Whether the beneficial owner of the instant stock transfer income and the Plaintiff are liable to withhold the tax.

The beneficial owner of the instant stock transfer income is the CCC, but it is reasonable to deem that the Plaintiff could not have known that the beneficial owner was CCC. Therefore, it cannot be deemed that the Plaintiff is obligated to withhold corporate tax on capital gains on the basis of CCC.

Article 98 (Special Cases of Withholding or Collection for Foreign Corporations)

2017Guhap75712 Revocation of a disposition, etc. of withholding tax

BB corporation BB

K Director of the Korean Tax Office

December 6, 2018

January 24, 2019

1. The collection disposition by the Defendant against the Plaintiff on April 17, 2015, for the 2010 Business Year Withholding Taxx (including additional taxes) shall be revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a corporation that runs the business of organizing and operating a franchise store including the operation of a general retail store, and the Korea AAA (hereinafter referred to as the “AA”) is a corporation established under the Netherlands (hereinafter referred to as the “ Netherlands”); (b) on January 25, 2010, the Plaintiff entered into a contract with AE (hereinafter referred to as the “E”) to purchase 000 shares of the EA (hereinafter referred to as the “E”) from a domestic person, such as EO, to purchase 00 shares (hereinafter referred to as the “instant sales contract”); and (c) on April 20, 2010, the Plaintiff acquired 00 shares, including the remaining 0 shares of the AA under the name of AA (OO).

C. On April 21, 2010, AA submitted to the director of the tax office BB an application for non-taxation and exemption of corporate tax under the Securities Transfer Income Tax Treaty, namely, KRW 000, the withheld tax amount of KRW 000, and KRW 000, and the non-taxation and exemption of corporate tax pursuant to the Securities Transfer Income Tax Treaty, pursuant to Article 14(4) of the Convention between the Government of the Republic of Korea and the Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income between the Government of the Republic of Korea and the Netherlands (hereinafter “Korea-N

D. From June 15, 2010 to July 19, 2010, the director of the Seoul Regional Tax Office: (a) investigated the portion of corporate tax withheld from June 15, 2010 to the Do government established for the purpose of tax avoidance; and (b) deemed the investors of the CCC L.P. (hereinafter “CCC”) located in Kamando as the beneficial owner of the instant stock transfer income; and (c) notified the head of the NN tax office of the taxation data related to the corporate tax withheld at source. Accordingly, on August 2, 2010, the director of the NN Tax Office decided and notified the Plaintiff of the corporate tax xx (including additional tax) for the investors of the countries that concluded the tax treaty among the investors (hereinafter “the previous disposition”).

E. After the Supreme Court decision was rendered that if a foreign unincorporated association, foundation, or other organization distributes domestic source income to an individual who is a partner and can be seen as a foreign corporation under the Corporate Tax Act, the organization should be deemed a taxpayer. The director of the Seoul Regional Tax Office reviewed the previous disposition of this case and notified the Defendant of taxation data by deeming the beneficial owner of the transfer income of this case as CCC rather than an investor. Accordingly, on April 17, 2015, the Defendant notified the Plaintiff of the correction and notification of the corporate tax xxx (including additional tax, no penalty tax is imposed) for the business year 2010 (hereinafter “instant disposition”).

F. The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Board of Audit and Inspection on May 25, 2017.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 5, Eul evidence Nos. 1, 2 and 5, the purport of the whole pleadings

2. Whether the disposition is lawful;

A. The plaintiff's assertion

For the following reasons, the instant disposition is unlawful.

1) A real beneficiary certificate

The defendant issued the disposition of this case on the premise that it is the beneficial owner of the capital gains of this case, and even if based on the investment structure, financial statements, etc. submitted by the defendant, the CCC did not prove that it is the beneficial owner.

