Cho High-2016-west-626 (Law No. 12, 2016)

Non-profit corporations under the Corporate Tax Act, which are deemed corporations established under special Acts.

A Non-Performing Loan Resolution Fund is a foundation with basic property, which falls under a non-profit domestic corporation under the Corporate Tax Act, and shares of the Fund shall be contributed and shall not be subject to the exclusion of income dividends under Article 18-3 of the Corporate Tax Act, and such shares shall not be subject to the exclusion of income dividends under the Act,

Article 18-3 (Non-Inclusion of Dividend Amount in Gross Income)

2016Guhap68748 Revocation of Disposition of Rejecting Corporate Tax

○○ Bank

○○ Head of tax office

oly 23, 2017

December 15, 2017

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The defendant's disposition rejecting to correct or rectify corporate taxx,xx,xx,xx, andxx source for the business year 201 against the plaintiff, which was made against the plaintiff, and the disposition rejecting to correct or correct the corporate taxx,xx,xx, andx source for the business year 2012, which was made against the plaintiff, shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a financial institution that contributed to the Non-Performing Loan Resolution Fund established in the Korea Asset Management Corporation (Law No. 6073 of December 31, 1999, hereinafter “Korea Asset Management Corporation”) on December 15, 2007 (hereinafter “Korea Asset Management Corporation”).

B. The Plaintiff received x, x, x, x, x, x million in 201, x, and x and x0 million (hereinafter “distribution of this case”) under the pretext of the share distribution from the Fund of this case, and reported and paid corporate tax including the income in each business year of 2011 and 2012.

C. The Plaintiff asserted that the time when the amount of the distribution of the instant case reverts to the business year prior to the business year 2007 or that it is subject to exclusion from taxable income pursuant to Article 18-3 of the Corporate Tax Act, and filed a request for correction of the tax base and tax amount of each corporate tax for the business year 201 and 2012, but the Defendant rejected it (hereinafter “instant disposition”).

D. The Plaintiff, who is dissatisfied with the instant disposition, filed a request for an inquiry with the Tax Tribunal on x.x. x. The Tax Tribunal rendered a decision of dismissal on x. x. 201 x.

Facts that there is no dispute over the basis of recognition, entry in Gap evidence 1, 2, and 5 (including each number in the case of additional number), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Since the Fund does not constitute an organization deemed a juristic person or a juristic person, the shares of this case shall be reverted to a business entity or an organization deemed a juristic person prior to the business year 2007, in accordance with the legal principles as to joint business or trust property. Therefore, the disposition of this case based on the premise that the shares of this case were reverted to the business year 201 and 2012

2) If the instant fund constitutes an organization deemed a corporation under tax law, the provision on the exclusion of income dividends under Article 18-3 of the Corporate Tax Act shall apply to the instant amount distributed, and thus, the instant disposition that did not apply is unlawful (section 2).

3) If the provision on exclusion of dividend income from taxable income is not applicable to the distribution of this case, the distribution of this case falls under the value of assets received without compensation under Article 18 subparag. 6 of the Corporate Tax Act, and should be appropriated for losses carried forward for which the period of deduction expires (Chapter 3).

B. Relevant statutes

It is as shown in the attached Form.

C. Facts of recognition

1) The Fund was amended by Act No. 5371 of Aug. 22, 1997 and amended by Act No. 5505 of Jan. 13, 1998; Act No. 6073 of Dec. 31, 1999; Act No. 10682 of May 19, 201; Act No. 10682 of the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Companies and the Establishment of Korea Asset Management Corporation; however, the Fund was amended by Act No. 10682 of May 19, 201; the Act was established on Nov. 24, 1997 based on the Act on the Establishment of Non-Performing Assets, etc. of Korea Asset Management Corporation (the former Act on Asset Management; hereinafter referred to as the "former Asset Management Corporation"); the Fund was established on Nov. 24, 1997; the Fund was financed from the financial institution, the Asset Management Fund’s contributions to issue the Non-Performing Fund bonds;

(The following table omitted):

2) Article 2 of the Addenda to the former Asset Management Corporation Act (No. 5371, Aug. 22, 1997) provides that the remaining property of the Fund shall be returned to a contributed financial institution after the end of the operation period of the Fund. However, the proviso to Article 2(5) of the Addenda to the former Asset Management Corporation Act (amended by Act No. 8698, Dec. 21, 2007; hereinafter referred to as the “Annex to the former Asset Management Corporation Act”) was provided for the grounds for returning the residual property of the Fund even before the end of the operation period.

