Whether it constitutes retroactive taxation and violates the principle of good faith

As long as there exists an excess exceeding the amount re-calculated with the allowance for severance benefits for the pertinent business year after the enforcement of the basic rules of the Corporate Tax Act, it does not constitute retroactive taxation since it is the fact that the previous amendment was made before or after the amendment of the basic rules of the Corporate Tax Act.

Article 18 of the Framework Act on National Taxes and prohibition of retroactive taxation

Article 33 (Inclusion of Retirement Benefits Reserve Fund in Loss)

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 872,685,180 of corporate tax for the business year 2001, the imposition of KRW 676,326,250 of corporate tax for the business year 2002, the imposition of KRW 117,895,70 of the imposition of KRW 676,326,250 of corporate tax for the business year 2002, the imposition of KRW 146,486,390 of corporate tax for the business year 2003, and the imposition of KRW 49,243,010 of corporate tax for the business year 204 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a company incorporated on December 29, 1997 by dividing the fields of virtual, information and communication, and super-high speed Internet service from ○○○○ Co., Ltd. (hereinafter referred to as “○○○○○”). On January 29, 1998, the Plaintiff acquired employees who engaged in the fields of virtual, etc. from ○○○○○○○○○○○, and then did not include KRW 13,127,917,372 in the estimated amount of retirement benefits, which is a debt equivalent to the retirement benefits payable by ○○○○○○ at the time of acquisition, in 200 business years, exceeding 40/100 of the estimated amount, and included KRW 7,876,750,423 in the accumulated amount of retirement benefits in the calculation of deductible expenses when separately managing each employee pursuant to General Rule 2-6313(3) of the former Corporate Tax Act.

B. After the amendment of Article 85(1)3 and (2)3 of the Enforcement Decree of the Corporate Tax Act by Presidential Decree No. 17033 on December 29, 2000, Article 85(1)3 and (2)3 of the Enforcement Decree of the Corporate Tax Act was amended on November 1, 2001, Article 2-6-313(3) of the former Corporate Tax Act was deleted. Article 4(3) of the amended General Rule of the Corporate Tax Act provides that the amount equivalent to the estimated amount of retirement benefits separately managed by employees under Article 2-6-313(3) of the former General Rule of the Corporate Tax Act shall be deemed to be the allowance for severance benefits held by the corporation acquiring the employees for the business year to which the date of enforcement of the General Rule of the Corporate Tax Act belongs, and Article 33 of the Act and Article 60 of the Enforcement Decree shall apply.

C. Under Article 4(3) of the General Rules of the Corporate Tax Act, the Defendant calculated the amount of KRW 7,876,750,423 separately managed by the Plaintiff for each employee among the estimated amount of retirement benefits acquired by the Plaintiff from ○○○○○○ in the business year of 2001, including the amount of KRW 1,825,760,410, which exceeded the limit for allowances for severance benefits in the business year concerned, and included the amount of KRW 1,825,760,410 in the deductible expenses. From 2002 to 2004, the Defendant calculated the amount of allowances for severance benefits in the business year concerned and calculated the amount of KRW 1,527,14,49, 499, KRW 437,537, KRW 162,198,311, August 18, 2005, and imposed the amount of corporate tax for 2008, including the amount of corporate tax reverted to 2007,86364,67

D. On October 31, 2005, the Plaintiff filed a request for adjudgment with the Director of the National Tax Tribunal, but the Director of the National Tax Tribunal dismissed the Plaintiff’s request for adjudgment on July 28, 2006.