2) Non-existence of withholding obligation

At the time of the purchase of the instant shares, the Plaintiff faithfully investigated the beneficial owner of the capital gains, thereby confirming the final investor. In light of the transaction process, it cannot be said that the CCC is the beneficial owner of the capital gains, and thus, the Plaintiff cannot be deemed to have the obligation to withhold taxes.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) AAA는 2006. 6. 27. EE의 최대주주인 주식회사 QQ(이하 'QQ'이라 한다)과 주식양수도계약을 체결하여, 2006. 7. 20. EE 홀딩스 주식회사(이하'EE홀딩스'라한다)는QQ이보유한EE주식 000주를 포함한 000주 전량을 인수하였고, 같은 날 EE는 임시주주총회의 결의에 따라 000주를 유상감자한 후 2008. 1. 31. EE 홀딩스를 흡수합병하였으며, 그 결과로 EE 홀딩스의 투자회사인 AAA는 합병대가로 이 사건 주식을 취득하였다. AAA는 ◇◇뱅크를 주간사로 정하고 이 사건 주식을 매각하려 하였고, 이를 위하여 2009. 10.경 투자설명서를 발행하였는데, 투자설명서 중 주요 내용은 아래와 같다.

2) Upon the Plaintiff’s request, △ Accounting Corporation’s major contents of the financial performance report prepared on December 30, 2009 with respect to EE are as follows.

3) The main contents of a sales contract dated January 25, 2010 concerning the instant shares are as follows.

4) The CCC investment flows submitted by the Defendant are as follows, and the CCC’s list of base investors on July 13, 2010 is as listed in the list of investors.

CCC (Kmanmando)

The "PPP (KS; hereinafter referred to as the "PPP")", "S (Luxembourg; hereinafter referred to as the "SS")", "CCC Netherlands."

The "RR (the Netherlands, hereinafter referred to as the "RR")", the AA (the Netherlands)

5) According to the financial statements of AA, AA does not have any other operating income from the transfer of the instant shares from March 3, 2006 until the business year 2009, and the number of employees is zero (based on December 31, 2006; December 31, 2008); one (based on December 31, 2007; December 31, 2007; December 31, 2009); and three (based on July 7, 201).

RR was dissolved on November 3, 201, and the CCC Netherlands was dissolved from 2006 to 2006, and the number of employees around September 201 was three. CCC Netherlands was dissolved on June 18, 2015, and the CCC Netherlands was dissolved from 2006 to 200, and the number of employees of the CCC Netherlands was 0.In addition, the only shareholder of SS is PP.

6) In relation to the investigation conducted by the director of the Seoul Regional Tax Office from June 15, 2010 to July 19, 2010, the contents indicated in the written request for examination by the Board of Audit and Inspection concerning the previous disposition of this case are as follows.

7) The main contents of the witness’s appearance before this Court are as follows.

8) The main contents of the witness HuO present at this Court and stated are as follows.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 4, 5, 10, 12, 13, 14, 16, Eul evidence Nos. 3, 4, 19, 22, testimony and the purport of the whole pleadings

D. Determination

1) Determination on the beneficial owner

A) Article 93 subparagraph 10 (a) of the Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter "the Corporate Tax Act") provides that one of the domestic source income of a foreign corporation shall include "income prescribed by Presidential Decree from transfer of stocks, investment shares, or other securities issued by the domestic corporation", and the main sentence of Article 98 (1) provides that "the domestic source income under subparagraphs 1, 2, 4 through 7, and 9 through 11 of Article 93 which is not substantially related to the domestic place of business or is not attributed to the domestic place of business (including the amount paid to a foreign corporation with no domestic place of business), and the amount of income (including the amount paid to the foreign corporation with no domestic place of business), which is less than the amount of acquisition tax for each business year of the concerned corporation and shall be paid at the district tax office having jurisdiction over the place of tax payment by the 10th day of the month following the date of withholding under the proviso of Article 93 (10).

Meanwhile, the principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes, in cases where there is a separate person to whom such income, profit, property, and transaction belongs, unlike the nominal owner, should be the person to whom such income, profit, property, and transaction belong. Thus, the nominal owner of the property does not have the ability to control and manage the property, and there is a separate person who substantially controls and manages the property through the control, etc. over the nominal owner, and such disparity between the nominal owner and the substance arises from the purpose of tax evasion, income on the property shall be deemed to have been attributed to the person to whom the property is substantially controlled and managed, and such principle shall be deemed to be the person to whom the income tax belongs unless there is a special provision excluding the interpretation and application of a tax treaty with the same legal effect. However, in cases where a foreign unincorporated association, foundation, or other organization can be deemed to be a foreign corporation under Article 93 of the Corporate Tax Act, if it falls under a profit-making organization and distributes it to individuals, it shall be deemed to be the person to be the person to pay taxes.

