Whether to provide double support for tax benefits may be applied simultaneously with tax reduction or exemption if each place of business is kept separately within the same taxable year based on the criteria of the place of business.

In light of the purport of each provision of the Restriction of Special Taxation Act, whether tax benefits are duplicate support shall be determined not by a national or a resident but by a place of business. Thus, if each place of business is kept separately within the same taxable business year, tax reduction and tax credit may be applied simultaneously

Article 127 (Elimination of Overlapping Assistance) of the former Restriction of Special Taxation Act

2013Guhap57679 Revocation of Disposition of Imposing corporate tax

AA Corporation

○ Head of tax office

April 24, 2014

May 29, 2014

1. On May 16, 2012, the Defendant revoked each imposition of corporate tax on the Plaintiff for the business year 2007, ○○○○○, ○○○○, ○○○○○, and ○○○○○○○○ (including additional tax on ○○○, ○○○, and ○○○○○○), corporate tax for the business year 2008, 008, ○○○○,○○○, ○○○, ○○, and ○○○, and ○○○, and 2009, corporate tax for the business year 2009, respectively.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The plaintiff's business and the relocation of factory

1) The Plaintiff’s business is divided into “BB” and “S” and “BSB” into “BB” and “BS” and “BS” are divided into “BS” and “BS” and “BS” and “BS” and “BS” and “BS” are divided into “BS” and “BS” and “BS” and “BS” and “BS” among the Plaintiff’s business.

2) From 2005 to 2006, the Plaintiff transferred the Incheon factory located in the overconcentration control region in the Seoul Metropolitan Area to Ulsan Metropolitan City and Chungcheong Gun outside the Seoul Metropolitan area (hereinafter referred to as the “Seoul Metropolitan City relocation factory”). The Boan factory has produced military and fire-proof goods belonging to the "Nansan Project Division within the previous area of Balan Island," but added a public water treatment plant, such as industrial explosives, etc. produced in the Incheon factory due to the transfer of the Incheon Metropolitan factory.

be produced by being newly established.

(b) Tax reduction or exemption for factories relocating to local areas and tax credit for other business places;

1) From 2005 to 2010, the Plaintiff applied tax reduction of ○○, ○○, ○○○, and ○○○○○○○○○, to a factory relocating to provinces when filing a report on the tax base and amount of corporate tax for the business year 2010, to the factory relocating to provincial areas under Article 63-2(2) of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010).

2) From 2006 to 2010 to 2010, the Plaintiff reported that the Plaintiff received temporary tax credit (2006 to 2010 to 2010 to 2010) related to the remaining business places, as a result of Article 26 of the same Act, the sum of the tax credit for investment in research facilities and equipment (2008 to 2010 to 2010 to 200), the tax credit for investment in overseas resources development (2008 to 2010 to 2008 to 2010 to 2008 to 2010 to 200, the tax credit for investment in production-oriented industry (2008 to 2010 to 208 to 2010 to 200 to 200 to 200 to 300

(c) Audit results by the Board of Audit and Inspection.

1) From June 1, 2011 to September 27 of the same year, the Board of Audit and Inspection conducted an audit on the actual status of tax statutes, established rules and general rules with respect to the Defendant.

2) The Board of Audit and Inspection determined that the Plaintiff received an excessive tax deduction equivalent to the tax credit amount by simultaneously applying the tax reduction or exemption and the tax credit for investment, in violation of Article 127(4) of the Restriction of Special Taxation Act regarding the exclusion of overlapping support. The Board of Audit and Inspection demanded the Defendant to additionally collect the corporate tax collected from 2007 to 2010, and to correct the refund of ○○○○,○○,○○, and○○○○○ (i.e., the total tax credit amount for investment from 2005 to 2010) (i.e., the total tax credit amount for investment from 2005 to ○○○,○○,○○,○○, and○○○ (ii) from 2005 to ○○○,○○, and ○○). The business year was reflected in the business year 2007 to 209 to 2010 to 2010 to 2010).

3) In violation of Article 127(4) of the Restriction of Special Taxation Act, the Board of Audit and Inspection prepared a plan to change the inquiry reply (the special taxation system and the special taxation system-284, March 23, 2010; hereinafter referred to as the “instant inquiry reply”) interpreted by a national so that the national may be simultaneously subject to tax credit and tax reduction and exemption, and demanded the relevant person to pay attention.

D. Defendant’s taxation disposition

1) On May 16, 2012, the Defendant decided and notified the Plaintiff on May 16, 2012, the corporate tax of 2007, ○○○○○○, ○○○○, ○○○○○, ○○○○○, and ○○○○○○○ (including additional tax ○○○, ○○○, ○○○○, and ○○○○○), corporate tax of 2008, 2009, and corporate tax of 2009, ○○○, ○○, ○○, ○○, ○○, and ○○○, and ○○○○ (hereinafter “instant disposition”).