[Ground of recognition] Facts without dispute, Gap evidence 1 to Gap evidence 3, Gap 6 evidence, Eul evidence 1 to Eul 11, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

(1) Violation of the principle of good faith

On April 1, 1997, the tax authority revised and promulgated the General Rule 2-6-313 of the former Corporate Tax Act on April 1, 1997, and expressed a public view on the method of calculating the limit of deductible expenses for allowances for severance benefits in cases of a corporation acquiring an employee. The Plaintiff, trusted it without any cause, took over the liability equivalent to retirement benefits while managing the amount of money equivalent to 60% of the amount separately for each employee, and paid it out of the above allowances at the time of the employee’s retirement. Accordingly, when determining the limit of inclusion in deductible expenses for allowances for severance benefits, the Plaintiff was able to reduce corporate tax by obtaining more allowances for severance benefits as deductible expenses. However, instead of eliminating the General Rule 2-6-313(3) of the former Corporate Tax Act, the tax authority newly prepared Article 4(3) of the Addenda of the Corporate Tax Act, which is applied to the instant disposition of taxation by the Defendant, by applying the General Rule 4(3) of the Corporate Tax Act, which is retroactively deleted from the basic provision.

(2) Violation of non-taxable practices

According to the former Corporate Tax Act and the Enforcement Decree of the same Act before 2001, in cases where the estimated amount of retirement benefits at the time of a merger, division, or business transfer was not succeeded to, and where the estimated amount of retirement benefits at the time of a merger, division, or business transfer, the acquiring corporation is bound to deny the estimated amount of retirement benefits at the time of the acquisition of the retirement benefits at the time of the acquisition of the employee's retirement benefits and thereby be subject to corporate tax due to the denial of the deductible expenses for the transfer of retirement benefits under the tax law at all times and thereby, the tax authority explicitly expressed that this portion of retirement benefits is not subject to corporate tax through Article 2-6-313(3) of the former Corporate Tax Act, even though it is aware that it could be taxed for an unreasonable period of time, and accordingly, the non-taxation practice is established. Meanwhile, in this case, the retirement benefits allowance limit for each business year is indivisible with the retirement benefits allowance limit at the end of the previous year, and it is unlawful to reduce the amount of retirement benefits payment at the time of the tax.

(3) Violation of double taxation

Article 13(4) of the former Corporate Tax Act (amended by Act No. 5581, Dec. 28, 1998); Article 13(4) of the former Corporate Tax Act (amended by Act No. 5581, Dec. 28, 1998; ○○○○○○○’s balance of allowances for severance and retirement benefits for its employees was transferred, but the reserved amount of the allowances for severance and retirement benefits was not succeeded. Therefore, even though ○○○ included the amount of allowances for severance and retirement benefits in the previous accounts, the inclusion of the deductible expenses under the Corporate Tax Act was limited to half of the amount of allowances for severance and retirement benefits under the corporate accounting but the amount of corporate tax imposed on the corresponding portion is denied. However, Article 4(3) of the Addenda of the former Corporate Tax Act (amended by Act No. 681, Nov. 1, 2001) of the former Corporate Tax Act (amended by Act No. 6581, Dec. 3, 2001).

(b) Relevant statutes;

Article 18 of the Framework Act on National Taxes and prohibition of retroactive taxation

(1) In interpreting and applying tax-related Acts, property rights of a taxpayer shall not be unreasonably infringed on in light of the equity in taxation and purpose of the relevant provisions.

(2) With respect to any income, profit, property, act or transaction formed with an obligation to pay national taxes (in cases of national taxes separately provided for by tax-related Acts, an obligation to collect and pay such taxes; hereinafter the same shall apply), a new tax-related Act shall not be levied retroactively after such establishment.

(3) Once any construction of the tax-related Act or practices in tax administration has been generally accepted by the taxpayers, any act or computation according to such a construction or practice shall be considered to be correct, and no tax shall be retroactively imposed by a new construction or practice.

Article 13 of the Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998). Inclusion of retirement benefits in deductible expenses

(1) Where a domestic corporation appropriates allowances for severance benefits as losses in order to appropriate for the retirement benefits of officers and employees, such allowances shall be included in the calculation of losses in calculating the income amount for the concerned business year.