B) In light of the above legal principles and the following circumstances, i.e., (1) SPP is composed of the Plaintiff’s overall arguments, (2) SPS’s Netherlands, and CCC Netherlands was the sole shareholder of RP. CCC’s investment shares on March 3, 2006, and CCC Netherlands was established by investing 100% of its shares. In light of SS, CCC Netherlands, RR, financial statements of AA, etc., it is not likely that there were essential tangible assets for its employees to engage in substantial business activities or to engage in business activities. In addition, CCC’s share acquisition and disposal of the PCC’s shares for profit-making purposes is not likely to have been carried out under the premise that CCC’s final investment and disposal of the shares were carried out under the premise that CCC’s investment and disposal of the shares were carried out under the control of PCC’s shares for subordinate investors.

2) Determination as to the existence of withholding obligation

A) Article 98(1)4 of the Corporate Tax Act provides that a foreign corporation shall withhold as corporate tax on income for each business year of the concerned corporation the amount of 10% (if the acquisition value and transfer expenses of the concerned securities are verified under the proviso of Article 92(2)2, the smaller of the amount equivalent to 10% of the amount paid, etc. or the amount equivalent to 20% of the amount calculated under the proviso of Article 92(2)2) of the amount paid at the time of payment, notwithstanding the provisions of Article 97, a person who pays capital gains from the stocks issued by the domestic corporation to the foreign corporation, namely, the income under Article 93 subparag. 10 of the same Act, which is not substantially related to the domestic place of business, or who is not attributed to the said place of business. Accordingly, the person who pays capital gains from the stocks issued by the domestic corporation to the foreign corporation is liable to withhold corporate tax on the income by applying the tax treaty, etc. concluded with the country in which the Republic of Korea is a resident.

In addition, the principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes applies to withholding tax on capital gains from stocks issued by a domestic corporation under Article 98(1)4 of the Corporate Tax Act. Thus, barring any special circumstance, a person who pays capital gains from the transfer of stocks issued by a domestic corporation is obligated to withhold corporate tax on the income based on the person to whom the income actually accrues after investigating whether the person to whom the income substantially accrues, unlike the nominal nominal ownership, exists. However, a person who pays capital gains from the stocks issued by a domestic corporation bears the duty to withhold corporate tax on the income upon a request for public interest, such as securing tax revenue early and promoting tax collection efficiency, while no other investigation authority granted by the tax authorities, such as the right of questioning and questioning, does not exist in view of the following: (a) the person who pays capital gains from the stocks issued by a domestic corporation, which is faithfully investigated and secured in the course of transaction or payment of income amount, may not be deemed liable to withhold corporate tax on the income based on the person to whom the income substantially accrues was actually known (see, etc.

B) In light of the above legal principles and the following circumstances acknowledged by adding the purport of the entire argument to the above facts, it is reasonable to deem that the Plaintiff could not have known that the beneficial owner of the transfer income of the instant shares was CCC, and therefore, it cannot be deemed that the Plaintiff is obligated to withhold corporate tax on the transfer income of the instant shares based on CCC. Therefore, the prior disposition of the instant case is unlawful on a different premise, and the Plaintiff’s assertion on this part is with merit.

① At the time of the previous disposition of this case, it was common to impose tax on the members of the Plaintiff in accordance with the Note 8.8 to Article 4 of the OECD Model Convention and the Supreme Court precedents regarding whether to impose tax on the foreign investment organization by deeming that it would be deemed as a juristic person or not in stock transaction related to foreign investment organization, and thus, whether it should be imposed on the foreign investment organization. Therefore, the Plaintiff appears to set the amount of tax Escro of the instant tax Escro contract at KRW 00 after investigating the shares and nationality of the final investor, namely, the Plaintiff’s class members, namely, the final investor, and examining the conclusion of the tax treaty.

