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The judgment below is reversed and the case is remanded to Seoul High Court.
Reasons
The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).
1. Article 57(1)1 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides for a method of deducting the amount of foreign corporate tax from the amount of corporate tax for the pertinent business year, where income generated from overseas is included in the tax base of a domestic corporation for each business year, if the amount of foreign corporate tax paid or payable on such income generated from overseas exists, within the limit of credit.
In addition, Article 57 (3) provides that the amount equivalent to the tax amount reduced or exempted by a domestic corporation on the relevant foreign source income in the other country of the tax treaty shall be deemed the foreign corporate tax amount subject to the said tax credit within the scope prescribed by the relevant tax treaty.
It is stipulated in individual treaties on the deduction of tax paid abroad.
Article 23(3) of the Agreement between the Government of the Republic of Korea and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Korea-China Tax Treaty”), which was concluded in 2006, was replaced by Articles 2 and 5(1) of the Agreement between the Government of the Republic of Korea and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “instant provisions”).
The instant provision was replaced by Article 23(1)(a) of the Korea-China Tax Treaty (amended by Article 4 of the Protocol No. 2), which would have been paid by one Contracting Party referred to in Article 23(1)(a) of the Korea-China Tax Treaty, if there was no other relevant legal provision regarding the reduction, exemption, or promotion of economic development.