(4) Where a domestic corporation having the account for allowances for severance benefits expires due to a merger, the amount transferred to the relevant account for allowances for severance benefits for the relevant extinguished corporation which is the amount transferred to a corporation surviving such merger or a corporation established by such merger shall be deemed the amount of the account for allowances for severance benefits held

(5) Paragraph (4) shall apply mutatis mutandis where an entrepreneur comprehensively transfers his/her business to a domestic corporation.

○ Article 33 of the Corporate Tax Act: Inclusion of retirement benefit funds in deductible expenses

(1) Where a domestic corporation appropriates allowances for severance benefits as losses in order to appropriate for the retirement benefits of executives or employees in each business year, they shall be included in the calculation of losses within the limit of the amount calculated as prescribed by the Presidential Decree.

(2) Where a domestic corporation which has included allowances for severance benefits in the calculation of losses under paragraph (1) pays severance benefits to executives or employees, the relevant allowances for severance benefits shall be first paid.

(3) Where a domestic corporation which has included allowances for severance benefits in the calculation of losses under the provisions of paragraph (1) is merged or divided, the amount transferred to a merged corporation, a corporation established through division, or a counterpart corporation to a division and merger (hereinafter referred to as "merged corporation") from among the allowances for severance benefits as of the registration date of the merger or the registration date of the division of the

(4) The provisions of paragraph (3) shall apply mutatis mutandis where an entrepreneur comprehensively transfers the business to a domestic corporation.

(5) A domestic corporation which intends to be subjected to paragraph (1) shall submit a detailed statement on allowances for severance and retirement benefits to the head of the tax office having jurisdiction over the place of

(6) Matters necessary for handling the allowances for severance benefits under paragraphs (1) through (4) shall be prescribed by the Presidential Decree.

○ Article 49 of the Corporate Tax Act and succession, etc. to assets and liabilities at the time of merger or division

Where a domestic corporation merges or divides, matters necessary for the disposal of the amount, etc. included or not included in the calculation of earnings or losses and the succession, etc. of assets and liabilities of a merged corporation, divided corporation, or extinguished counterpart corporation to a merger and division (hereinafter referred to as "merged corporation") in the calculation of the income amount and the tax base for each business year, except as otherwise provided in this Act or other Acts and subordinate statutes, shall be prescribed by Presidential Decree.

○ General Rule 2-6-313 of the former Corporate Tax Act (Disposition of retirement benefits, etc. at the time of employee acquisition or transfer due to business transfer, acquisition, etc.)

(1) Where a corporation has agreed to accept (including takeover of an organization retirement insurance contract) the total amount equivalent to retirement benefits to be paid by all the employees at the time of takeover on the grounds of the following subparagraphs, and to pay the retirement allowances of the relevant employee in accordance with the retirement allowance payment regulations of the relevant corporation by adding up the period of service at the time of payment of retirement allowances to the employees, the estimated amount of retirement benefits under Article 18 (3) of the Decree may be calculated by adding

1. When he has taken over (including the acquisition of one workplace or business from among several workplaces or businesses) a business from another corporation or an individual entrepreneur;

2. Merger of corporations;

3. Transfer of entry between persons interested in an office or indirect investment under the proviso to Article 13(4) of the Rule;

(2) Where the retirement benefits amount at the time of acquisition is not received from a former business operator or are deficient and the total period of service made by a former business operator is to be paid as retirement benefits, the amount not accepted or insufficient shall be prepared by considering the acquisition amount of liabilities that have no obligation to pay to the relevant corporation, a detailed statement equivalent to the amount of the retirement benefits for each employee's retirement benefits shall be included in deductible expenses in the calculation of income amount for each business year of the business year in which the date of acquisition falls, and the same amount shall be reserved in deductible expenses and the amount reverted to the relevant employee in the calculation of deductible expenses shall be reserved in the calculation of income amount of each business year in which the date