② 이 사건에서 △△회계법인이 재무실사보고서를 작성함에 있어 대상 자료는 매각자문사인 ◇◇뱅크와 EE가 제공하였는데, 위 재무실사보고서에 매도인 측 투자구조의 기재는 나타나지 않았고, 그후의 계약 체결과정에서도 위 투자구조가 알려진 바 없었다. 또한, 2010. 1.경 홍콩에서 이루어진 협상 과정에서 참석자는 □□의 유OO, ◇◇뱅크의 권OO과 변호사 2명뿐이며, CCC의 소속 직원이나 관계자 등이 참여하거나 그 명칭이 드러난 바 없으며, 원고는 매각을 주관한 □□이나 매각자문사인 ◇◇뱅크 등에 대하여 최종투자자 명단을 제공하여 달라고 요청하였으나 매도인 측의 거부로 이를 받지 못하였고, 매도인 측 대리인인 ZZ회계법인의 사무실에서 투자자 명단을 확인하는 것만 허용받아 원고 측 회계사인 허OO가 ZZ회계법인을 방문하여 투자자 이름, 지분율, 국가 등이 기재되어 있는 자료를 단순히 열람한 것으로 보일 뿐이어서 원고로서는 이 사건 매매계약 체결과 대금 지급 과정에서 매도인 측의 투자구조를 알 수 없었을 것으로 보이고, 달리 원고가 이 사건 주식 매수 무렵 CCC를 실질귀속자로 인식할 수는 없었다고 보인다.

③ Furthermore, under the instant sales contract, the Plaintiff did not have the contractual authority to request documents or investment structures necessary to determine the beneficial owner of the instant shares of the Plaintiff. As such, the Plaintiff appears not to have been in a situation where it would have been possible for the Plaintiff to request and carry out such requirements despite the seller’s intent to refuse the refusal. As long as the Plaintiff did not know of such superior investors as CCC, PPP, SS, CCC Netherlands, and RR in addition to AAA, it would have been inevitable to recognize △ or final investors as the seller’s GP or investor.

④ On June 21, 2010, the Defendant appeared on behalf of the Plaintiff, and thereafter rejected the statement as stated in the evidence No. 13 (written confirmation), but later, the confirmation was rejected. The Plaintiff and AAA gave advice to the Plaintiff that there was a withholding RIK at the time of negotiations on the price of the stocks in Hong Kong, and the AAA stated that “AA shall confirm the actual investors of the CCC, a superior fund, at the office of the AA Accounting Corporation, the seller’s agent, and that “AA shall confirm the actual investors of the CCC, a superior fund, at the office of the AA Accounting Corporation,” so the CCC was argued to the effect that it was the beneficial owner of the transfer income of the stocks of this case. However, the said written confirmation did not have any seal or signature in the printed form, and it is difficult to view it as the HuO’s statement. Therefore, the Defendant’s assertion is rejected

⑤ The Defendant, if the Plaintiff secured materials by faithfully investigating the income amount in the process of paying the income amount, could have known that the actual person to whom the income actually accrued was CCC. However, the Plaintiff asserted to the effect that the Plaintiff did not faithfully investigate the actual person to whom the income actually accrued. However, the Plaintiff is liable for withholding taxes upon a public demand, such as securing tax revenue early and promoting tax collection efficiency, while the Plaintiff did not have any investigation authority granted to the tax authority, such as the right to questioning and inspection. In the previous disposition of this case, the Plaintiff was a general agent of imposing taxes on the members in relation to the share transaction related to a foreign investment organization. The Plaintiff set the amount of the instant tax EP contract based on the list of final investors, and the previous disposition of this case was made within the amount of tax EP, and the Plaintiff could not verify the investment structure in the process of EE’s financial affairs or subsequent negotiations upon request from △ Accounting Firm. In full view of the above, it is difficult to deem that the Plaintiff conducted an investigation in good faith to secure data.

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition.