Expenses incurred by a casino operator for providing food, gifts, etc. to foreign customers shall be entertainment expenses.

Expenses for a casino operator to provide food, gifts, etc. to foreign customers can not be considered as a "compact with sales incidental expenses", and should be considered as entertainment expenses.

Where a casino operator pays the compact in the name of another customer without disclosing the real name, it shall be deemed as entertainment expenses.

2013Guhap3399 Revocation of Disposition of Imposing corporate tax

AAA Leisure Corporation

Samsung Head of Samsung Tax Office

May 22, 2014

July 3, 2014

1. The following dispositions that the Defendant rendered to the Plaintiff on March 2, 2011 shall be revoked:

A. A portion exceeding the OO's won out of the OO's corporate tax attributed to the business year 2007

B. A portion exceeding the OOO of the corporate tax attributed to the business year 2008 (OOO)

C. A portion exceeding the OOO of the corporate tax attributed to the business year 2009 (OOO)

2. The plaintiff's remaining claims are dismissed.

3. Of the litigation costs, 70% is assessed against the Plaintiff, and the remainder is assessed against the Defendant, respectively.

Cheong-gu Office

The following dispositions taken by the Defendant against the Plaintiff on March 2, 2011 shall be revoked:

A. A portion exceeding the OO's won among the OO's corporate tax attributed to the business year 2006

B. A portion exceeding the OOO of the corporate tax attributed to the business year 2007 (OOO)

C. A portion exceeding the OOO of the corporate tax attributed to the business year 2008

D. A portion exceeding the OOO of the corporate tax attributed to the business year 2009;

1. Details of the disposition;

(1) On September 6, 2005, the Plaintiff was established by investing 100% in BBB, and after January 2006 with permission under the Tourism Promotion Act, the Plaintiff is carrying out casino business exclusively for foreigners at O, OD D hotel stores, OE hotel stores, and (b) Seoul Director of Seoul Regional Tax Office shall conduct a tax investigation on the Plaintiff from December 7, 201 to February 28, 201, and notify the Defendant to impose corporate tax for the following reasons: ① excessive compacts (excluding transportation and lodging expenses paid by the Plaintiff in excess of internal payment standards); ② Loss of professional fund chip to be provided to a specific person at the time of the exercise of professional fund chip, ③ cost for overseas sales (the amount of additional tax paid by the Plaintiff’s employee at the time of entry into a foreign country or an office for solicitation of foreign currencies, ④ cost for collection of additional tax for the Plaintiff’s non-permanent credit sales (the amount of additional tax paid by the employee at the time of entry into a foreign country).

C. In accordance with the above notification, the Defendant issued a revised and notified each corporate tax from March 2, 201 to 2009 as follows (the first disposition).

A disposition of reduction correction was rendered to the effect that "the amount including additional tax for dispute" and "(d). The plaintiff filed an appeal against the tax Tribunal on October 29, 2012, the excess compact number ① included in the sales unit expense, and ② the professional chip is presumed to be a loss with reasonable grounds, and thus it cannot be deemed entertainment expense, and that the remainder of the claim is dismissed. Accordingly, the defendant issued a disposition of reduction correction as follows on November 6, 2012, and the amount of tax remaining after reduction of the original tax imposition amount becomes an OOO member (the remaining tax amount after the reduction of the tax amount and the remaining tax amount after the reduction of the tax amount become an OO member is referred to as "the disposition of this case")," and the purport of each of subparagraphs 1 through 5, 13 (including the number of pages), and the purport of all pleadings as a whole.

2. The plaintiff's assertion

(a) Key overseas sales promotion expenses;

The key foreign sales promotion cost is the compact cost recognized as casino cost, and it can not be considered as entertainment cost.

(b) Key Non-Real Name Compon;

The issue-free compact is the general compact cost, which is the customer's direct game and the customer suffers from the game.

(c) Fees for soliciting issues;

Even if the plaintiff erroneously paid subscription fees, it should be recognized as losses because it is the cost of collecting subscription fees to compensate for the performance from attracting customers.

D. Relevant additional tax

The Plaintiff could not know whether FF’s activities of the F F’s domestic liaison office are deemed to be a permanent establishment, and there was no lack of eligibility for FF to undergo verification as the FF did not have registered its business in the Republic of Korea. The Plaintiff was unable to undergo verification of eligibility, and there was a justifiable reason therefor.

3. Determination on key overseas sales promotion expenses and non-real-name telecom

(a) Facts of recognition;

1) For the business year from 2006 to 2009, the Plaintiff spent gift, liquor, ordinary research expenses, daily gift expenses, etc. for the existing overseas and new customers through the marketing team belonging to the local office of Japan, the Chinese Marcaro Office, the head office marketing strategy team (Japan, China, Busan, and the International Marketing Team) and the Mabter belonging to the new market development team, and the detailed disbursement details are as follows.

Table Omission of the Table

2) After having disbursed the cost of overseas sales promotion for the issues, the Manager reported the expected date of visit, etc. of the customer subject to disbursement, and managed whether to visit and the results thereof.

3) The Plaintiff handled the total amount of overseas sales promotion fund as casino cost (customer transportation cost, customer accommodation cost, customer sales promotion cost) among the sales cost.

"4) The plaintiff internal compact payment criteria (hereinafter referred to as "standard for payment") provides customers with 0 or more compacts. The plaintiff defined the compacts as "lives, food beverages (F&B), transportation and other customer convenience services provided free of charge or at a discounted price to customers." The payment criteria was revised on October 27, 2010. The payment criteria set forth the standards for provision by customer grade and the annual provision limit, and the compacts were ① paid by 00-GEs (the results of the customer's game), ② the possibility of being provided to the customers with 0-GEs' overseas compacts' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' promotions' 20-year promotions promotions promotions promotions promotions promotions.

Classification

Benefits

Point of origin

The conversion of foreign sales promotion fund into the Compact

(1) The effect of tax reduction of corporate tax.

(2) Strengthening the management and control of overseas promotional expenses.

(1) Amendment to the compact Regulations

(2) Marketing decline due to strengthening of cost control.

Current Maintenance

Benefits due to the maintenance of the current system

(1) Corporate tax risks.

(2) Overseas sales promotion funds are likely to be excessively executed.

However, when converting overseas sales promotion expenses into the compact protocol, there is room for violation of the casino business rules (amended by Ministry of Culture, Sports and Tourism No. 2008-23, Jul. 31, 2008; hereinafter referred to as the "business rules") and overseas sales promotion expenses were not converted to the compact protocol. 7) The Plaintiff’s customer, participated in casino games from December 6, 2008 to February 1, 2009, and the Plaintiff’s international marketing team employees requested the Plaintiff’s international marketing team employees to pay the compact number generated to H customer’s name. The Plaintiff’s international marketing team employees paid the compact number accumulated according to the Plaintiff’s game performance in this HH’s name, after confirming the compact amount from the place where GG, e.g., mother, and e., the Plaintiff paid the amount equivalent to the relevant amount to GG’s pre-paid card (BO card) with this H’s advice.

Game Date

Lossss (wons)

Compact occurrence amount(won)

From December 6, 2008 to December 7, 2008

OOO

OOO

From January 27, 2009 to January 28, 2009

OOO

OOO

February 1, 2009

OOO

OOO

OOO

OOO

[Ground of recognition] Evidence Nos. 4, 6 through 8, Evidence Nos. 1 and 2, the purport of the whole pleadings

B. Determination of key foreign promotional expenses

1) We examine whether the cost of overseas promotion corresponds to the compact cost.

"The Ministry of Culture, Sports and Tourism prescribes matters to be observed by a casino business operator in relation to casino business and accounting." The business rules define "compact casino business operator provides customers with board and lodging, transportation services, golf expenses, goods, and other services free of charge for attracting customers (Article 3 subparagraph 2). Where a casino operator pays the scope of compacts which it is possible for customers to provide to customers, customer lodging, food and beverage to customers, it is limited to "where it provides or pays golf expenses, goods, and other services for the purpose of attracting customers" (Article 52). A casino business operator has to provide compacts to customers, "certificates of compacts, passport copies of beneficiaries, air ticket copies, board receipts, etc." (Article 53). It is difficult to recognize that the casino business rules are limited to the limited scope of casino casino casino business rules and to provide them with sound compacts at its own expense, but it is difficult to recognize that the plaintiff's payment criteria such as compacts are limited to the limited scope of casino business rules and to provide them at its own expense.

However, the key foreign sales promotion expenses do not comply with all business rules or payment standards, such as the scope of payment by the Plaintiff to provide food, alcoholic beverages, gifts, etc. in a foreign country, and whether evidentiary documents are attached. In this context, the Plaintiff’s internally converted the key foreign sales promotion expenses into the compact amount, there is a fractional point in strengthening the cost control, and it is pointed out that the overseas sales promotion expenses may be excessively executed if maintaining the current system, and it also examines the conversion of the overseas sales promotion expenses under the premise that the overseas sales promotion expenses do not constitute the compact amount. In light of the above, the overseas sales promotion expenses do not constitute the compact amount.

