The date of accrual of earnings from shares of the Non-Performing Loan Resolution Fund shall be the business year in which the actual shares are paid.

The date of accrual of earnings from the shares of the Non-Performing Loan Resolution Fund shall not be the business year in which the profits of the Non-Performing Loan Resolution Fund accrue, but the actual

Article 104-11 of the Restriction of Special Taxation Act

2014Guhap8551 Revocation of Disposition of Rejecting Corporate Tax

AAAAA

BB Director of the Tax Office

July 24, 2015

1. The plaintiff's claim is dismissed.

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

The defendant's rejection disposition against the plaintiff on June 18, 2013 against the plaintiff of KRW 170,553,680 (related to the shares of the Non-Performing Loan Resolution Fund) shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a financial institution that has contributed to the Non-Performing Loan Resolution Fund established in the Korea Asset Management Corporation (hereinafter “Korea Asset Management Corporation”) (hereinafter “Korea Asset Management Corporation”) (hereinafter “Korea Asset Management Corporation”) without distinguishing the name before and after the change.

B. The Plaintiff received the amount of KRW 775,244,00 from the business of the Fund in 2009 as a dividend (hereinafter “distribution of this case”) and reported and paid corporate tax as the total revenue dividends in the business year 2009.

C. On March 29, 2013, the Plaintiff filed a claim for correction of the tax base and amount of corporate tax for the business year 2009 (hereinafter “instant claim for correction”) with the Defendant on the ground that the time when the amount of the instant distribution is reverted to the income is prior to the business year 2007. However, on June 18, 2013, the Defendant rendered a disposition rejecting the Plaintiff’s claim for correction (hereinafter “instant disposition”) on the ground that the amount of the instant distribution is not subject to exclusion from taxable income for the business year 2009.

D. On September 13, 2013, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but was dismissed on January 28, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 and 2, the purport of the whole pleadings

2. Judgment on the Defendant’s main defense

A. The defendant's main defense

1) The Plaintiff invested the instant shares in the credit recovery company pursuant to Article 104-11(1) of the former Restriction of Special Taxation Act (amended by Act No. 9584, Apr. 1, 2009; hereinafter “former Restriction of Special Taxation Act”) and included the amount equivalent to the relevant investments in deductible expenses for the business year of 2009. In comparison with the foregoing case and the case where the instant shares are not included in the gross income for the business year of 2009 and the amount equivalent to the said investments is not included in the deductible expenses for the business year of 2009, there is no change in the tax base of corporate tax for the business year of 2009. Accordingly, the instant

2) The Plaintiff reported and paid corporate tax on the ground that the time when the amount of the instant claim for correction was reverted to the business year of 2009, and again, it was before the business year of 2007, on March 29, 2013, which was the day immediately preceding March 31, 2013, which was the deadline for filing a request for correction of the instant claim. If the Plaintiff’s assertion is accepted, the Defendant is unable to impose corporate tax for the business year of 2003 to 2007, which had already been subject to the statutory period for exclusion of corporate tax for the business year of 2003 to 2007. As such, the Plaintiff’s filing of the instant claim for correction after the statutory period for exclusion of corporate tax for the business year of 2003 to

B. Determination

1) As to the assertion that there is no benefit of lawsuit

Article 104-11 (1) of the former Restriction of Special Taxation Act provides that where a financial institution intends to acquire stocks by investing in a corporation designated by the Minister of Strategy and Finance, which is a corporation for the purpose of supporting the recovery of credit from the financial underprivileged by the end of the business year following the business year in which the date it received the residual property from the Non-Performing Loan Resolution Fund after being returned, it may include the amount to be invested in deductible expenses in calculating the amount of income for the business year to which the date it received the return belongs, and "the corporation designated by the Minister of Strategy and Finance as a corporation for the purpose of supporting the recovery of credit from the financial underprivileged" is the Korea Credit Counseling and Recovery Fund. However, there is no evidence to prove that the Plaintiff invested the amount of the instant shares in accordance with the above provision in the Credit Counseling and Recovery Fund, while there is no evidence to prove

