Education Tax for valuation profit and loss such as currency guidance;

The valuation profit and loss such as monetary guidance falls under the "other profit and loss" under Article 4 (1) 8 of the Enforcement Decree of the Education Tax Act and it is impossible to add it to subparagraph 5 of the same paragraph.

Article 4 of the Enforcement Decree of Education Tax Act

2015Guhap74869 and revocation of disposition of imposing education tax and corporate tax

△△ Bank

Head of the tax office;

August 24, 2016

December 9, 2016

1. Of the instant lawsuit, the part of the claim for revocation of a corrective disposition of KRW 43,560,000 for the business year 208, Dec. 7, 2013, shall be dismissed.

2. The plaintiff's remaining claims are dismissed.

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

The Defendant’s disposition of correcting KRW 43,04,950 as corporate tax and KRW 205,921,780 as corporate tax and KRW 205,780 as of December 7, 2013 among the disposition of imposing each education tax and additional tax on the Plaintiff as stated in the list of education tax listed in the separate sheet of education tax on November 26, 2013 is revoked. The Defendant’s disposition of correcting KRW 603,560,00 as corporate tax for the business year 2010 and KRW 233,04,921,780 as of December 7, 2013.

1. Details of the disposition;

A. The Plaintiff is a foreign corporation established for the purpose of banking business, and is dealing with derivatives such as a monetary forward contract, currency swap contract, etc.

(b) Education tax assessment background;

1) Article 76(1)2 of the Enforcement Decree of the Corporate Tax Act provides that an amount appraised as of the date of concluding a contract or the end of a business year shall be reflected in assets or liabilities with respect to a currency forward and currency swap product held by a financial company, etc., and the Plaintiff has continuously reflected the currency forward, currency swap contract evaluation profit and loss (hereinafter “evaluation profit and loss”) on the basis of the end of a business year since the date when the corporate tax was reported in a business year 2007 in the tax base for corporate tax. Meanwhile, Article 5(3) of the Education Tax Act and Article 4(1)8 of the Enforcement Decree of the Education Tax Act set forth the operating profit and loss of the financial or insurance company, and the non-business profit and loss as the education tax base. The Plaintiff has reflected the evaluation profit and loss in the currency forward, currency swap contract, and transaction profit and loss (hereinafter “derivatives transaction profit and loss”).

2) On November 26, 2013, the Defendant conducted a corporate tax integration investigation against the Plaintiff, and as a result, the Plaintiff reported the education tax by making only profits among the valuation profits and losses in the instant case as other items of other business profits, but did not include them in the Asia’s education tax base from the first quarter to the fourth quarter of 2009, and on the ground that the instant valuation profits and losses, not the appraised profits and losses, were included in the assessment tax base from the first quarter to the second quarter of 2013, were included in the assessment income tax base, the Defendant issued a revised notice of education tax (including additional tax) as stated in the “tax amount imposed” list of education tax (hereinafter “instant disposition imposing education tax”).

(c) Particulars of corporate tax taxation;

After entering into a consulting contract with the retirement of the Bank of Korea from 2008 to 2012, the Plaintiff paid the service cost of KRW 13,200,000 each month, and then included the above service cost as deductible expenses for each business year in the corporate tax return process. On November 26, 2013, the Defendant notified the Plaintiff of the correction and notification of corporate tax of KRW 836,660,280 for the business year 2010 (hereinafter “instant disposition imposing corporate tax”). Since then, the Defendant, which was scheduled to pay to the Plaintiff, appropriated the instant corporate tax refund of KRW 440,053,560 for the business year 208, which was scheduled to pay to the Plaintiff, and notified the Plaintiff on December 7, 2013.