(3) If a corporation which has acquired an employee separately manages the amount exceeding 50/100 of the estimated amount of retirement benefits as at the time of acquisition among the amount received for retirement benefits under paragraph (1), and appropriates the amount for retirement benefits to be paid at the time of the employee's retirement, such amount shall not be included in the accumulated amount of retirement benefits allowances under Article

(4) Notwithstanding the provisions of Article 13 of the Act and Article 18 of the Decree, an amount equivalent to retirement benefits at the time of transfer of employees paid by a corporation to an employee who takes over the employee where the employment relationship with the employee is substantially extinguished by transferring the employee to another business operator shall be offset by the retirement benefits reserve funds and the

○ Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17338 of August 14, 2001)

Article 85 Succession, etc. to Assets and Liabilities at the time of merger or division

(2) Where a domestic corporation divides, the amount included or not included in the calculation of earnings or losses in the calculation of the income amount and tax base of the divided corporation (including extinguished counterpart corporation to a division and merger; hereafter in this Article the same shall apply) for each business year, except as otherwise provided in the Act or other Acts and subordinate statutes, shall

1. A corporation newly established by division (including a counterpart corporation to a division and merger; hereafter in this Article the same shall apply) may succeed to the compressed accounts reserve fund and lump sum depreciation reserve fund;

2. The earnings or the amount not included in the calculation of losses of a divided corporation before the arrival of the fiscal year of accrual of losses under Article 40 of the Act shall be succeeded to the corporation established through division in accordance with the fiscal year of accrual; and

3. The amount that is not included in earnings or losses in connection with depreciation, the appraisal provided for in Article 42 of the Act or the tax adjustment shall not be succeeded to any corporation newly established by division: Provided, That the amount that is not included in earnings or losses or the amount that is not prescribed by the Ordinance of the Ministry of Finance and Economy in connection with the accumulation of the allowance for severance benefits and the appraisal of

(3) Other necessary matters concerning the succession of amounts under paragraphs (1) and (2) shall be prescribed by the Ordinance of the Ministry of Finance and Economy.

○ 부칙 ⟨제17033호, 2000. 12. 29⟩ 제8조 분할평가차익상당액의 손금산입 등에 관한 적용례

The amended provisions of the proviso to Article 82 (3) 2, the proviso to Article 85 (1) 3, and the proviso to Article 85 (2) 3 shall apply to the portion merged or divided in the business year in which this Decree enters into force.

○ Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 18706 of Feb. 19, 2005)

Article 85 Succession, etc. to Assets and Liabilities at the time of merger or division

(2) Where a domestic corporation divides, the amount included or not included in the calculation of earnings or losses in the calculation of the income amount and tax base of the divided corporation (including extinguished counterpart corporation to a division and merger; hereafter in this Article the same shall apply) for each business year, except as otherwise provided in the Act or other Acts and subordinate statutes, shall

1. A corporation newly established by division (including a counterpart corporation to a division and merger; hereafter in this Article the same shall apply) may succeed to the compressed accounts reserve fund and lump sum depreciation reserve fund;

2. The earnings or the amount not included in the calculation of losses of a divided corporation before the arrival of the fiscal year of accrual of losses under Article 40 of the Act shall be succeeded to the corporation established through division in accordance with the fiscal year of accrual; and

3. The amount that is not included in earnings or losses in connection with depreciation, the appraisal provided for in Article 42 of the Act and the tax adjustment shall not be succeeded to any corporation newly established by division: Provided, That the amount falling under each of the following items may be succeeded to any corporation newly established by division:

(a) Amount that is not included in earnings or losses in connection with accumulation of the allowance for severance and retirement benefits and the allowance for bad debts or the appraisal of securities in compliance with the corporate accounting standards;

(b) The amount that is not included in earnings or losses in connection with the readjustment of bonds and liabilities, the appraisal of the current value of bonds and liabilities, and the accumulation of the reserve for payment guarantee in accordance with the corporate accounting standards;

(c) Reserves included in deductible expenses under the Restriction of Special Taxation Act;

(d) Other amounts prescribed by the Ordinance of the Ministry of Finance and Economy.