2) It is deemed that the issue of overseas sales promotion cost constitutes losses as a sales incidental expense or entertainment expense.

Article 25(5) of the former Corporate Tax Act (amended by Act No. 1037, May 31, 2010; hereinafter the same) provides that entertainment expenses, social expenses, recompense, and other expenses of a similar nature regardless of the pretext thereof, which are expenses paid by a corporation in connection with its business. Meanwhile, among the expenses paid by a corporation for its business, if the other party is a person related to its business and the purpose of its expenditure is to further promote friendship with business-related persons through activities such as entertainment and to facilitate transactional relations, the expenses are entertainment expenses. However, the expenses paid by the corporation directly related to its profits cannot be readily concluded as entertainment expenses (see Supreme Court Decision 2010Du14329, Sept. 27, 2012). Article 19(1) and (2) of the Corporate Tax Act provides that the deductible expenses are losses incurred by the transaction that reduces net assets of the corporation, which are expenses related to the corporation's business, which are generally related to losses or losses, or are generally related to profits.

The ‘profit-relatedness' should be recognized. However, since the purpose of the entertainment expense is to promote smooth business relations by promoting friendship with the business partners, it cannot be said that it is directly related to profit-making under the latter part of Article 19(2) of the Corporate Tax Act.', the entertainment expense is characterized as entertainment expense, but business rules are limited to strict procedures within a certain scope by respecting the practice of casino industry. In other words, entertainment expenses spent by casino business operators should be used as a compact cost, which is, in principle, controlled by business rules and payment standards. ① The overseas promotion expense is not included in the scope of business rules and payment standards, and internal control is weak, ② the expenses paid to existing overseas customers from 2006 to 2009, and the expenses paid to the new overseas customers can not be considered as entertainment expenses, ④ the expenses paid to the new overseas customer, and ④ the expenses paid to the plaintiff's new overseas customer by the person in charge of the business relations can not be considered as entertainment expenses, and ④ the expenses paid by the person in charge of the plaintiff's participation in the overseas competition with the customer's.

C. Determination on this issue-based compact number

"A casino operator shall undergo strict procedures, such as providing documents evidencing the provision of compact costs, such as compact approval, beneficiary's passport copies, airline tickets copies, room receipt, etc., when providing the compact to casino customers. However, the issue non-real-name cards are registered in the name of a non-registered customer and paid losses (Loss) to a non-registered customer in another customer's name after the non-registered customer participated in the game without making a membership card, and thus, are inconsistent with business rules or payment standards. Considering the purpose of recognizing the costs of the compact, the scope of recognition, and procedures, etc., the issue non-registered compact cannot be deemed as ordinary expenses, and is not included in deductible expenses."

(a) Facts of recognition;

"1) The plaintiff entered into a contract with (ju), III, JJ, (ju), KK, and (ju), LLL with the professional solicitor. The plaintiff classify non-to-door customers into the customer brokerage contract into the customer brokerage contract as "Dormant customer", and assign and manage the customer to the professional solicitor, and as a result, when the customer participates in the game, 10% or 15% of the customer's loss is paid to the professional solicitor as the fee for solicitation," and 2. The following is "the terms and conditions of delivery, calculation of the fee and payment of the fee for good offices as stipulated in the contract by the plaintiff and (ju) III (the plaintiff under the contract refers to the plaintiff A and the professional solicitor)."

(1) The customers recruited by "B" shall be new customers or dormant customers (not less than 6 months of visit) without our visiting records, provided that the customers recruited by "B" shall be determined by mutual consultation with each other in the event of a dispute against the Dormant customers; "B" shall be customers who have been engaged in games for more than 4 hours at least 10 million U.S. dollars standard or whose short-term contract amount exceeds 10 million won. "I shall notify "A" of the list of customers prior to their visit to the place of business"; "B" shall be subject to notification to "B", "B" shall be excluded from the customer group subject to commission by judgment of "A" if the customers of other professional customers are included."

(1) The customer group, which serves as the basis for the payment of the good offices fees, shall be determined through consultation on the basis of the pre-notification customer list of "B", and 2) where the short-term payment of the initial reference is confirmed, it may be paid through consultation.