D. On February 21, 2014, the Plaintiff was dissatisfied with the instant imposition of education tax and the instant imposition of corporate tax, and filed an appeal with the Tax Tribunal on February 21, 2014, but was dismissed on June 25, 2015.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4 (including a serial number; hereinafter the same shall apply), the purport of the whole pleadings

2. Whether the part of the instant lawsuit seeking revocation of the corrective disposition of KRW 43,560,000 for the business year 2008, December 7, 2013 is legitimate

According to Article 51(1), (2), and Article 52 of the Framework Act on National Taxes and Article 31 and Article 33(1) of the Enforcement Decree of the same Act, where a taxpayer erroneously paid or overpaid the amount of national tax, surcharges, or expenses for disposition on default, or there is a tax refund to be refunded under the tax-related Acts, the head of a tax office shall immediately determine the amount of erroneous payment, the amount paid in excess, or the amount of refund, as a national tax refund, and determine the additional payment on refund of national taxes, in addition, in the case of each subparagraph of Article 51(2) of the Framework Act on National Taxes, he/she shall determine the amount of refund of national

As above, Article 26 subparag. 1 of the Framework Act on National Taxes stipulates that the appropriation of a national tax refund is separately stipulated in the tax-related Acts, and the tax liability is extinguished due to its effect (Article 26 subparag. 1 of the Framework Act on National Taxes). However, rather than a disposition that specifically and directly affects the existence, scope, or extinction of the right to claim the refund of the national tax held by the taxpayer, the appropriation is similar to offset under the Civil Act in that the State’s obligation to refund and the tax claim ceases to exist on an equal basis, and in cases where there is no tax claim extinguished, or where the extinguished tax claim is null and void or canceled on an inevitable basis, the appropriation is null and void. In such a case, the taxpayer may claim the return of the national tax refund already determined by civil procedure at any time on the ground that there is no effect of appropriation by the taxpayer. Thus, it cannot be deemed a disposition that is the object

Therefore, on December 7, 2013, the Plaintiff’s lawsuit seeking revocation by deeming that the Defendant notified the Plaintiff of the refund amount of corporate tax for the business year 2008 to be appropriated for the corporate tax of this case is unlawful.

3. Relevant statutes;

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

4. Whether the imposition of education tax of this case is legitimate;

A. The plaintiff's assertion

1) Since the instant valuation profit and loss is an intermediate stage for seeking final profit and loss, it is not possible to separate the valuation profit and loss from the derivatives trading profit and loss. If the valuation profit and loss in this case constitute other profit and loss under Article 4(1)9 of the Enforcement Decree of the Education Tax Act, the problem of double taxation arises, and since the valuation profit and loss in this case are the major profit and loss of the bank, it cannot be deemed as other profit and loss, in light of the fact that the valuation profit and loss in this case cannot be deemed as other profit and loss, it shall be included

2) Even if the instant valuation profit and loss constitutes other profit and loss under Article 4(1)8 of the Enforcement Decree of the Education Tax Act, Article 5(4) of the Education Tax Act provides that the tax base of the education tax shall be the total amount of revenue. In cases where the valuation profit and loss are incidental, Article 5(4) of the Education Tax Act provides that the assessment profit and loss shall be included in the tax base of the education tax; where the corporation which selected the method of recognizing the valuation profit and loss at the time of filing the corporate tax return and the corporation which selected the method of not recognizing the valuation profit and loss without being added; and where the assessment profit and loss is not added to

3) As seen in the above arguments, as long as the evaluation profit and loss of this case should be included in the education tax base, the evaluation profit and loss of this case should also be included in the tax base of education tax even in the taxable period prior to February 18, 2010, regardless of the amendment of the Enforcement Decree of the Education Tax Act of February 18,

(b) An overview of the Education Tax Act and the details of amendment under Article 4 of the Enforcement Decree of the Education Tax Act;

1) Article 1 of the Education Tax Act provides that the purpose of Article 1 is to secure the financial resources required for expanding the education finance in order to improve the quality of education. Article 5(1) and (3) of the same Act provides that the amount of education tax shall be calculated by multiplying the revenue amount of financial and insurance business entities by the relevant tax rate, but the above revenue amount means interest, dividend, commission, guarantee fee, securities sales profit and redemption profit, insurance premium and other amounts determined by Presidential Decree.

2) The revised details of Article 4 of the Enforcement Decree of the Education Tax Act upon delegation of Article 5(3) of the Education Tax Act are as follows.

