Whether the calculation of rent between related corporations is appropriate;

Where there is a value appraised and assessed as to the land and buildings, such appraised and assessed value shall be deemed the market price and shall be calculated as the adequate difference between the land and buildings, except in extenuating circumstances.

Article 52 of the Corporate Tax Act

Daejeon District Court 2015Guhap1009444 Revocation of Disposition of Corporate Tax Imposition

○○○ et al.

○ Head of tax office

August 17, 2016

February 15, 2017

1. A. The part exceeding 10,497,224 won among the disposition imposing corporate tax for the business year of 2008, which was made on March 17, 2014 on the Plaintiff ○○○○○○○○○○○○, Inc., the part in excess of 20,58,592 won among the disposition imposing corporate tax for the business year of 2009, the part in excess of 15,492,840 won among the disposition imposing corporate tax for the business year of 209, the part in excess of 18,221,858 won among the disposition imposing corporate tax for the business year of 2011, the part in excess of 18,203,530 won among the disposition imposing corporate tax for the business year of 2012, and the part in excess of

B. The Defendant revoked each disposition of imposition of KRW 164,94,080 of corporate tax for the business year 2008, March 17, 2014, and KRW 158,816,310 of corporate tax for the business year 2009, KRW 154,18,970 of corporate tax for the business year 2009, KRW 154,18,970 of corporate tax for the business year 2010, and KRW 162,405,680 of corporate tax for the business year 2011, and KRW 134,452,910 of corporate tax for the business year 2012.

2. The remaining claims of the Plaintiff ○○○○ Factory are dismissed.

3. Of the costs of lawsuit, the part arising between the Plaintiff ○○○○ Factory and the Defendant 1/4 of the cost of lawsuit is assessed against the Plaintiff ○○○○○ Factory and the remainder is assessed against the Defendant, respectively. The part arising between the Plaintiff ○○○ Factory and the Defendant is assessed against the Defendant.

Cheong-gu Office

The disposition of imposition of corporate tax of KRW 75,648,290 for the business year 2008, which was March 17, 2014, imposed by the Defendant on the Plaintiff ○○○○○○○○○○, Inc., and the disposition of imposition of corporate tax of KRW 78,188,610 for the business year 209, April 21, 2014, corporate tax of KRW 66,141,440 for the business year 2010, and corporate tax of KRW 63,743,230 for the business year 201, and corporate tax of KRW 56,076,40 for the business year 209.

1. Details of the disposition;

A. The plaintiffs are companies running the ○○ Manufacturing and Sales Business, and the △△△△ representative is the company.

B. On December 29, 2006, the Plaintiff ○○○○○○○ Factory (hereinafter referred to as the “Plaintiff Dogjin Factory”) leased 42,059 square meters of the factory site located in Dagjin-gun, Chungcheongnam-gun, Chungcheongnam-do, the representative director of the Plaintiff Dogjin Factory, for five times on March 27, 2009, 209; and 42,059 square meters (hereinafter referred to as the “instant land”). The lease deposit and rent under the lease term are as follows.

Table 1

Term of Lease

'08.4.1~08.31

'08.4.1~10.6.30

'10.7.1 to 12.11.9

'12.11.10 to 12.31

Deposit for lease;

264,971,700 won

264,971,700 won

0 won

50,000,000 won

Monthly rent;

15,000,000 won

23,000,000 won

23,000,000 won

21,200,000 won

B. On December 29, 2006, after constructing two buildings on the instant land (1,744.58 square meters, 2.58 square meters, 5,139 square meters, 1.29 square meters, 2006) on the instant land and the instant land were leased to the Plaintiff ○○○○○ Co., Ltd. (hereinafter “Plaintiff ○○○○○”). On the instant land, the Plaintiff additionally constructed two buildings on the instant land (3, 734.8 square meters, 4, 410 square meters), and on March 28, 2008, leased one or four buildings on the instant land to Plaintiff ○○○○○○ on the instant land, and thereafter newly constructed one building on the instant land (5,569 square meters, 2,569 square meters, and 1 or 5 buildings on the instant land to the Plaintiff ○○○ and the instant building rent under the lease term of the instant land and the instant building.

Table 2

Term of Lease

'08.4.1~08.31

'08.4.1 to 10.7.31

‘10.8.1' from 12.31

Deposit for lease;

250,000,000

250,000,000

250,000,000

Monthly rent;

30,000,000

46,000,000

54,885,000

C. The rent paid by the Plaintiff at the time of the 2008 to 2012 on the land of this case to Magman Factory in the year of 2008 to 2012 is as follows. The rent paid by the Plaintiff ○○○○ in the year of 2008 to 2012 on the land of this case is as follows:

D. From January 8, 2014 to January 24, 2014, the Defendant conducted a tax investigation of each corporate tax on the Plaintiff ○○○○○○○○○○○○ from February 4, 2014 to February 13, 2014, ○○○○○○○○○○○○, ○○○○○○○○○○○○, ○○○○○○○○○, ○○○○○○, ○○○○○, ○○○○○, ○○○○○, ○○○○○○, ○○○○○○○, ○○○○○○, ○○○○○○, ○○○○○, 106, ○64, 106, 106, 406, 106, 207, 106, 406, 106, 207, 207, 2014, 14.

