Whether retirement pension contributions constitute personnel expenses eligible for tax credit for research and human resources development expenses under the Restriction of Special Taxation Act;

Retirement pension contributions to pay retirement benefits only upon termination of a labor contract is not directly corresponding to research and human resources development.

Article 10 of the Restriction of Special Taxation Act

2015Guhap105260 Revocation of Disposition of Imposing corporate tax, etc.

AAA, Inc.

Daejeon Head of the District Tax Office

on April 21, 2016

on October 26, 2016

1. The plaintiff's claim is dismissed.

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

On November 26, 2013, the disposition imposing corporate tax of KRW 46,688,290 (including additional tax), KRW 102,95,420 (including additional tax), and KRW 243,227,510 (including additional tax) belonging to the business year 2009, which belongs to the Plaintiff on November 26, 2013, shall be revoked in entirety.

1. Details of the disposition;

A. On January 26, 2015, the Plaintiff (hereinafter “Plaintiff, regardless of whether it was established before or after the division,” a corporation’s purpose was manufacturing, selling, and services for golf products, driving practice ranges, golf course businesses, screen golf businesses, etc., which operated a department in exclusive charge of manufacture, such as screen golf time, and was recognized as a business-affiliated research institute under the Technology Development Promotion Act by the head of the Korea Industrial Technology Association of Korea incorporated on March 28, 2007 as a business-affiliated research institute under the Technology Development Promotion Act (hereinafter “the research institute”).

B. Until 207 to 2010, the plaintiff paid 4,431,867, 800, 208, 203,08, 884,802, 863, and 820,468, 770, 167, 207, 207, 30, 167, 167, 207, 207, 206, 30, 167, 167, 206, 30, 167, 207, 206, 30, 206, 167, 206, 37, 206, 37, 206, 206, 167, 30, 206, 37, 206, 206, 16, 201, 27, 207, 296, 16, 27, 27.

E. Accordingly, on November 26, 2013, the head of the Seo-gu Daejeon District Tax Office imposed corporate tax of 296,358,700 won on the Plaintiff for the business year 2008, corporate tax of 29,338,690 won for the business year 2009, corporate tax of 352,403,840 won for the business year 2010, and corporate tax of 945,101,230 won for the total amount of corporate tax of 945,230 won for the business year (hereinafter referred to as “tax imposition disposition as of November 26, 2013”), which was dissatisfied with the disposition of imposition as of November 26, 2013, the Plaintiff’s request for review was rejected on March 27, 2014, and it is reasonable to exclude the Plaintiff’s request for review from the Plaintiff’s tax credit requirement under the Restriction of Special Taxation Act.

H. Accordingly, the tax authorities corrected the corporate tax of the Plaintiff according to the review and decision by the Board of Audit and Inspection, and refund the Plaintiff KRW 249,670,410 of the corporate tax for the business year 2008, KRW 193,343,270 of the corporate tax for the business year 2009, KRW 109,176,330 of the corporate tax for the business year 2010, and KRW 552,190,010 of the corporate tax for the business year 2010. As a result, the remaining portion of the disposition imposing the corporate tax as of November 26, 2013 is as follows (hereinafter referred to as the “instant disposition imposing the tax amount that remains reduced”). The latter part of the Daejeon District Tax Office’s disposition was separated and newly established from the Daejeon District Tax Office.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 5, Eul evidence Nos. 1 through 3 (including branch numbers), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

① The Decree on the Restriction of Special Taxation does not exclude retirement pension contributions within the scope of the ‘labor cost subject to the tax credit under the Restriction of Special Taxation Act'. The above ‘labor cost' refers to all the expenses paid in compensation for labor to workers regardless of its title. ② Retirement pension contributions constitute labor cost as the total expenses recognized as losses. ③ Retirement pension contributions, which is a final and conclusive retirement pension plan, are completely different in the nature of both parties depending on the difference between actual expenses, accumulation and accounting at the time of payment, and ④ The expenditure of the fourth insurance premium is recognized as labor cost subject to the tax credit under the Restriction of Special Taxation Act. However, the instant retirement pension is unlawful. (b) The instant disposition that did not recognize retirement pension contributions subject to the tax credit under the Restriction of Special Taxation Act is unlawful.

It is as shown in the attached Form.