3) Pursuant to the foregoing revised supplementary provision, the Fund paid shares to a financial institution, including ○ Bank, in 2012, before the end of the operating period, and at the time, the Asset Management Committee of the Corporation (hereinafter “Management Committee”) decided not to pay any additional interest at the time of repayment of the Fund.

4) The Fund reported and paid corporate tax on the income in each taxable period except from 2003 to 2007, a non-taxation period.

Facts without dispute over the basis of recognition, Gap evidence 4, 5, 10, 14

Each entry, the whole purport of the pleading, including

D. Determination as to the First Claim

1) Legal nature of the instant fund

Article 13(1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007) provides that, among non-corporate organizations, an unregistered association, foundation, or other organization established with the permission or authorization of the competent authority or which is registered with the competent authority pursuant to the law and has not been registered as an unregistered foundation (Article 1(1)) or a foundation which has basic property contributed for the public interest (Article 1(2)) shall be deemed a corporation under tax law (amended by Act No. 8830 of Dec. 31, 2007, which does not distribute profits to its members). Such an organization constitutes a non-profit domestic corporation under the Corporate Tax Act (Article 1 subparag. 2(c) of the Corporate Tax Act).

In full view of the following circumstances, the Fund is a foundation with basic property contributed for public interest under Article 13(1)2 of the former Framework Act on National Taxes, which is not registered, and is a non-profit domestic corporation under the Corporate Tax Act.

A) The fundamental property contributed for the public interest exists.

이 사건 기금은 금융기관이 보유하고 있는 부실채권 등의 효율적인 정리를 위해 설치되었고(구 자산관리공사법 제38조), 이 사건 기금의 설치를 위한 재원은 금융기관의 출연금뿐만 아니라 부실채권정리기금채권으로 조성한 자금과 한국은행으로부터 차입금 등의 재원으로 조성되며(위 법 제39조 제1항), 금융기관의 부실채권 및 부실징후기업의 자구계획대상자산의 인수 등에 사용된다(위 법 제41조 제2항 제1호). 또한 부실채권기금과 같이 국가재정법의 적용을 받는 기금은 기금의 설치목적과 공익에 맞게 기금을 관리・운용하여야 하고(국가재정법 제62조), 공익을 위하여 특히 인수할 필요가 있다고 인정되는 부실자산이나 이해관계인이 많아 정리의 효과가 큰 부실자산을 우선적으로 인수할 수 있다(구 자산공사법 제41조 제2항, 같은 법 시행령 제6조 제1항 제1, 2호). 한편 기금의 부담으로 발행한 부실채권정리기금채권의 경우 정부가 원리금 상환을 보증하고(구 자산공사법 제40조 제4항), 한국은행으로부터 차입한 자금에 대해서는 기금이 한국은행법의 규정에 따른 정부대행기관으로 지정되는 등(위 법 제39조 제3항), 자산공사가 아니라 기금이 그 재원에 대해 책임을 부담하고, 부실채권기금과 자산공사의 회계는 구분되며(위 법 제43조 제2항), 자산공사는 기금에 관한 결산서, 대차대조표, 손익계산서를 작성하고, 기금운용계획안을 회계연도 개시 90일 전까지 국회에 제출하여 기금운용에 관해 국회의 통제를 받도록 되어 있다(위 법 제66 내지 68조).

In full view of the purpose of the establishment of the Fund, methods of raising funds, restrictions on the use of the Fund, preferential acquisition of non-performing assets in accordance with the need for public interest, methods of management and operation of the Fund, etc., the purpose of the Fund seems to be more public interest purpose than simply improving the liquidity and soundness of financial institutions, not merely improving the liquidity and soundness of financial institutions, but to prevent damage that may occur to the majority of the public, including users of financial institutions, if it fails to secure such liquidity and soundness. Accordingly, the Fund constitutes an underlying property contributed for public interest purpose.

(B) has the substance of an unincorporated foundation.

The term “unregistered property” means a group of property incorporated for a certain nonprofit purpose, which is a group of property independently of contributors and other specific individuals, but is not granted legal personality because it has not been registered. As seen earlier, the Fund is a group of property invested or created by a certain method, and its accounting has been carried out separately from the Asset Corporation, and it is operated as an organization separate from the Asset Corporation, such as the Non-Performing Loan Resolution Fund Bonds and the Bank of Korea Loan Resolution Fund Bonds issued by the Fund are liable to pay debts independently from the Asset Corporation. In addition, the Fund was established pursuant to the former Asset Corporation Act, and Articles 38 through 43 of the same Act provide for the purpose of establishment, method of creation, management and operation of the Fund, methods of management and operation of the Fund, accounting and executive organ, etc. Therefore, it cannot be deemed necessary to establish separate articles of incorporation that provide for the purpose, organization, performance of duties, etc. of the Fund as a foundation.

