Seocho 2010west 2410 ( November 29, 2010)

Multi-family transport service provider and the person with a special relationship lend funds at a low price without connection with the business.

As long as a corporation operating a taxi transport business receives interest of 6% per annum less than 9% per annum of the current loan interest rate while lending provisional payments paid to a person with a special relationship without connection with the business of the corporation, it is reasonable to add the interest recognized as constituting wrongful calculation, and to impose corporate tax by adding the loan interest to the calculation of unlawful calculation.

2011Revocation of disposition of revocation of corporate tax, etc.

XX Round Co., Ltd.

O Head of tax office

June 3, 2011

July 8, 2011

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of imposition of corporate tax of 73,10,750 won for the business year 2005 against the Plaintiff on February 3, 2010, corporate tax of 176,570,590 won for the business year 2006, corporate tax of 51,043,080 won for the business year 207, corporate tax of 51,043,080 won for the business year 7,71,380 won for the first year 2005, value-added tax of 9,623,700 for the second year value-added tax of 205, value-added tax of 5,914,760 for the first year 206, and each disposition of imposition of KRW 303,350,498 for the year 2006, and KRW 27,851,418 for the business year 207, is revoked.

1. Basic facts and circumstances of dispositions;

A. The Plaintiff is a corporation that runs the taxi transport business. The director of the Seoul Regional Tax Office confirmed that the Plaintiff made an integrated investigation into the corporation tax for the business year from August 11, 2009 to October 30, 2009 by the Plaintiff’s 2005 to October 30, 2007, and confirmed that the Plaintiff’s joint representative director, from August 11, 2009, the head of the Seoul Regional Tax Office loaned the funds to the Plaintiff’s joint representative director, from 2004 to 2007, and received interest at 6% per annum from 200 to 207, and omitted the transportation revenue amount during the above period.

B. Based on the above findings, the Defendant deemed that the Plaintiff unfairly reduced the tax burden by lending funds at an interest rate lower than the market price at XXL, which is a person with a special relationship, based on the above findings, and accordingly, deemed that the tax burden has been reduced unfairly, and accordingly, Article 52(1) and (2) of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter referred to as the “former Corporate Tax Act”) and Article 88(1)6 and Article 89(3) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 19891, Feb. 28, 2007; hereinafter referred to as the “former Enforcement Decree of Corporate Tax Act”) applied 9% per annum to the amount recognized as 1405 through 207 business years, and included 31,201,204 won in the gross income, among the daily transport amount received by the Plaintiff’s settlement confirmation.

C. On the other hand, the Defendant deemed that the loan that the Plaintiff paid to XXD constitutes “the provisional payment, etc. that was paid to a person with a special relationship without connection with the business,” and excluded the Plaintiff’s total amount of the Plaintiff’s loan interest during the business year 2005 and 2007, pursuant to Article 53(1) of the former Corporate Tax Act and Article 28(1)4(b) of the former Corporate Tax Act and Article 53(1) of the former Enforcement Decree of Corporate Tax Act from deductible expenses.

D. The details of the inclusion in the calculation of earnings and the inclusion in the calculation of losses for each business year are as follows. On October 28, 2009, the representative director regularA signed a written confirmation confirming the following (hereinafter referred to as the "written confirmation of this case") on October 28, 2009, and the omission of return attached to the said written confirmation are written in KRW 301,092,650, which is excluded from value added tax.

E. On February 3, 2010, the defendant issued a correction and notification of the corporate tax of 73,10,750, corporate tax of 2005, corporate tax of 176,570,590, corporate tax of 2006, corporate tax of 51,043,080, corporate tax of 2007, value-added tax of 7,711,380, value-added tax of 205, value-added tax of 9,623,70, value-added tax of 205, and value-added tax of 5,914,760, and value-added tax of 1,206 (hereinafter referred to as "each imposition disposition of corporate tax of this case"), and each disposition of 206,303,350,498, 207, 208, 207, 208, 207, 208(hereinafter referred to as "the income amount of each disposition of this case").

[Ground of recognition] Facts without dispute, Gap evidence 1, 2 (including each number, hereinafter the same shall apply), Eul evidence 1 to 8, and 10, the purport of the whole pleadings

2. Whether each of the dispositions of this case is legitimate

A. The plaintiff's assertion

Each disposition of this case is unlawful for the following reasons.

1) As to the application of the wrongful calculation panel

The Plaintiff is not subject to the avoidance of wrongful calculation under Article 52 of the former Corporate Tax Act, since the Plaintiff’s interest rate at an appropriate rate of 6% per annum was leased to XXD by applying the rate of 6% per annum, and the tax burden was not unjustly reduced.

2) As to the payment and non-deductible expenses

Considering the fact that a gas charging business entity is closely related to the Plaintiff’s taxi transport business, that the Plaintiff provides the Plaintiff with a vehicle fuel at a price lower than the market price, and that the Plaintiff pays a high level of rent every month for leasing a building owned by the Plaintiff, the Plaintiff’s loan related to the Plaintiff’s work is related to the Plaintiff’s business. Therefore, the interest paid on the loan related to the loan is not subject to non-deductible expenses under Article 28(1)4(b) of the former Corporate Tax Act.

(iii)related to the omission of sale and notice of change in income amount;

The letter of confirmation of this case is signed and sealed by A.A. without confirming the contents of A.A. It is merely the representative director of the Plaintiff under the name of the Plaintiff, and the actual management of A.A. does not have to be the subject of the preparation of the above certificate. In addition, the settlement confirmation presented by the Defendant based on the omission of transport income is prepared by the Plaintiff in preparation for the inspection of the total management system of the Gu office under the jurisdiction of the competent authority, not the actual amount of income, but the amount of the initial report is the legitimate amount of income.