2) On May 16, 2013, the Plaintiff filed a request for review with the Chairman of the Board of Audit and Inspection to the Chairman of the Board of Audit and Inspection. On the grounds that there was a justifiable reason by trust in reply to the question of this case, the Plaintiff was partly granted a decision of acceptance of the disposition imposing corporate tax for the business year 2008 to revoke the penalty tax ○○○,○○○, and○○○○○○. Accordingly, the Defendant revised the disposition imposing corporate tax for the business year 2008 by reducing KRW 0,000 among the disposition imposing corporate tax for the business year 208 (the disposition of this case remains ○○,○○, ○○, and○○○).

2. Whether the instant disposition is lawful

A. The allegations and issues of the parties

The plaintiff asserts that the disposition of this case based on the premise that it constitutes duplicate support is illegal since it does not constitute "dual support" as stipulated in Article 127 (4) of the Restriction of Special Taxation Act by dividing tax reduction and exemption related to factories to local areas and tax credit for the remaining business places, and by filing a corporate tax return, it does not constitute "dual support" as stipulated in Article 127 (4) of the Restriction of Special Taxation Act. Accordingly, since Article 127 (4) of the Restriction of Special Taxation Act excludes duplicate support of tax reduction and tax credit based on "national", the defendant,

The issue is whether Article 127 (4) of the Restriction of Special Taxation Act applies to local factories, such as the Plaintiff, if they are subject to tax reduction or exemption for local factories, and if they are subject to tax credit for investment in other business places.

B. Relevant statutes

Attached Form. The entry in the relevant statutes is as follows.

(c) Fact of recognition;

1) Circumstances leading up to the amendment of Article 127(4) of the Restriction of Special Taxation Act

Article 127 (4) of the Restriction of Special Taxation Act on the exclusion of duplicate support stipulates that the tax credit shall not apply to cases where corporate tax is reduced or exempted before it was amended by Act No. 6762 on December 11, 2002. However, as the amendment was made on December 11, 2002, a national may select only one of them if he can be simultaneously subject to tax reduction or exemption and tax credit for the same taxable year. The revised tax law theory of the National Tax Service (2003) provides that the National Tax Service may select one of them as applicable.In relation to the above amendment, there is no provision on whether the overlapping exclusion between tax reduction or exemption and tax credit for each taxable year is applied to each taxable year, and it is interpreted that the same taxable year excludes duplicate application of tax reduction or exemption and tax credit for each taxable year, but the purpose of allowing the choice of a tax reduction or exemption system is to allow different for each taxable year.

December 2, 2002

11. Before amendment.

Article 6, Article 12 (4) of the Addenda to the Amendment Act of the Regulation of Tax Reduction and Exemption Act (Act No. 5584)

In cases where income tax or corporate tax is reduced or exempted, the provisions of Article 12 (2) (limited to the amended provisions of Article 37) of the Addenda of the Regulation of Tax Reduction and Exemption Act (Act No. 5584) shall not apply.

December 2, 2002

11. After opening the court.

Where the income tax or corporate tax is reduced or exempted pursuant to Article 6 and 12 (2) (limited to the previous provisions of Article 37) of the Addenda to the Amendment Act of the Regulation of Tax Reduction and Exemption Act (Act No. 5584) for the same taxable year by a national, and where the income tax or corporate tax is deducted pursuant to Article 5, he may select only one of them as applicable.

After the amendment on December 11, 2002, Article 127 (4) of the Restriction of Special Taxation Act has been partially changed to the individual provisions related to tax reduction and exemption, but the same taxable year has been excluded from the application and only one of them can be selected and applied.

2) The inquiry of this case (the special taxation system and the special taxation system, March 23, 2010),

A) On August 7, 2008, the Plaintiff’s Gangwon-gu Seoul Special Planning Office applied the temporary special tax reduction and exemption due to the relocation of the factory to the income accrued from the factory relocated to the Commissioner of the National Tax Service, and the temporary tax credit for investment of other factories is applied to the capital investment of the factory. However, even if each factory selects the tax reduction and exemption and the tax credit and only one of them is applied, it is asked whether the overlapping support under Article 127(4) of the Restriction

B) The Commissioner of the National Tax Service confirmed that Article 63-2 of the Restriction of Special Taxation Act applies to the income generated from the relocated factory outside the Seoul Metropolitan area and the other corporation operating the factory separately for each factory, notwithstanding Article 127(4) of the same Act, and Article 26 of the same Act applies to the investment in facilities of another factory in the same taxable year (Article 63-2 of the same Act-2680, August 29, 2008).

