[1] Whether a foreign-capital invested company's application for reduction or exemption of corporate tax is a requisite procedure for corporate tax reduction or exemption (affirmative)

[2] Whether applying Article 121-2 (10) newly established by the amendment of the Restriction of Special Taxation Act (amended by December 29, 2000) to capital increase with consideration that was made before the amendment of Article 121-2 (10) goes against the principle of non-payment of tax law (negative)

[1] In order for a foreign-invested enterprise to be subjected to the reduction and exemption of corporate tax, etc. according to the foreign investment ratio, it is required to obtain the reduction and exemption by applying for reduction and exemption to the Minister of Finance and Economy within the fixed period

[2] According to Article 121-2(10) newly established in the amendment of the Restriction of Special Taxation Act as of December 29, 2000, where a foreign-capital invested company receives a decision of reduction or exemption by filing an application for reduction or exemption with the Minister of Finance and Economy after the expiration of the period for application for reduction or exemption, the provisions on reduction or exemption shall apply only to the taxable year to which the date of application for reduction or exemption belongs and the remaining reduction or exemption period thereafter. This provision provides that even if the period for application for reduction or exemption expires after the expiration of the period for application for reduction or exemption, even if the reduction or exemption itself was excluded, the reduction or exemption is allowed to be granted

[1] Articles 121-2(6) and (8), and 121-4(1) of the former Restriction of Special Taxation Act (amended by Act No. 6538 of Dec. 29, 2001) / [2] Article 121-2(10) of the former Restriction of Special Taxation Act (amended by Act No. 6538 of Dec. 29, 2001)

Hanmm Chemical Co., Ltd. (Attorney Kang Jae-in, Counsel for defendant-appellee)

The director of the tax office

Seoul High Court Decision 2003Nu4517 delivered on September 18, 2003

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

Article 16(1), Article 14(6) and (7) of the former Foreign Investment and Foreign Capital Inducement Act (amended by Act No. 5559, Sep. 16, 1998); thereafter, Article 11(1), Article 9(6) and (8) of the former Foreign Investment Promotion Act (amended by Act No. 5559, Sept. 16, 1998; hereinafter referred to as the “Foreign Investment Promotion Act”) which was applicable at the time of the instant application for reduction or exemption; Article 11(1), Article 9(6) and (8) of the former Foreign Investment and Foreign Capital Inducement Act (amended by Act No. 6297, Dec. 29, 200; hereinafter referred to as the “Special Act”) provides that a foreign-invested enterprise subject to reduction or exemption shall be subject to reduction or exemption by examining the foreign-invested enterprise’s application rate for reduction or exemption by the date of its foreign-invested enterprise, and it shall be subject to reduction or exemption by the Presidential Decree No. 2.

Meanwhile, according to Article 121-2(10) newly established in the amendment of the Special Assistance Act on December 29, 2000, where a foreign-capital invested company receives a decision for reduction or exemption from the Minister of Finance and Economy after the expiration of the period for application for reduction or exemption, the provisions on reduction or exemption shall apply only to the taxable year to which the date of application for reduction or exemption belongs and the remaining reduction or exemption period thereafter. This provision provides that even if the period for application for reduction or exemption expires after the expiration of the period for application for reduction or exemption, even if the reduction or exemption itself was excluded, the reduction or exemption is allowed to be made for the period after the application for reduction or exemption was made, and thus, even

In the same purport, the court below is just in holding that the reduction or exemption of the period before the date of applying for reduction or exemption is not permissible because the provision on the application for reduction or exemption of corporate tax does not stipulate a simple duty to cooperate with the government, but is a necessary procedural provision for the reduction or exemption of corporate tax by foreign-capital invested companies. There is no error of law

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Young-ran (Presiding Justice)