The same shall apply in future.

D. Determination

1) Determination of the first argument (whether or not to include derivatives transaction profit and loss)

In light of the following circumstances, the valuation profit and loss of this case can not be included in the derivatives transaction profit and loss in light of the fact of recognition and the purport of the entire pleadings.

(1) The amount of education tax is not subject to net income, but subject to the revenue per se (Article 5(1) of the Education Tax Act). Accordingly, Article 4(1) of the Enforcement Decree of the Education Tax Act provides that the amount of revenue included in the education tax base shall be excluded from the tax base, and Article 4(2) of the Enforcement Decree of the same Act. Although the valuation profit or loss in the instant case falls under the interim phase before the final realization of derivatives as profit or loss from trading derivatives, Article 4(1)5 of the former Enforcement Decree of the Education Tax Act (amended by Presidential Decree No. 22046, Feb. 18, 2010) provides that “foreign exchange profit or loss (excluding foreign exchange profit)” in Article 4(2)2(a) of the former Enforcement Decree of the Education Tax Act (amended by Presidential Decree No. 22046, Feb. 18, 2010; Presidential Decree No. 22014, Feb. 21, 2014>

② In addition, derivative financial products transaction profits and derivative financial products evaluation profits are divided into other accounts in corporate accounting standards, and the Plaintiff also has included the transaction profits of derivative financial products and derivative financial products evaluation profits separately from the standard income statement from 2009 to 2012.

③ For the purpose of securing the financial resources required for expanding the education finance in order to improve the quality of education, the education tax stipulates that the revenue amount per se, unlike the ordinary revenue tax, shall be its tax base due to the unique nature of the purpose tax, which is the tax for securing the financial resources required for expanding the education finance (in addition, the taxation principle of foreign taxation). Article 8(1) of the Education Tax Act provides that the taxable period was set each quarter differently from the business year of the Corporate Tax Act until the amendment by Act No. 13620, Dec. 29, 2015. The unreasonable issue of taxation, such as double taxation, etc., pointed out by the Plaintiff, is due to the inherent limit in the education tax law system, which does not recognize the carried-over, while only the tax base is the revenue amount assessed every three months. Furthermore, if each quarterly tax base overlaps with the annual education tax base, it is difficult to regard

(4) Article 4 (1) 8 of the Enforcement Decree of the Education Tax Act provides a basis for inclusion in subparagraph 8 of Article 4 (1) of the Enforcement Decree of the Education Tax Act even if the amount of revenue not listed in Article 4 (1) 1 through 7 of the Enforcement Decree of the Education Tax Act, using a comprehensive term "other profit and loss from business and non-business profit". As seen above, so long as the evaluation profit and loss in this case is deemed not to constitute derivatives transaction profit and loss, it

(5) "Other operating income" in Article 4 (1) 8 of the Enforcement Decree of the Education Tax Act means (4) insofar as the revenue not enumerated in paragraph (1) 1 through 7 of the same Article should be interpreted in the language referring to the revenue, the plaintiff's assertion that the non-main part of the plaintiff's operating income should be classified into non-main operating income and other operating income is merely an independent opinion.

(6) Article 4 of the Enforcement Decree of the Education Tax Act has specified internal profits not deemed the revenue amount as the revision of February 18, 2010, and recognized the aggregate of foreign exchange transaction profits and losses deemed the revenue amount as the revision of July 14, 2011, and recognized the aggregate of the appraised profits and losses deemed the revenue amount as the revenue amount by the revision of February 3, 2015. In light of the circumstances where the Enforcement Decree of the Education Tax Act has specified the education tax base and recognized the aggregate of profits and losses, it is reasonable to interpret the content of the revision of February 3, 2015 as the constructive revision. If it is interpreted that the content of the amendment of February 3, 2015 was confirmed, it is difficult to permit the aggregate of the valuation profits and losses to be calculated retroactively until the time, as well as to the content of the amendment of July 14, 2011, causing a serious violation of the same legal stability.