In addition to the purport of the whole, the plaintiff is recognized to have disbursed the amount distributed in this case as a contribution to the Foundation of Small and Medium Enterprise in the business year 2009. Thus, the defendant's assertion on the premise that the plaintiff invested the amount distributed in the Credit Counseling Fund of the Corporation

2) As to the assertion that the principle of invalidation is violated

When the plaintiff filed a claim for correction of corporate tax for the business year 2009 within the deadline for filing the lawsuit in this case, the defendant cannot be deemed to have a legitimate expectation that the plaintiff would not exercise his/her right, even if considering the grounds alleged by the defendant, so the plaintiff's claim for correction against corporate tax for the business year 2009 and filing the lawsuit in this case as to the rejection disposition cannot be deemed to have abused his/her right to file the lawsuit in this case to the extent that the right to file the lawsuit in this case would be denied. Accordingly,

3. Whether the instant disposition is lawful

A. The plaintiff's assertion

The Fund is not a juristic person, and it does not constitute a “organization deemed a juristic person without meeting the requirements prescribed in Article 13(1) or (2) of the former Framework Act on National Taxes (amended by Act No. 9911, Jan. 1, 2010; hereinafter “former Framework Act on National Taxes”). Rather, the legal nature of the Fund is a joint business or trust property. Rather, even in the case of a joint business or trust property, the time when the amount of profit and loss accrued from the Fund accrued to the Plaintiff is not the business year 2009, which the Plaintiff actually received the instant amount of profit and loss, but rather the business year 2007, which occurred from the Fund. Accordingly, the instant disposition was unlawful on the premise that the instant amount of profit and loss was reverted to the Plaintiff in the business year 200

B. Relevant statutes

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

(c) Fact of recognition;

1) The Fund was established on November 24, 1997 on the basis of the former Act on the Establishment of the Non-Performing Assets Management Corporation of Non-Performing Assets, etc. (amended by Act No. 5371 of Aug. 22, 1997 and amended by Act No. 5505 of Jan. 13, 1998; hereinafter referred to as the “former Act”). The Fund was raised from financial institutions’ contributions, funds transferred from the Corporation of this case, funds created from the issuance of Non-Performing Loan Resolution Fund bonds, etc. from 1997 to 2008 as follows.

Year

Contributions from a financial institution (won)

Government contributions (won)

Total contributions (won)

Jinay

1997

568,000,000,000

568,000,000,000

1998

573,380,000,000

573,380,000,000

199

573,380,000,000

573,380,000,000

200

573,380,000,000

573,380,000,000

201

573,380,000,000

573,380,000,000

202

573,380,000,000

573,380,000,000

2003

573,380,000,000

3,505,66,000,000

4,079,046,000,00

Contribution of Public Funds

204

573,380,000,000

3,505,66,000,000

4,079,046,000,00

205

573,380,000,000

3,505,66,000,000

4,079,046,000,00

206

573,380,000,000

3,505,66,000,000

4,079,046,000,00

2007

573,380,000,000

505,666,00,000

1,079,046,000,000

Return of 3 trillion won of Public Funds

208

573,380,000,000

573,380,000,000

Return of 0.5 trillion won of Public Funds

2) Article 2(3) of the Addenda to the former Act stipulates that the remaining property of the Fund shall be returned to the invested financial institution after the end of the operating period of the Fund. However, on December 21, 2007, the foregoing provision was amended as follows, and the grounds for returning the remaining property of the Fund was established even before the end of the operating period.