○ 부칙 ⟨제17457호, 2001.12.31⟩ 제14조 합병·분할시 자산·부채의 승계 등에 관한 적용례

The amended provisions of Article 85 shall apply to the portion merged or divided in the business year to which the date of promulgation of this Decree belongs.

○ General Rules of Corporate Tax Act ( November 1, 2001)

Addenda

Article 1 (Enforcement Date) The General Rules shall enter into force on November 1, 2001.

Article 4 (Special Cases of Application)

(3) The amount equivalent to the estimated amount of retirement benefits separately managed by each employee under the former provisions of Article 2-6-313 (3) of the Act shall be deemed the allowance for severance benefits held by the corporation which has acquired the employee in the business year which includes the date on which the general provisions are implemented, and the provisions of Article 33

C. Determination

(1) Whether the principle of good faith or non-taxable practice is violated

(A) The principle of trust and good faith in taxation is the same as a closed-end legal principle that the tax authority should not infringe on a taxpayer's interest who has trusted and acted on its own speech and behavior. Accordingly, the requirement to apply the principle of trust and good faith lies first, the tax authority must issue a public opinion that is the object of trust to the taxpayer; second, there is no reason for the taxpayer to believe that the statement of opinion by the tax authority is justifiable; third, the taxpayer must trust the statement of opinion and engage in the act in accordance with it; fourth, the taxpayer's interest should be infringed by the disposition against the opinion already expressed by the tax authority (see, e.g., Supreme Court Decision 86Nu101, Sept. 13, 198). In addition, Article 18(3) of the Framework Act on National Taxes provides that "after the interpretation of tax-related Acts or practices have been generally accepted by the taxpayers, the act or calculation by the said interpretation or practice should not be imposed retroactively by a new interpretation or practice, and thus, the tax authority's opinion or practice should not be imposed explicitly for a considerable period of taxation.

Therefore, the principle of trust and good faith or the principle of non-taxation is legitimate to prohibit a tax authority from taking a retroactive disposition against a past speech and behavior, and to correct the past speech and behavior in the future, and then dispose of it to the future. Thus, the imposition disposition corrected by a statement of opinion in the past cannot be deemed a disposition in violation of the principle of trust and good faith or the principle of non-taxation (see Supreme Court Decision 92Nu5478, Feb. 12, 1993). In this context, in a case where the enactment or amendment of tax-related Acts and subordinate statutes or the principles of interpretation or disposition by the tax authority on the grounds that the pertinent Acts and subordinate statutes cannot be applied to the facts which were closed before the occurrence of the validity, or new Acts and subordinate statutes, etc. are not restricted to the fact that the relevant Acts and subordinate statutes cannot be applied to the facts which were pending before the occurrence of the validity (see Supreme Court Decision 94Nu14308, Aug. 11, 1995).

(B) In light of the Plaintiff’s assertion, even though the tax authority’s general rule 2-6-313(3) of the former Corporate Tax Act is deemed to be an expression of public opinion of the tax authority, the tax authority’s deletion of the above general rule provision according to the amendment of the relevant laws and regulations, and the new provision of the supplementary rule of the Corporate Tax Act newly provides for the supplementary provision of the Corporate Tax Act would impose corporate tax from the beginning of business to which the date of the general rule’s entry into force belongs on the “amount equivalent to the estimated retirement benefits managed separately by each employee,” which is not subject to corporate tax. This can be deemed to have expressed a new public opinion that the tax authority would correct the past’s speech and behavior and thereby make a tax disposition future. Therefore, insofar as the tax disposition based on the corrected public opinion expressed by the tax

