Seoul Administrative Court 201Guhap10676 ( November 04, 2011)

Seocho 2010west 1863 ( December 31, 2010)

The key amount deemed a disposition as a dividend does not constitute a domestic source income of a foreign corporation.

The interest on the loan that exceeds six times the equity shares paid in 2004 and 2005 to the Plaintiff’s principal office that is a foreign controlling shareholder shall be deemed to have been disposed of at the time of each payment or the expiration of each business year.

Article 14 of the Adjustment of International Taxes

2011Nu40327. Revocation of notice of change in income amount

XX Bank

Seoul District Court

Seoul Administrative Court Decision 2011Guhap10676 Decided November 4, 2011

March 28, 2012

May 2, 2012

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the defendant.

1. Purport of claim

In February 25, 2010, the defendant's notification of change in the income amount stated in the attached Table against the plaintiff shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. cite the judgment of the first instance;

2. On January 1, 200, the court's reasoning for the disposition of this case was as follows: (a) whether the disposition of this case is legitimate; (b) whether the disposition of this case is legitimate; (c) whether it constitutes "other outflow from the company in accordance with the Enforcement Decree of the Corporate Tax Act" is stated in the corresponding part of the judgment of the court of first instance (from the second to the fifth to the third below), except for the addition of "the relevant Acts and subordinate statutes added" under the Enforcement Decree of the Corporate Tax Act. It is cited in accordance with Article 8 (2) of the Administrative Litigation Act; and Article 420

2. A new part.

2) Whether the issue amount in this case constitutes a domestic source income under the Corporate Tax Act

According to Article 2(1) of the former Corporate Tax Act, a foreign corporation with a domestic source income is obligated to pay corporate tax on income, and Article 93 of the same Act separates domestic source income of a foreign corporation. Article 91(2) of the same Act provides that each domestic source income under the subparagraphs of Article 93 of the same Act shall be the corporate tax base for the relevant corporation in the case of a foreign corporation with no domestic place of business or real estate income. In light of the fact that the Plaintiff is a foreign corporation with a domestic place of business, it is reasonable to interpret that it is liable to pay corporate

Article 17(1) of the Income Tax Act and Article 9 of the Adjustment of International Taxes Act only provide for dividend income as income generated from sources in the Republic of Korea by foreign corporations, but did not classify the amount disposed of as dividend pursuant to Article 14 of the Adjustment of International Taxes Act as income generated from sources in Korea. The amended provision of the instant case first added the amount disposed of as dividend pursuant to Article 14 of the Adjustment of International Taxes Act as

The defendant asserts that the amended provisions of this case are amended within the meaning of confirming the natural principles that have to be treated as dividend income pursuant to Article 14 of the Adjustment of International Taxes Act and Article 25 of the Enforcement Decree of the Adjustment of International Taxes Act. However, in light of the principle of no taxation without law, the amended provisions of this case have the effect of creating the deemed dividend income pursuant to Article 14 of the Adjustment of International Taxes Act as an item of income subject to taxation against foreign corporations as a domestic source income. The key amount of this case deemed as a dividend before the amended provisions of this case enters into force ( January 1, 2006) is not a foreign corporation, and

The defendant asserts that Article 18 (1) of the Addenda to the Corporate Tax Act provides that "the amendment clause of this case shall apply from the first disposition of dividends after this Act enters into force," and that the defendant disposed of the amount of this case as dividends on February 25, 2010, which was after the enforcement of the Corporate Tax Act, the amount of this case shall be deemed as deemed dividend income and shall be subject to taxation.

According to Article 14(1) of the Adjustment of International Taxes Act and Article 25(5) of the Enforcement Decree of the Adjustment of International Taxes Act, where loans borrowed from a foreign controlling shareholder from a domestic corporation (including a domestic business place of a foreign corporation) exceeds a certain ratio of equity shares invested in stocks, etc., the interest paid in excess shall be deemed to have been disposed of as a dividend under Article 67 of the Corporate Tax Act and shall not be included in the calculation of losses of the domestic corporation. The key amount of this case, which is interest paid in excess of six times as much as the equity shares paid in 2004 and 2005 to the Plaintiff’s headquarters that constitutes a foreign controlling shareholder, shall be deemed to have been disposed of as dividend at the expiration of each payment or business year under the above Act and subordinate statutes. Since this case’s revised provision was not disposed of after the enforcement of the amended provision, there is no room to apply Article 18(1) of the Addenda of the Corporate Tax Act (the notice of change in income amount given by the Defendant on February 25, 2010>

3. Conclusion

The appeal is dismissed.