▣ 구법 부칙

Article 2 (Operation Period, etc. of Fund)

(3) Where the repayment of principal and interest of bonds and borrowings and disposal of acquired assets, etc. are completed after the operation period of the Fund referred to in paragraph (1) expires, residual property of the Fund shall be returned to the relevant institution according to the disposal standards in consideration of the contribution ratio, etc. referred to in Article 39 (1) 1

▣ 금융기관부실자산 등의 효율적 처리 및 한국자산관리공사의 설립에 관한 법률(2007. 12. 21. 법률 제8698호로 개정된 것) 부칙

Article 2 (Operation Period, etc. of Fund)

(5) The Fund shall complete repayment of principal and interest of bonds and loans and disposal of acquired assets, etc. by the date on which the operation period under paragraph (4) expires, and shall return residual assets to persons who make contributions, etc. according to the standards for disposal taking into account the ratio of contributions, etc. within three months after the expiration of the operation period: Provided, That where it is clear that the Minister of Finance and Economy has residual assets at the end of the operation period as a result of an actual inspection of assets and liabilities of the Fund under Article 7 (1) of the Public Capital Redemption Fund Act, and it is possible to estimate such amount

3) Pursuant to the above revised supplementary provision, the Fund paid shares in the year 2008 and 2009, which was before the end of the operating period, to the funded financial institutions including the Plaintiff, and the Plaintiff received each payment of KRW 7,116,00,00 in the year 2008, and KRW 775,24,000 in the year 209.

4) Meanwhile, the instant fund is KRW 24,002,00,000,000 in the business year 1999, and the business year 2008

160,01,00,000 won, and 64,100,000,000 won in each business year in 2009 as corporate tax (from 2000 to 2002, there was no income or the tax base was zero won, and the corporate tax was not paid from 2003 to 2007).

[Ground of recognition] Facts without dispute, Gap evidence No. 5, Eul evidence No. 6, the purport of the whole pleadings

D. Determination

1) The issue of when the instant amount distributed is reverted to the Plaintiff, and it is connected to the legal nature of the instant fund. If the instant amount is deemed a corporation under the tax law, the income accrued from the instant fund was reverted to the instant fund at the time of occurrence, and the said fund was paid to the Plaintiff, including the Plaintiff. If the instant amount is not recognized as a corporation under the tax law, the income accrued from the said fund will be attributed to the beneficiary at the time of occurrence of the said fund. In addition, if the instant amount is not recognized as a corporation under the tax law, the period of attribution of the instant amount distributed would vary depending on whether the beneficiary of the said fund is deemed a financial institution or a third party.

2) Comprehensively taking account of the following circumstances, the Fund should be deemed as falling under the following “organization deemed as a corporation” under Article 13(1)2 of the former Framework Act on National Taxes.

▣ 구 국세기본법

Article 13 (Organization Deemed a Juristic Person)

(1) This Act and other tax-related Acts shall apply to an unincorporated association, foundation or organization (hereinafter referred to as "unincorporated organization") which falls under any of the following subparagraphs and which does not distribute profits to its members as a corporation:

1. Any unregistered organization, foundation or other organization which is established with permission or authorization of the competent authority or registered with the competent authority under Acts and subordinate statutes;

2. Foundations which hold any basic property contributed for the public interest, but not registered.

가) 먼저, 공익을 목적으로 출연된 기본재산이 있는지 여부에 대하여 보면, 이 사건 기금은 금융기관이 보유하고 있는 부실채권 등의 효율적인 정리를 위해 설치되었고(구법 제38조), 기금은 원고와 같은 금융기관의 출연금 뿐만 아니라 이 사건 공사가 발행한 부실채권정리기금채권으로 조성한 자금, 한국은행으로부터의 차입금 등의 재원으로 조성되며(구법 제39조 제1항), 기금은 금융기관의 부실채권 및 부실징후기업의 자구계획대상자산의 인수 등에 사용된다(구법 제41조 제2항 제1호). 또한 이 사건 공사는 공익을 위하여 특히 인수할 필요가 있다고 인정되는 부실자산이나 이해관계인이 많아 정리의 효과가 큰 부실자산을 우선적으로 인수할 수 있다(구법 시행령 제6조 제1항 제1, 2호). 또한 이 사건 기금과 같이 국가재정법의 적용을 받는 기금은 기금의 설치목적과 공익에 맞게 기금을 관리・운용하여야 하고(국가재정법 제62조), 정부가 기금운용계획안을 회계연도 개시 90일 전까지 국회에 제출하도록 하여 기금운용에 관하여 국회의 통제를 받도록 하고 있으며(위 법 제66, 67, 68조), 위 기금과 이 사건 공사의 회계는 구분된다(구법 제43조 제2항).