(C) satisfies the condition that profits will not be distributed to its members.

As long as the Fund has the substance of the Foundation, the Foundation is composed of the property contributed and cannot be deemed as the members of the Foundation. As such, there is no problem of distributing profits to its members due to its nature. Article 2 of the Addenda to the former Asset Management Corporation Act provides that the Fund shall return residual property to the contributors after the expiration of the operating period of the Fund. However, this provision is prescribed as to the reversion of residual property after the dissolution of the Foundation, and it cannot be deemed as a provision on the distribution of profits.

D) There are a number of regulations premised on the premise that the instant fund under the former Asset Corporation Act and the Corporate Tax Act is a corporation under tax law.

(1) The funds of this case are deemed to have been designated as government agencies under the Bank of Korea Act for the funds borrowed from the Bank of Korea (Article 39(3) of the former Asset Management Corporation Act). The term "government agencies" in this context means corporations that carry out public projects or functions for the Government in production, purchase, sale or distribution (Article 85 of the former Bank of Korea Act (amended by Act No. 5491 of Dec. 31, 1997).

(2) Article 29(1) of the Corporate Tax Act, and Article 56(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 24357, Feb. 15, 2013; hereinafter the same shall apply), Article 56(1)3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 24357, Feb. 15, 2013; hereinafter the same

(3) Article 2(1)8(d) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 17826, Dec. 30, 2002; Presidential Decree No. 20619, Feb. 22, 2008) excludes “business related to the acquisition and disposal of insolvent bonds” under the premise that the Fund is a non-profit domestic corporation within the scope of profit-making business.

(4) Article 34(1) of the Corporate Tax Act and Article 61(2)30 of the former Enforcement Decree of the Corporate Tax Act provide that "where the Korea Asset Management Corporation (including Non-Performing Loan Resolution Fund) under the Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset Management Corporation appropriates allowance for bad debts as deductible expenses, it shall be included in deductible expenses within a certain percentage." As seen earlier, since the accounts of the Asset Management Corporation and Non-Performing Loan Fund are separated, the said provisions are meaningful in the accounting of the Non-Performing Loan Fund, and the inclusion in deductible expenses is premised on the calculation

2) The nature of the shares of this case

In light of the following circumstances revealed by the regulations and interpretation of the former Asset Management Corporation Act, it is reasonable to deem that Article 2 of the Addenda to the former Asset Management Corporation Act provides that the residual property of the Fund shall be returned to the relevant institution according to the criteria for disposal taking into account the contribution ratio, etc. after the expiration of the period of operation of the Fund, rather than the return of profits to investors.

A) Article 39(1) of the former Asset Management Corporation Act provides for an “contribution of a financial institution” as one of the financial resources created by the instant fund. However, Article 9 of the same Act provides that the capital of the Asset Management Corporation is comprised of a financial institution and an investment by the Government, and the meaning of the contribution refers to an increase in property losses by paying money or bearing obligations according to its own intent.” In light of the fact that the said financial institution’s contribution is not construed as an investment in which profit is anticipated.

B) Article 39(1) of the former Asset Management Corporation Act provides for “1. Financial resources from the creation of the Fund of this case, funds transferred from the Corporation, 2.3. Funds created by the issuance of Non-Performing Loan Resolution Fund Bonds, 4. Loans from the Bank of Korea, 5. Loans from persons other than the Bank of Korea, 6. Operational earnings and other revenues.” This is distinguishable from contributions, transferred funds, funds from the creation of bonds, borrowed funds, borrowed funds, profits, and other revenues. Therefore, it cannot be deemed that the members of the Fund, which are the premise for return of profits from the investment, are presented.

C) As long as financial institutions including the Plaintiff are not deemed to have invested in the instant fund, the fact that the former Asset Management Corporation Act had the relevant institutions return residual property after the expiration of the period of operation of the Fund under Article 2 of the Addenda to the former Asset Management Corporation Act according to the criteria for disposal taking into account the contribution ratio, etc. is deemed to be a policy provision stipulating the method of disposal of residual property after the expiration of the period of operation, and cannot be deemed to have the right to receive a refund as seen above.