Table 3: relation to the plaintiff party factory

Sheet 4: Plaintiff ○○○ related matters

E. On May 15, 2014, Plaintiff 1, and Plaintiff ○○○○, dissatisfied with the instant disposition, filed an appeal with the Director of the Tax Tribunal for adjudication on May 15, 2014, but the said appeal was dismissed on December 18, 2014.

[Ground of recognition] Evidence Nos. 1 through 4, 7, Eul evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the first and second dispositions of this case are legitimate

A. The plaintiffs' assertion

According to Article 52(2) of the Corporate Tax Act and Article 89(2)1 of the Enforcement Decree of the Corporate Tax Act, where an appraisal appraisal institution has appraised the rent for the instant land and building, the appraised value shall be deemed the market price and shall be calculated as the difference between the instant land and the instant building, barring any special circumstances not to be employed. However, in rendering the Disposition 1 of this case, the Defendant calculated the acquisition price of the instant land and the instant building by multiplying the amount obtained by deducting the deposit from each of the above amounts after recognizing the acquisition price of the instant land and the instant building at the market price in the Disposition 2 of this case. As such, the calculation process of an adequate rent, which is the premise of the Disposition 1 of this case, is unlawful, and thus, the Disposition 1 and 2 of this case is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

(c) Fact of recognition;

1) From around 2003, Plaintiff ○○○○○○○ leased the instant land from ○○○○○, from around 2004, and around December 24, 2006, Plaintiff 1 leased the instant land and buildings from ○○○○○○○○○. In light of the following factors: (a) around December 24, 2006, Plaintiff 270,000 lease deposit for real estate located in an industrial complex, such as the South-dong Industrial Complex, Sightseeing Industrial Complex, etc.; (b) rent of KRW 27,00; (c) rent of KRW 27,00; (d) rent of KRW 230,00; (d) rent of KRW 0; (e) rent of KRW 23,00; (e) rent of KRW 100,000; (e) rent of KRW 100,000; (e) rent of KRW 10,000; and (e) rent of KRW 209,0100,0000.0.

2) On January 2014, when conducting a tax investigation with respect to the Plaintiffs, the Defendant investigated the leased cases of the instant land and buildings adjacent thereto, and inquired of the market price of the instant land and buildings at the real estate brokerage office, and confirmed that there was no leased cases, and that there was no transaction of the instant land and buildings.

3) According to the result of the judgment of rent at the court of Daejeon District Court 2015Guhap103820 in the Daejeon District Court 2015Guhap103820, the plaintiffs filed against the defendant for revocation of the disposition imposing corporate tax for the business year of 2013 (hereinafter referred to as "the result of the assessment of rent at the time of the delay in the auction for the appraiser"), the rent of the land in this case from January 1, 201 to December 31, 2011 is KRW 193,864,563, and the rent of the land in this case is KRW 5 Dong among the buildings in this case as of August 22, 2011. The rent of the land in this case from January 1, 2011 to August 31, 2011 to KRW 379,856,000, the rent of the land in this case and the building in this case from October 11, 2011 to 30.

[Reasons for Recognition] Evidence No. 9, Evidence No. 15, and the purport of the whole pleadings

D. Determination

1) The rejection of unfair act and calculation under Article 52 of the Corporate Tax Act is a system under which the taxation authority denies or reduces the tax burden by abusing the various forms of transactions listed in each subparagraph of Article 88(1) of the Enforcement Decree of the Corporate Tax Act without using a reasonable method by a person with a special relationship. It is limited to a case where, in light of the economic person’s viewpoint, it is deemed that the person with a taxation authority denied it and there was an income objectively and reasonably reasonable by the method stipulated in the laws and regulations. Determination of whether the economic rationality exists shall be made based on whether the transaction is abnormal in view of sound social norms or commercial practices, taking into account the various circumstances of the transaction (see, e.g., Supreme Court Decision 2005Du14257, Dec. 13, 2007).