B. Relevant statutes

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

C. Determination

1) Determination on the first argument of the Plaintiff

Article 52 of the former Corporate Tax Act (amended by Act No. 88(1)1 of the former Enforcement Decree of the Corporate Tax Act) provides that a corporation has avoided or reduced tax burden by abusing the various forms of transactions listed in each subparagraph of Article 88(1) without a reasonable method by a person having a special relationship with the person having a special relationship. It is deemed that the person having a right to taxation has denied it and has the income objectively and reasonably deemed objective and reasonable by the method stipulated in the Act and subordinate statutes. In light of the economic person’s position, it is limited to cases where it is deemed that the person having a right to taxation has neglected the economic rationality due to disregarding the calculation of an unnatural and unreasonable act. Determination of whether the economic rationality exists shall be made on the basis of whether the transaction is unfair in light of sound social norms and commercial practices, and the special circumstances at the time of the transaction should also be considered (see, e.g., Supreme Court Decision 2008Du1541, Oct. 28, 2010).

In light of the above legal principles, the Health Board: (a) first, as to the instant case, the Plaintiff’s executive officer, EAB, and his relatives hold 100% of the outstanding shares; (b) it is clear that there is a special relationship with the Plaintiff pursuant to Article 87(1)3 and 4 of the former Enforcement Decree of the Corporate Tax Act; (c) it delegates specific types of wrongful calculation under Article 88(1)6 of the former Enforcement Decree of the Corporate Tax Act to the Enforcement Decree; and (d) Article 88(1)6 of the former Enforcement Decree of the Corporate Tax Act provides that one of the wrongful calculation types provides that “if an asset is loaned at a rate lower than the market price, it is difficult to view that the Plaintiff’s annual interest rate is defined as the market price at the market price at the same time as the annual interest rate under Article 89(3) of the former Enforcement Decree of the Corporate Tax Act; and (c) it is difficult to view that the Plaintiff’s annual interest rate under Article 9(1)6 of the former Enforcement Rule of the Corporate Tax Act is a special calculation in accordance with the aforementioned provision.

2) Determination on the second argument of the Plaintiff

Article 28 (1) 4 (b) of the former Corporate Tax Act provides that "the amount calculated by Presidential Decree (limited to interest on the relevant asset value among loans) among interest on loans paid to a related party in each business year by a domestic corporation that owns assets prescribed by Presidential Decree, such as provisional payments, which are not related to the business of the relevant corporation, shall be subject to non-deductible expenses." Article 53 (1) of the former Enforcement Decree of the Corporate Tax Act defines "a loan which is not related to the business of the relevant corporation" as "a loan which is not related to the business of the relevant corporation regardless of its name by embodying the type of the above assets." The "provisional payments paid without relation to business" under the above provisions includes not only pure meaning, but also a loan equivalent to a loan due to its nature, and also a provisional payment shall be determined objectively based on the purpose of business or business contents of the relevant corporation (see, e.g., Supreme Court Decision 2005Du9155, Sept. 20, 2007).

In light of the above legal principles, the Plaintiff provided fuel to the Plaintiff, who is a taxi transport business entity, a liquefied petroleum gas filling business entity, at a higher level than the market price, and pays a high level of rent when leasing the Plaintiff’s owned building. Thus, the Plaintiff asserted that the act of lending the Plaintiff is related to the Plaintiff’s business. However, even if the Plaintiff did not submit any evidence to acknowledge the circumstances as asserted by the Plaintiff, and such circumstances are acknowledged, it is difficult to see that the above loan is directly related to the Plaintiff’s business in light of the Plaintiff’s business purpose and business contents. Accordingly, the Plaintiff’s assertion on this part is without merit.

3) Judgment on the third argument of the plaintiff

Unless there exist special circumstances, such as that if a tax authority received a written confirmation from a taxpayer in the course of conducting a tax investigation, it is difficult to readily deny the evidence of such written confirmation only by means of the evidence of such fact, barring any special circumstance, such as that the written confirmation was forced against the will of the originator, or that it is difficult to consider it as evidence of specific facts due to insufficient details (see, e.g., Supreme Court Decision 2001Du2560, Dec.

In light of the above legal principles, the following circumstances can be acknowledged by comprehensively taking into account the descriptions in the Health Team, Eul's evidence Nos. 9 through 12 as well as the facts and the circumstances surrounding the dispositions as seen earlier: ① the Plaintiff's certificate of settlement of accounts is written in detail with respect to the pertinent month, and the Seoul Regional Tax Office, in the situation where the Plaintiff voluntarily prepared and kept it, secured data stored in the Plaintiff's office computer at the time of the consolidated investigation into the Plaintiff's corporate tax system; ② the representative director regular AA of the Plaintiff owns 100% of the Plaintiff's shares as the owner of the establishment of the Plaintiff corporation; ③ the Plaintiff's representative director regular AA signed the confirmation document of this case attached to the settlement confirmation of accounts after the investigation of the Plaintiff; ③ it is difficult for the Seoul Regional Tax Office to use the confirmation document of settlement of accounts against the intent of the Plaintiff; and the Defendant's each of the disposition of this case and the notice of changes in the amount of income of this case based on the confirmation and settlement of accounts of this case.

3. Conclusion

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