D) Furthermore, the Fund is established for the efficient liquidation of non-performing loans, etc. owned by financial institutions, and is used for the liquidation business of non-performing loans, etc., so it does not directly aim at generating profits (Articles 38 and 41 of the former Asset Management Corporation Act).

3) The time when the amount distributed was reverted to gross income

(A) Article 40(1) of the Corporate Tax Act provides that “The fiscal year to which profits and losses of a domestic corporation accrue shall be the fiscal year which includes the date on which the profits and losses are determined.” Such rights are realized if there is no actual income, and adopt the so-called principle of confirmation of rights for the calculation of taxable income. The principle of confirmation of rights lies between the time when the rights causing income and the time when the income is realized, and the time when the rights other than the time when the income is realized, shall be deemed the time income and the principle of allowing a prior taxation on the income of the Fund is based on the premise that it will be realized in the future. However, the concept of “determined” in the principle of determination of rights cannot be determined as a general principle that does not include any exception to the time when the assets are disposed of after the end of the fiscal year. It shall be determined that the amount of residual assets and the time when the assets are disposed of within the period of 20 years before the end of the fiscal year and the time when the assets are disposed of within 197 years after the end of the fiscal year.

C) Therefore, the time when the Plaintiff can be deemed to have secured the taxpayer’s money by enabling the management and control of the shares of this case. Therefore, it is reasonable to deem that the business year to which the shares of this case accrued was paid is the business year of 2011 and 2012.

4) Sub-determination

The Fund is a foundation with basic property contributed for public interest under Article 13(1)2 of the former Framework Act on National Taxes and not registered as a non-profit domestic corporation under the Corporate Tax Act. The amount distributed in this case is the distribution of residual assets to contributors, not the return of profits to investors, and the business year to which the amount belongs is deemed to be the business year of 2011 and 2012, which received the amount. Thus, the prior Plaintiff’s assertion on this different premise cannot be accepted.

E. Determination as to the second proposal

1) Although the Monopoly Regulation and Fair Trade Act has been prohibited from establishing a holding company in the past, when there was a need to introduce a holding company for corporate restructuring, the establishment of a holding company, which is mainly engaged in controlling the domestic company’s business through stock ownership, was limited upon the amendment by Act No. 5813 on February 5, 199 (see Articles 8, 8-2, and 8-3). In addition, the Corporate Tax Act amended by Act No. 6047 on December 28, 199, which was amended by Act No. 6047 on December 28, 199, was newly established to exclude the holding company from taxable income the amount equivalent to the specified ratio of dividend income that it receives from its subsidiary from its corporate income (Article 18-2).

After all, when the Financial Holding Companies Act was enacted on October 23, 200 in order to establish a financial holding company that controls a company that runs a financial business in order to enhance the competitiveness of financial institutions through the largeization and concurrent operation of financial institutions, Article 18-2 of the Corporate Tax Act amended on December 29, 2000 included a financial holding company under the Financial Holding Companies Act in a holding company, and Article 18-2 of the Corporate Tax Act newly established a provision on the exclusion of double taxation (Article 18-3) for dividend received by a general domestic corporation that is not a holding company in order to promote the balance of taxation with the holding company.

Accordingly, Article 18-3 (1) of the Corporate Tax Act provides that "if a domestic corporation (excluding a non-profit domestic corporation as defined in subparagraph 2 of Article 1; hereafter the same shall apply in this Article) receives a certain amount of dividend from another domestic corporation invested by it, such excess amount shall not be included in the gross income for the purpose of calculating the amount of income for each business year."

2) In full view of the following circumstances that can be seen in light of the purport of the entire pleadings, the Plaintiff’s assertion on this part is rejected as it is not subject to Article 18-3 of the Corporate Tax Act when calculating the Plaintiff’s income.

A) Article 18-3 of the Corporate Tax Act may apply to cases where a domestic corporation that is not a non-profit domestic corporation has invested in a domestic corporation that is not a non-profit domestic corporation. As seen earlier, the Plaintiff contributed money to the Fund, which is a non-profit domestic corporation. The Plaintiff refers to the capital to operate a business as a capital to contribute money or other property to a corporation, etc., and the contribution includes an act of increasing property losses caused by property losses by either paying money or bearing an obligation, and thus, there is no room to apply the above provision premised on the act of investment insofar as the Plaintiff made a contribution having the nature of the contribution to the Fund in this case.