Therefore, as seen above, it is clear that the disposition of this case is subject to taxation on the basis of the existence and amount of "amount equivalent to the estimated amount of retirement benefits separately managed by each employee" in the pertinent taxable year on the basis of the portion after 2001 business year, which is the business year which includes the date of enforcement of the general rules of the Corporate Tax Act, which is the basic date of the amended Corporate Tax Act. It is clear that the amount equivalent to the estimated amount of retirement benefits separately managed by each employee prior to the amendment of the common rules of the Corporate Tax Act, even if the "amount equivalent to the estimated amount of retirement benefits for each employee" which is the subject of the disposition of this case was divided from ○○○○○ before the amendment of the basic rules of the Corporate Tax Act, and there was an excess amount by calculating the retirement benefits payment limit for the pertinent business year as the retirement benefits payment reserve for the pertinent business year, which is the date of enforcement of the amended common rules of the Corporate Tax Act, and it cannot be deemed that the tax authority was retroactively subject to taxation prior to the amendment of the Corporate Tax Act.

Therefore, as long as the instant disposition does not constitute a retroactive taxation, the Plaintiff’s assertion that it violates the principle of good faith and non-taxation on the premise that it is a retroactive taxation is without merit without examining the remaining points.

(2) Whether it is double taxation

Comprehensively taking account of the overall purport of the arguments in each of the statements No. 13-1, No. 14-2, No. 15-3 of the evidence No. 14-2, and No. 15-3 of the evidence No. 13, ○○○○○○, a corporation prior to the division, for each of the business years 1997 through No. 19999, 199, and each of the business years 199, ○○○○ was 0 won in excess of the maximum amount of inclusion in deductible expenses among the allowances for severance benefits established by ○○○○ in each of the business years 1997 through No. 1999. Thus, there is no corporate tax imposed on the portion that ○○○○○, a corporation prior to the division, appropriated as the amount of allowances for severance benefits under the accounts from 199 to 199.

Meanwhile, in 200, the fact that ○○○○ transferred KRW 13,127,917,372, the estimated amount of retirement benefits, which is a debt equivalent to the retirement benefits payable to the Plaintiff to the previous employee, to the Plaintiff, was transferred to the Plaintiff. As seen above, 13,127,917,372 won, which is the estimated amount of the retirement benefits, was excluded from the calculation of the retirement benefits allowance limit in the business year 2000 when the said amount was transferred to the Plaintiff during the business year 2000, and thus, the corporate tax was not imposed on ○○○, a corporation prior to the division, on the above amount.

Therefore, the Plaintiff’s double taxation assertion based on the premise that a considerable portion of the balance of the allowance for severance and retirement benefits that ○○○○○○, a corporation prior to the division, is subject to the deductible expenses before the division of the corporation, and the corporate tax has already been imposed on ○○○, a corporation prior to the division, is without merit.

(3) Sub-decisions

Therefore, the defendant's disposition of this case is legitimate.

3. Conclusion

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

[Seoul High Court Decision 2008Nu8781, 2008.30]

1. The plaintiff's appeal is dismissed.

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

The decision of the first instance shall be revoked. The defendant's disposition of imposition of KRW 872,685,180 for the plaintiff on August 18, 2005 (which appears to be a clerical error in August 1, 2005), the disposition of imposition of KRW 872,685,180 for the business year 2001, the portion exceeding KRW 117,895,70 for the corporate tax belonging to the business year 2002, the disposition of imposition of KRW 146,486,390 for the business year 203, and the disposition of imposition of KRW 49,243,010 for the corporate tax belonging to the business year 204 shall be revoked.

This Court's reasoning is "the third 8th of the judgment of the first instance court" and "the third 8th of August 1, 2005" in front of the 8th th th th th th th th th th th th th th th th th th th th th th th," and "the amount exceeding 50/100 of the estimated amount of retirement benefits at the time of acquisition of retirement benefits out of the total th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th th,".

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just, and the plaintiff's appeal is dismissed as it is without merit, and it is so decided as per Disposition.