s length price shall be the price calculated by the most reasonable method among the methods in each of the following subparagraphs, and the method in subparagraph 4 shall be limited to cases where the arm’s length price cannot be calculated by the methods in subparagraphs 1 through 3. Article 5(1)1 provides that the comparable third party’s price method in subparagraph 2, the resale price method in subparagraph 3, the cost plus plus method in subparagraph 4, and other reasonable methods as prescribed by the Presidential Decree in subparagraph 4. Article 4 of the former Enforcement Decree of the Adjustment of International Taxes Act (amended by the Presidential Decree No. 18628, Dec. 31, 2004; hereinafter “Enforcement Decree”) provides that the method in subparagraph 1 provides that the method in subparagraph 2 shall be excluded by the net trade profit ratio in subparagraph 3, and the method in subparagraph 4 shall be applied only to cases where it is deemed reasonable in light of the substance and practice of other transactions.

According to the above provisions, "the methods deemed reasonable in light of the substance and practice of other transactions" under Article 4 subparagraph 3 of the Enforcement Decree of the above arm's length price computation method shall apply only to cases where the arm's length price cannot be calculated by the methods under Article 5 (1) 1 through 3 of the Act. However, in this case where the methods under Article 4 subparagraph 1 or 2 of the Enforcement Decree cannot be applied by the methods under Article 4 (1) 1 or 3 of the Act, there is no assertion or proof that the arm's length price cannot be calculated by the methods under Article 5 (1) 1 through 3 of the Act. In this case, the court below did not determine only whether the above customs investigation price conforms to the arm's length price under Article 5 (1) 1 of the Act, and it did not determine whether the above customs investigation price conforms to the arm's length price under Article 4 subparagraph 3 of the Enforcement Decree, and it did not err in the misapprehension of legal principles as to the determination of the arm's length price.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Yang Sung-tae (Presiding Justice)