C) On August 11, 2009, the Commissioner of the National Tax Service asked the Minister of Strategy and Finance as to whether a corporation subject to reduction or exemption of corporate tax, etc. for foreign investment in a main office is subject to the separate accounting of each workplace on August 11, 2009; a corporation subject to reduction or exemption of corporate tax for foreign investment in a secondary factory in a secondary factory is subject to the temporary tax credit for investment in the relevant workplace due to the loss of the secondary factory in a business year 2006; thus, where a temporary tax credit for investment in the relevant workplace is subject to the application of reduction or exemption of tax and tax credit for the same taxable year. The Minister of Strategy and Finance asserted that the application of reduction or exemption of tax and tax credit for each workplace on October 9, 2009 would not occur concurrently if the workplace is clearly divided, but it is not reasonable to judge the overlapping of tax credit for the relevant workplace, and it is generally large amount of investment amount and thus, it is not subject to the separate accounting.

D) On November 3, 2009, the Commissioner of the National Tax Service sent to the Plaintiff that double support between tax reduction and tax credit could be made, and re-reconvened that the above Ministry of Strategy and Finance (Special Taxation System and Special Taxation System-866, October 9, 2009), pursuant to the interpretation of the above Ministry of Strategy and Finance (Special Taxation System and Special Taxation-86, October 9, 2009), tax reduction and tax exemption could not be applied simultaneously, and that only one of them should be selected and applied.

E) AD made an inquiry to the Commissioner of the National Tax Service on November 4, 2009. On November 11, 2009, the Commissioner of the National Tax Service responded to the same purport as the reply of the Ministry of Strategy and Finance (the special taxation system and-866, October 9, 2009).

F) On November 11, 2009, EDR asked the Minister of Strategy and Finance on the same purport. On March 24, 2010, the Minister of Strategy and Finance selected only one of them pursuant to Article 127(4) of the Restriction of Special Taxation Act in cases where a national is eligible to both tax reduction and tax credit at the same time for the same taxable year. However, in applying Article 127(4) of the Restriction of Special Taxation Act, in cases where a corporation operating two factories unrelated to each other in the manufacturing process can reasonably separate the tax amount attributed to each factory as the corporation separate accounts for each factory, even if the tax amount attributed to each factory can be applied in the separate accounts for each factory, the amount of tax credit for investment credit arising from investment in another factory may be deducted to the tax amount attributed to the second factory (Special Taxation System and - 284, March 23, 2010).

3) Establishment of Article 127(10) of the Restriction of Special Taxation Act

With the amendment by Act No. 11614 on January 1, 2013, Article 127(10)(3) and (4) of the Restriction of Special Taxation Act was newly established that, in applying Article 127(10)(3) and (4), where the separate accounting of the business subject to tax reduction and exemption under Article 143 is applied to other business, the relevant tax reduction and exemption are not subject to duplicate support.

According to the revised tax law theory of the National Tax Service (2013), the above provision is reflected in the legislation in order to clarify that the application of tax reduction and tax credit by dividing the place of business does not constitute duplicate support.

4) The plaintiff's separate accounting

A) The Plaintiff: (a) moved the powder Section Incheon factory in Incheon, which is the overconcentration control region of the Seoul Metropolitan Area; and (b) separately kept separate accounting of the items produced in the Incheon factory among the items produced in the Onnuri and Boan factory, subject to the tax reduction or exemption due to the relocation of the factory.

The Plaintiff entered the amount by account into each business division (marbing/support/trade), and also in the powder sector, codeed the direct reversion department and the indirect reversion department for each business unit, and kept separate accounts for the reduction and exemption business and the non-reduction business. The Plaintiff compiled expenses by department and classified them into the reduction and exemption business and the non-reduction business. The items of common loss/gross income were calculated in accordance with the proportional distribution method under the Corporate Tax

From 2005 to 2010, the Plaintiff filed a return by attaching income classification statement in relation to the reduction and exemption of corporate tax for the taxable year.

B) The Plaintiff was investigated by the Seoul Regional Tax Office on February 22, 2010 to May 11, 2010 with respect to the business year 2005 and 2007, and was investigated by the Plaintiff. As a result of the investigation, the Plaintiff should have classified the amount equivalent to the interest paid for the borrowings, etc. related to the relocation of the Incheon Factory into the common reduction and exemption of the powder business division. However, the Plaintiff was pointed out that the amount equivalent to the interest paid was appropriated for the excessive reduction and exemption of the income by calculating the amount as the common deductible expenses of the powder sector and the trade sector.