C. Determination

1) Article 10(1) of the former Enforcement Decree of the Act on Special Cases concerning the Restriction on Taxation (amended by Presidential Decree No. 21307, Feb. 4, 2009); Article 9(2) and attached Table 6 of the former Enforcement Decree of the Act on Special Cases concerning the Restriction on Taxation (amended by Presidential Decree No. 23590, Feb. 2, 2012); Article 8(1) and attached Table 6 of the former Enforcement Decree of the Act on Special Cases concerning the Restriction on Taxation (amended by Presidential Decree No. 23590, Feb. 2, 2012) lists personnel expenses of a person prescribed by Ordinance of the Ministry of Strategy and Finance among the expenses for research and human resources development as one of the expenses for research and human resources development to be deducted from the income tax or corporate tax for the pertinent taxable year. The employee of the research institute is recognized as being subject to the tax credit of the research institute under Article 2 of the former Enforcement Rule of the Restriction on Special Taxation (amended by Ordinance of the Ministry of Strategy and Finance).

3) We examine the following facts: (a) the instant retirement pension premium constitutes one of the retirement benefit plans stipulated in the Guarantee of Workers' Retirement Benefits Act; (b) the employer’s contribution under the defined contribution plan, which is one of the retirement benefit plans stipulated in the Act; (c) there is room to regard the amount of retirement allowance as included in the personnel expenses; (d) there is no explicit provision that excludes retirement pension contributions (user contributions) with regard to the scope of the personnel expenses subject to the tax credit under the Restriction of Special Taxation Act; (b) there is a difference in the accounting of retirement pension contributions in the fixed contribution plan and the retirement pension plan for retirement benefits, such as the final contribution plan; and (c) there is a difference in the amount of accounts on retirement pension contributions in the fixed contribution plan; and

However, in light of the above evidence and the following circumstances recognized by the purport of the entire argument, retirement pension contributions cannot be deemed as labor costs subject to tax credit under the Restriction of Special Taxation Act. Therefore, the Plaintiff’s assertion that differs from this premise is without merit.

① The purpose of the tax credit system under the Restriction of Special Taxation Act is to deduct a certain amount of money from the income tax or corporate tax for the pertinent taxable year in cases where there are personnel expenses within a certain scope required by a department exclusively in charge of research and development of technology. Thus, the tax credit system should only include the expenses directly corresponding to the research and human resources development for the pertinent taxable year. However, it cannot be deemed as the expenses directly corresponding to the research and human resources development for the pertinent taxable year only when the labor contract is terminated, such as retirement benefits, which are the expenses paid in lump sum, for which the duty to pay should be paid only when the labor contract is terminated. Furthermore, even if retirement benefits are included in deductible expenses in calculating the income amount for the pertinent taxable year under the Corporate Tax Act, it does not necessarily constitute the labor expenses that are subject to tax credit under the Restriction of Special Taxation Act. Therefore, even if retirement benefits or interim retirement allowances paid with the same amount of money as the retirement benefits payment are paid by the Plaintiff for each of the pertinent taxable years, it shall not be deemed as the amount of retirement benefits paid to the retirement pension or retirement pension payment for each of this case (see Supreme Court Decision 2013Du2147.

② Although the purpose of the Corporate Tax Act is to calculate taxable income by reasonably responding to the cost of profit, the Restriction of Special Taxation Act is to achieve the objectives of the period’s national policy through a tax support for a specific field, and thus, it cannot be deemed that the amount of tax credit under the Restriction of Special Taxation Act is naturally recognized as deductible expenses and thus, cannot be deemed as subject to the said tax credit under the Restriction of Special Taxation Act. Rather, the said tax credit under the Restriction of Special Taxation Act is recognized as an additional tax credit for the amount recognized as deductible expenses under the Corporate Tax Act, and it is a system that gives a considerable preference for policy purposes.

It is necessary to interpret more strictly.

③ According to the Guarantee of Workers’ Retirement Benefits Act, an employer should establish one or more of the retirement benefit systems, and the employer’s choice is entrusted to establish any of the defined contribution plans, defined benefit plans, and retirement benefit plans. However, if an employer establishes a defined benefit plan or retirement benefit plan, the amount of retirement benefits, allowances for severance benefits, and retirement allowance calculated does not constitute personnel expenses eligible for tax credit under the Restriction of Special Taxation Act (see Supreme Court Decision 2013Du22147, Mar. 13, 2014). On the contrary, if a retirement pension premium is considered to be included in personnel expenses eligible for tax credit under the Restriction of Special Taxation Act, the determination of tax credit under the Restriction of Special Taxation Act may vary depending on the contingency that the employer selects any retirement benefit system, and there is no need to recognize such difference. ④ The amount of national pension and health insurance premiums, etc., as well as the expenses to be immediately paid, there is no room for the employer to choose not only the amount of employer’s contribution, but also the amount of the retirement pension premium in this case’s voluntary payment.

3. Conclusion

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