B) In addition, Article 18-3 of the Corporate Tax Act may apply to cases where a domestic corporation that is not a non-profit domestic corporation has "amount of dividend received from a domestic corporation that is not a non-profit domestic corporation." "amount of dividend" means the amount of dividend or surplus distribution and the amount of dividend or distribution under each subparagraph of Article 16(1) of the Corporate Tax Act (see Article 18-2

However, the instant amount distributed by the Fund, which is a nonprofit corporation, to the Plaintiff does not constitute the amount of dividend or surplus distribution, and since the Plaintiff cannot be deemed the members of the Fund, which is a foundation, the instant amount distributed does not constitute “money acquired by the stockholders, etc. (including the members of an organization deemed a corporation) of the dissolved corporation under Article 16(1)4 of the Corporate Tax Act due to the dissolution of the said corporation.” Therefore, the instant amount distributed does not constitute “amount of dividend” under Article 18-3 of the Corporate Tax Act, and thus, the said provision cannot be applied in this respect.

C) The purpose of Article 18-3 of the Corporate Tax Act is to prevent double taxation on a single income by imposing a tax again at the stage of a domestic corporation with respect to the income already imposed on the first-time corporate tax in cases where a domestic corporation received dividend income from another domestic corporation invested. However, the corporate tax paid by the Fund is a tax paid by a separate entity for a separate reason, and it cannot be deemed the advance payment of the tax to be paid by the Plaintiff. Thus, the taxation on the instant dividend cannot be deemed as a double taxation on the same income as the tax already paid by the Fund.

F. Determination as to the third proposal

1) The value of assets received without compensation by a domestic corporation and the gains on the receipt of assets, etc., which are the reduced amount of liabilities due to the exemption or extinguishment of liabilities, fall under gross income as a matter of course, but according to Article 18 subparag. 6 of the Corporate Tax Act and Articles 10(2) and 18(1)1 of the former Enforcement Decree of the Corporate Tax Act, the amount appropriated to compensate losses carried forward out of the gains on the receipt of assets shall not be included in gross income in calculating the income amount for each business year. The losses carried forward here shall include losses carried forward from the business year that began five years before the beginning date of each business year, and the losses carried forward appropriated for the gains on the receipt of assets, etc. shall be deemed as having been deducted in calculating the tax base for each business year. This means that the taxpayer corporation grants preferential treatment to the purport that the losses carried forward no longer can be seen as having been deducted from the gains on the receipt of assets by means of deducting the losses from the tax base, such as gains on the transfer of assets.

2) Considering the following circumstances that can be seen by comprehensively taking account of the facts acknowledged earlier’s overall purport of pleading, the instant shares cannot be deemed as “value of assets received free of charge” under Article 18 subparag. 6 of the Corporate Tax Act, and thus, the Plaintiff’s assertion on this part cannot be accepted.

A) In light of the principle of no taxation without law, or the requirement for tax exemption or tax exemption, the interpretation of tax laws shall be interpreted in accordance with the text of the law, barring special circumstances. It is not permitted to expand or analogically interpret without reasonable grounds. In particular, it accords with the principle of fair taxation with the principle of fair taxation (see, e.g., Supreme Court Decision 2003Du7392, May 28, 2004). Examining the above provisions in light of its purport, it is reasonable to deem that the “value of assets received without compensation” refers to the value of assets received without any consideration or compensation for improving the financial structure of a corporation.

B) Article 2(5) of the Addenda to the former Asset Management Corporation Act that the Plaintiff received the instant amount from the Fund is determined as follows: (a) the Minister of Finance and Economy may return part of the estimated residual assets even before the expiration of the operating period, where it is clear that the Plaintiff would have residual assets at the end of the operating period, as a result of an actual inspection of the assets and liabilities of the Fund; and (b) where the amount can be estimated. The foregoing supplementary provision provides for the method of disposal of residual assets of the Fund, and does not provide for the purport that the Fund may donate assets to the Plaintiff for the purpose of improving the

C) Article 2(5) of the Addenda provides that the instant fund shall be returned to “a person who has made a contribution, etc.” in accordance with the “standards for disposal taking into account the contribution ratio, etc.” In other words, the instant shares are not paid without any consideration or compensation, but paid to the Plaintiff, such as the Plaintiff, to the person who made a contribution, etc. under the former Asset Management Corporation Act. It is difficult to view that the instant shares are the same as the donation that received free of charge without any consideration or compensation.

3. Conclusion

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