(3)A brokerage commission to be paid to 'A' shall be 10% of the loss of the relevant customer group, and 15% of the amount exceeding 100 million won shall be paid to 'A', 'B', 'A', '4) brokerage commission shall be paid to 'A', 'A', 'B', 'B', 'B', 'B', 'B', 'B', 'B', 'C', 'B', 'B', 'B', 'C', 'B', 'B', 'B', 'C', 'B', 'B', 'B', 'B', 'B', 'B', 207, 207, 'B', 2000, 'B', 'B', 'B', 'B', 6 months or more of its internal audit.

[Grounds for recognition] The descriptions of Gap evidence Nos. 4, 9, and 10, and the purport of the whole pleadings

B. Determination

The defendant denied the inclusion of the recruitment fees in the deductible expenses for the business year from 2007 to 2009 on the ground that they are non-business expenses.

In this regard, (i) A casino operator may attract contract games on condition of paying a certain price under a contract with a specialized solicitor (Article 57(1) of the Business Rule). The Plaintiff’s contract for brokerage of customers entered into with a specialized solicitor and the payment of solicitation fees under the contract is recognized as deductible expenses related to ordinary business expenses. ② Even if the Plaintiff does not meet the dormant customer standards stipulated in the contract, it is reasonable that certain of the customers are made to be managed by the specialized solicitor by mistake. However, even if the Plaintiff provided the service of managing the dormant customer, it cannot be said that there was no provision of services by the specialized solicitor or that part of the fee was paid upon the occurrence of the loss. The issue is that the Plaintiff paid the commission to compensate for the performance of attracting customers by the specialized solicitor. ③ The Plaintiff does not receive the commission from the specialized solicitor on the ground of erroneous payment, etc., but it cannot be readily concluded that there is no possibility that the Plaintiff may have any dispute between the Plaintiff and the specialized solicitor or any customer group within the scope of the contract.

Therefore, this part of the plaintiff's assertion that this part of the issue is justified.

5. Determination on the issue additional tax

(a) Facts of recognition;

1) The contract between the Plaintiff and MM

(A)MMM leisure set C&C (hereinafter referred to as “MM”) was a company specializing in casino solicitation, and the Plaintiff, on June 30, 2007, entered into a contract with MMM to pay some (70%) out of the amount of the customer’s casino usage (the Plaintiff’s gross amount of sales) (70%) as solicitation fees, instead of soliciting and arranging customers, as a company specializing in casino solicitation. The main contents of the contract are as follows:

⑤ MM must deposit an amount equivalent to 30% of the total mone set of mone set before the game with the Plaintiff. That is, when MM deposits 300 won, the Plaintiff will provide rolling chips equivalent to 1,000 won. Rawls chips equivalent to 70% are issued by MM from the Plaintiff.

Article 3 (Calculation and Payment of Brokerage Fee)

(1) MM shall be re-ordinate to the Ministry of Finance and Economy the matters related to withholding provisions under Chapter IV of Chapter IV of Corporate Tax Act and the conditions under Article 93 (5) of the Corporate Tax Act.

(2) Both parties agree to pay the following commissions:

1) Win/Lsb) Rawls US 1.7%

- 30% - 30%

MM - 70% M - 70%

(3) The calculation of rolling operations shall be calculated by the plaintiff and the accounting officer designated by MM. The sales calculation method shall be deemed the sales method for rolling chips recovered from the sales amount of rolling chips after the end of each month or set.

Article 4 (Settlement of Expenses)

(1) In principle, costs incurred in relation to the compacts of customers shall be borne by MM.

C) The Plaintiff paid the total amount of KRW OOOO to MF in the business year 2007 through 2009, but did not receive adequate documentary evidence, such as cash receipts. The Plaintiff did not report and pay taxes within the Republic of Korea.

(ii) audit results and MM-related lawsuits;

"A) As a result of the tax investigation, the director of the Seoul Regional Tax Office established an office on the third floor of the OO-dong 159 OO-dong 159 O-dong, the plaintiff's place of business (hereinafter "the office of this case") and judged it as a domestic permanent establishment of MM's domestic place of business, and notified the defendant that the amount equivalent to the amount of the regular receipt received should be attributed to the domestic permanent establishment of MM to impose corporate tax, etc. as income belonging to the domestic place of business of MM, on the ground that MM did not have registered its business even though MM operated its business with a permanent establishment in Korea."

July 1, 2007

On April 11, 201, the location of the place of business is the instant office, and the ex officio closure of business (the closure date: December 31, 2010) was registered.C) The Defendant decided and notified MM as a result of the tax investigation, and the corporate tax and value-added tax for each business year from March 2, 201 to 2010.