Article 8(1)7 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 26981, Feb. 12, 2016; hereinafter the same) provides that “where taxes are deemed to have been unjustly reduced” under Article 52(1) of the Corporate Tax Act as one of “where money or other assets or services are leased or provided free of charge or at an interest rate, rate, or rent lower than the market price,” Article 52(2) and (4) of the Corporate Tax Act and Article 89(1) of the former Enforcement Decree of the Corporate Tax Act provides that “when a corporation provides services at a lower price than the market price for a person with a special relationship, it shall be deemed that the tax base and the amount of tax imposed at a lower price than the market price is ordinarily traded with a third party, other than a person with a special relationship.” Article 88(1)7 of the former Enforcement Decree of the Corporate Tax Act provides that “The tax base and the amount of tax imposed at a lower price than the market price determined by the lower than the market price.

2) In light of the aforementioned legal principles, the part exceeding 10,497,224 of the disposition of imposition of corporate tax for the business year 2008, the part exceeding 20,58,592 of the disposition of imposition of corporate tax for the business year 2009, the part exceeding 15,492,840 of the disposition of imposition of corporate tax for the business year 2010, the part exceeding 18,211,858 of the disposition of imposition of corporate tax for the business year 2011, the part exceeding 18,211,858 of the disposition of imposition of corporate tax for the business year 201, and the part of the disposition of imposition of corporate tax for the business year 2008,203,530 of the disposition of imposition of corporate tax for the business year 2000 and the disposition of imposition of corporate tax

A) The issue of whether the Plaintiff ○○○○ unreasonably lowers the instant land and the instant building from △△ factory and whether the Plaintiff ○○○○○○ leased the instant land and the instant building from △△ factory ought to be determined on the basis of the rent appraisal result for the instant land and the instant building pursuant to Article 89(2)1 of the former Enforcement Decree of the Corporate Tax Act, insofar as there is no evidence by which the Plaintiffs could be aware of the prices continuously traded with many and unspecified persons other than persons with a special relationship or the prices generally traded between third parties, other than persons with a special relationship, in a similar situation where the instant land and the instant building are leased. However, the rent appraisal result of the appraisal by an appraiser at the time of the time of the rent appraisal of the instant land and the instant building ought to be determined based on the calculation of the basic price

According to the result of appraisal of the rent of appraiser: (i) the rent of the instant land from January 1, 201 to December 31, 201; (ii) KRW 193,864,563; (iii) the rent of the instant land from January 1, 201 to August 31, 2011; (iv) the rent of the instant land and the instant building from KRW 379,856,00; (iv) the rent of the instant land from September 1, 201 to December 31, 201; (v) the rent of the instant building from KRW 30,738,00; (v) the rent of the instant land and the instant building from KRW 20 to KRW 50,80; and (v) the adequate rent of the instant building from KRW 20,738,00; and (v) the pertinent rent of the instant building from KRW 20 to KRW 508,208,200.

B) The annual rent for the instant land paid by the Plaintiff Jin-si to △△ in the business year 2008 to 2012 is KRW 252,00,000 or KRW 276,00,000 per annum, and the reasonable rent of KRW 193,864,563 per year for the instant land is more than 29% or 42%, and the adequate rent for the instant land is considerably exceeded the instant land. However, there is no other evidence to prove that the Plaintiff Jin-si factory determined that it was a rent in consideration of the transaction cases or transaction practices surrounding the instant land at the time when it rents the instant land from △△ 208 to 2012, there is no other evidence to reasonably explain the difference in rent. Accordingly, the Plaintiff Jin-si’s act of renting the instant land from △△ 250,000 to KRW 276,000,000 per annum, and the Defendant’s act of unreasonably reducing the tax burden on the instant land from 2050, 29405,29,20505,29.

C) Since ○○○○○○○○○○ was provided with 208, 200, 200 KRW 508,00,00 or more than KRW 52,00 per annum of the instant land and building for 2008, 200, 200 or more than KRW 569,784,00,00 for 208, 206, 606, 205, 606, 206, 60 or more of the instant land and building for 205, 606, 205, 606, 605, 60, 606, 605, 206, 605, 606, 605, 606, 605, 206, 605, 606, 605, 606, 2005, 200

In light of the fact that the amount paid in excess of 2011 business year exceeds 29,529,70 won, which is 5/100 of the reasonable rent (=590,594,000 x 0.05), but considering that ○○○○○○ was a lease deposit and a rent (30,000,000) for the instant building, it is difficult to view the difference between the Plaintiff○○○○ and the Plaintiff’s 20-year rent and the 20-year rent and the 10-year rent and the 20-year rent and the 20-year rent and the 20-year rent and the 20-year rent and the 20-year rent and the 20-year rent and the 10-year rent and the 20-year rent and the 20-year rent and the 200-year rent and the 200-year rent and the 200-year rent and the 200-year rent are not reasonable.

3. Conclusion

Therefore, the plaintiff ○○○'s claim of this case is accepted on the grounds of its reasoning, and the plaintiff ○○○'s claim of this case is accepted within the scope of the above recognition. The remaining claims are dismissed as they are without merit. It is so decided as per Disposition.