2) Determination of the second assertion and whether the incidental amount should be recognized from other operating income

In light of the following circumstances, the amount of incidental (-) from other operating income may not be recognized, considering the following circumstances, which can be known according to the facts acknowledged as above and the purport of the entire pleadings:

(1) Article 5 (4) of the Education Tax Act provides that the revenue amount serving as the tax base shall be based on the total revenue amount of each taxable period prescribed in Article 8, but it shall be deemed that all the revenue amount in the taxable period should be added, and it shall not be deemed that the profit and loss of each item constituting the revenue amount should be added up.

(2) As seen earlier, Article 4(1) of the Enforcement Decree of the Education Tax Act specifically provides for the revenue amount included in the tax base of education. However, Article 4(1) of the Enforcement Decree of the Education Tax Act separates the term “profit and loss” and “profit and loss” and, in cases where losses are included in the tax base, the term “integment” is used as “other profit and loss,” and Article 4(1)8 of the Enforcement Decree of the Education Tax Act provides that “other profit and loss” shall be deemed as “other profit and loss, i.e., the amount

(3) On the other hand, the Plaintiff, like the Plaintiff, may cause inequality between the corporation that selected the method of recognizing the instant valuation profit and loss and the corporation that selected the method of not recognizing the instant valuation profit and loss at the time of filing the corporate tax return. However, in the event there was a derivatives valuation loss, if the Plaintiff selected the method of recognizing the valuation profit and loss in the pertinent year’s corporate tax for the purpose of reflecting the pertinent valuation loss, it cannot be deemed unjust even if the Plaintiff’s choice of the method of recognizing the valuation profit and loss

④ Also, in cases where the assessed gain or loss of this case is deemed other profit or loss, there are some overlappings of the subject matter of education tax in each quarter, but this is due to the short of the taxable period of education tax and the peculiarity of education tax taxation system, and it cannot be deemed that it actually constitutes duplicate taxation.

3) Judgment on the third argument

The Plaintiff’s assertion on this part is premised on the premise that the assessed profit and loss of this case should be included in the education tax base. As seen earlier, as long as the assessed profit and loss of this case cannot be deemed to be included in the education tax base, this part of the Plaintiff’s assertion on this premise, which differs from the premise, is without merit.

5. Whether the imposition disposition of the corporate tax of this case is legitimate

A. The plaintiff's assertion

The plaintiff entered into a service contract with the Bank of Korea, and was actually provided with consulting services for the development of business between domestic financial institutions, and thus, the disposition imposing the corporate tax of this case is unlawful as the expense of non-business.

B. Determination

In principle, Article 19(2) of the Corporate Tax Act provides that “the cost of loss or expenses incurred in connection with the business of the corporation is generally accepted as normal or directly related to profit.” The term “generally accepted cost” refers to the cost that is deemed to have been disbursed under the same situation with respect to other corporations operating the same kind of business as the person liable for tax payment. Whether it constitutes such cost shall be objectively determined by comprehensively taking into account the process, purpose, form, amount, effect, etc. of the disbursement, barring special circumstances, the cost that is disbursed in violation of social order is excluded (see Supreme Court Decision 2007Du12422, Nov. 12, 2009).

According to the evidence No. 7, the plaintiff is acknowledged to have been arranged for the plaintiff's visit or interview from the retired workers of the Bank of Korea who entered into a consulting contract, or received a report from the economic-related council. However, in light of the fact that the number of services provided by the plaintiff to the retired workers of the Bank of Korea is not much higher than the amount of service costs paid by the plaintiff to the retired workers of the Bank of Korea and its contents are mere mere simple business, the above facts alone are insufficient to recognize that the service costs paid by the plaintiff to the retired workers of the Bank of Korea are generally accepted as losses or expenses incurred or spent in connection with the plaintiff's business, and there

6. Conclusion

Therefore, the part of the claim for revocation of the corrective disposition of KRW 43,560,000 for the business year 2008, which was December 7, 2013 among the lawsuit in this case, is unlawful, and thus, it is dismissed. The remaining claims of the plaintiff are dismissed as it is without merit. It is so decided as per Disposition.