"D) Accordingly, on December 28, 2012, MM filed a request for review, and on December 28, 2012, by the Commissioner of the National Tax Service to re-examine the revenue amount related to domestic business operation activities, and as a result, the Seoul Regional Tax Office rendered a decision that "the tax base and tax amount for each city enterprise of MM shall be corrected, and the remainder of the claims shall be dismissed." However, the Seoul Regional Tax Office re-audited that the initial disposition was appropriate and notified to MM on March 22, 2013, "(e) MM filed a lawsuit (Seoul Administrative Court 2013Guhap9854), claiming revocation of the disposition of revocation of the disposition of imposition of corporate tax, etc. (Seoul Administrative Court 2013Guhap9854) against the existence of domestic permanent establishment, and filed a lawsuit claiming revocation of the disposition of imposition of corporate tax, etc. on March 7, 2014, and dismissed the remainder of the claims."

A) From July 2007, 2007, 15 employees of MM were working for 3 bridges per day (average 4 to 5 employees per day) from the instant office.

B) At the time of the tax investigation, the instant office had seven books, seven computer units, one credit cooperative for cash storage, one credit cooperative for chips for chips for chips, three cashnets, one work card size of attendance card, etc. At the instant office, MM had prepared and managed each customer’s game settlement card on a date, stating the customer’s name, chip chip (Depos) amount, chip (Dachip) amount, balance, chip (Balm) amount, loan details, etc. at the instant office.

C) From January 2007 to September 2008, the Plaintiff Company served as the new market development team as the head of the new market development team. After that, KimN, who served as the head of the marketing headquarters international marketing team, was investigated by the Seoul regional tax office on January 4, 2011, in charge of the Plaintiff’s role in attracting customers in China, etc., and the Plaintiff provided space and human resources for the Plaintiff to play games. The Plaintiff received money from its head office from the FFF to the Plaintiff, from the FF field competition team, the Plaintiff provided chipset to the Plaintiff, and the FF field competition team and the Plaintiff field competition team settled daily accounts from the FF market development team and the Plaintiff’s field competition team. The reasons why FFFFF used the instant office free of charge by leasing the entire office of the Plaintiff, making it difficult for the Plaintiff difficult to use the entire office, and offered it to the Plaintiff at the same time as much as possible from the Plaintiff’s casino industry’s point of view that it offered it to the Plaintiff’s 1 to the Plaintiff.

B. Determination

1) In order to facilitate the exercise of taxation rights and the realization of tax claims, additional tax under the tax law is an administrative sanction imposed as prescribed by the individual tax law in cases where a taxpayer violates various obligations, such as a return and tax payment, without justifiable grounds, and thus, it may be deemed unreasonable for the taxpayer to be unaware of his/her obligations, and thus, it may be exempt from imposition in cases where there are justifiable grounds, such as where there are circumstances under which it is unreasonable for the taxpayer to reasonably present his/her obligations or where it is unreasonable for him/her to expect the performance of his/her obligations to the party concerned (see, e.g., Supreme Court Decision 2003Du4089, Apr. 15, 2005).

Article 116(2) of the Corporate Tax Act provides that the Plaintiff shall receive and keep evidential documents, such as credit card sales slips and Cash Receipts, if the Plaintiff is supplied with goods or services from the business operators prescribed by the Presidential Decree. Article 158(1)1 (d) of the Enforcement Decree of the said Act recognizes the exception to the obligation to receive goods or services. Meanwhile, the Convention between the Republic of Korea and the Republic of the Philippines for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as the “instant tax treaty”) provides that the Plaintiff shall be imposed only on one country unless the Plaintiff is engaged in business within the other country (the former part of Article 1(1)) with respect to the profit of the business operators of the Contracting State, and thus, the term “permanent establishment” is defined as a fixed place of business for which the Plaintiff is deemed to have no capacity to receive and serve as an employee of the said business operators or other organizations within the territory of the Republic of Korea for more than 12 months (the former part of Article 7(1) of the said Convention).

6. Sub-committee

Among the plaintiff's assertion, the argument related to overseas sales promotion expenses and non-real-name telecom is without merit, and the argument about the key issue recruitment fees and additional tax is with merit, and the legitimate corporate tax amount of the disposition of this case is calculated as follows.

7. Conclusion

Therefore, the plaintiff's claim is justified within the above scope of recognition, and the remaining claims are dismissed as it is without merit. It is so decided as per Disposition.