Considering the purpose of the establishment of the Fund, methods of raising financial resources, restrictions on the use of the Fund, possibility of preferential acquisition of non-performing assets due to the need for public interest, methods of management and operation of the Fund, and the establishment of the Fund as part of the comprehensive measures for financial market stability and financial industry restructuring immediately after the so-called 'IMF foreign exchange crisis', the Fund of this case is not simply intended to assist financial institutions in liquidation of non-performing loans and support financial institutions, but it is more for the public interest purpose to prevent damages that can be seen by the majority of the public in advance by effectively arranging non-performing loans to improve the liquidity and soundness of assets of financial institutions. Accordingly, the Fund of this case constitutes an endowment contributed for public interest purpose.

B) We examine whether the instant fund has the substance of the Foundation. It refers to a group of property formed for a certain nonprofit purpose and has a uniform management organization independently from contributors and other specific individuals, but is not granted legal personality. The instant fund is established based on the former Act. Since the purpose of the establishment of the said fund, the method of raising the fund, the method of managing and operating the fund, the accounting and the executive organ are stipulated in Articles 38 through 43 of the former Act, it is unnecessary to establish a separate articles of incorporation that determines the organization’s purpose, organization, business performance, etc. In addition, the said fund and the accounts of the instant corporation are separate (Article 43(2) of the former Act), the Non-Performing Loan Resolution Fund bonds shall be issued at the expense of the Fund (Article 40(1) of the former Act), and the settlement of accounts, balance sheets, and income statements shall be prepared (Article 42(2) of the former Act). For loans from the Bank of Korea, the instant fund constitutes an entity without legal personality as seen above.

C) Examining whether the Fund satisfies the requirements of “not to distribute profits to its members,” the Foundation is not a member of a financial institution that contributed to the Fund, as long as the Fund has the substance of the Foundation as above, since it is composed of assets, and Article 2(5) of the Addenda of the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation (amended by Act No. 8698, Dec. 21, 2007) provides that the Fund shall return its residual assets to the contributor after the end of the operating period of the Fund, such provision shall not be deemed to be a provision on the distribution of profits, as provided for in Article 80 of the Civil Act, which provides for the reversion of residual assets after the dissolution of

D) The following provisions seem to be premised on corporate personality under the tax law of the instant fund.

① The amount borrowed from the Bank of Korea is deemed to have been designated as a government agency under the Bank of Korea Act (Article 39(3) of the former Act). The term “government agency” in this context means a corporation that performs public projects or functions for the Government in producing, purchasing, selling or distributing (Article 85 of the former Bank of Korea Act (amended by Act No. 5491 of Dec. 31, 1997).

(2) One of the organizations deemed corporations under the provisions of the Corporate Tax Act shall be deemed as a corporation, and the fund shall be allowed to include the reserve fund for its proper purpose business in deductible expenses (Article 29(1) of the Corporate Tax Act and Article 56(1)3 of the Enforcement Decree of the same Act).

③ Article 2(1)8(d) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 20619, Feb. 22, 2008) regards the business related to the acquisition and liquidation of non-performing loans through the Non-Profit Loan Resolution Fund as a profit-making business on the premise that the Fund is a nonprofit corporation and takes the income accrued from such business as taxable income

3) In full view of the above circumstances, the Fund in this case constitutes a foundation with basic property contributed for the purpose of public interest under Article 13(1)2 of the Framework Act on National Taxes, and thus, it is recognized under tax law as being not registered. Therefore, the time when the Plaintiff received the instant amount distributed is the business year 2009, and thus, the Plaintiff’s tax base and tax amount of corporate tax for the business year 2009 is not subject to the Plaintiff’s request for correction under Article 45-2(1)1 of the former Framework Act on National Taxes (amended by Act No. 12848, Dec. 23, 2014). Accordingly, the instant disposition rejecting the Plaintiff’s request for correction is lawful.

4. Conclusion

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