D. Determination

Considering the following circumstances revealed through the interpretation of the above recognition facts and statutes, receiving tax credit for a factory relocated to a local area, such as the Plaintiff, is not duplicate support, but Article 127(4) of the Restriction of Special Taxation Act does not apply. The instant disposition that excluded tax credit on the premise that it is duplicate support is unlawful.

1) Article 127 of the Restriction of Special Taxation Act provides for "the exclusion of duplicate support." Article 127(2) of the Restriction of Special Taxation Act provides that where tax credits for invested assets for the same taxable year are simultaneously applied to a national for the same taxable year, only one of them shall be selected, and Article 127(3) of the Restriction of Special Taxation Act provides that where a national is granted tax credits for a foreign investment in the same taxable year, the amount calculated by multiplying the tax credits by the ratio of stocks or shares owned by a national investor to the total stocks or shares owned by the relevant company shall be deducted. Paragraph 5 of the same Article provides that where two or more provisions of the same taxable year are applicable to the same business place, a national may choose one of them, and Paragraph 6 of the same Article shall apply to the same business place where two or more of the provisions on maximum acquisition tax and property tax reduction and exemption provisions are applied to the same taxable year. Where a resident transfers land, etc. and at the same time applies the same time, only one of them may select one of them.

As such, each provision of Article 127 of the Restriction of Special Taxation Act does not determine whether a tax benefit is duplicately supported by a national or a resident unit, but rather determines whether a tax benefit is duplicate based on investment assets, foreign investment shares, workplaces, real estate in a workplace, reduced or exempted real estate, etc. In other words, it does not provide that a single investment act or acquisition of real estate can only receive one benefit if it satisfies the requirements for multiple tax benefits at the same time.

2) Article 127(4) of the Restriction of Special Taxation Act amended on December 11, 2002, and revised on the same taxable year, where “national” can be simultaneously subject to reduction and exemption of tax and tax credit, only one of them was selected. The above amendment does not purport that the taxpayer should determine reduction and exemption of tax and tax credit by excluding duplicate support in the case of the same taxable year among tax reduction and tax credit, and thus referring to “national” as quasi-national in line with the purpose of the amendment. It does not mean that there was a considerable reason to revise the term “national at the time of the amendment of the Act on December 11, 2002” to be used uniformly as a national in relation to the details in which “national” was added (the result of inquiry into the Ministry of Strategy and Finance of this Court).

3) Tax reduction or exemption under Article 63-2(2)1 of the Restriction of Special Taxation Act is not based on the taxpayer’s total income, but subject to “income accrued from the factory relocated to a local area” only. Whether to provide duplicate support for tax reduction or exemption under Article 63-2(2)1 of the Restriction of Special Taxation Act should be determined based on the income accrued from the factory as provided in subparagraph 1, not on the national’s total income. Although a for-profit corporation can not be a taxable unit, the said provision provides for a tax reduction or exemption under the premise that income accrued from the factory relocated to a local area can be separated by stipulating that a “income accrued from the factory relocated to a local area” can be separated by the said “income accrued from the factory relocated to a local area,” and the investment eligible for tax credit

(2) the Corporation.

In other words, when a certain amount of the amount of the investment tax for the factory is deducted from the corporate tax after receiving the reduction or exemption for the income accrued from the factory subject to the reduction or exemption, it is double support for the income accrued from the factory subject to the reduction or exemption.However, it cannot be deemed as double support for deducting a certain amount of the investment amount for other factory than the factory subject to the reduction or exemption, while imposing corporate tax on the remaining income other than the income.

4) Article 132 of the Restriction of Special Taxation Act imposes restrictions on tax support so as not to reduce or exempt any portion equivalent to the amount of the deficiency in a case where the calculated tax amount falls short of the minimum tax amount of a corporation which does not reduce or deduct after having been exempted or deducted. The Defendant asserts that the amount of tax credit equivalent to the portion that was not deducted falls short of the minimum corporate tax amount and the amount of tax credit carried over

Even if a carried-over deduction is not a deduction on the income reduced or exempted, but it is not a double support because it is not a deduction on the income reduced or exempted, since it is a tax credit at a certain ratio of investment amount, it is not a double support. It does not change whether a double support is made on the same income due to a carried-over deduction related to the minimum tax. Even after the establishment of Article 127(10) of the Restriction of Special Taxation Act on January 1, 2013, a carried-over deduction related to the minimum tax can be equally created,

5) Article 127(10) of the Restriction of Special Taxation Act, newly established on January 1, 2013, was made to clarify that the same does not constitute duplicate support at the time of separate accounting of the place of business. Considering the legislative intent of the foregoing provision, the content of authoritative interpretation, and the fact that Article 143 of the Restriction of Special Taxation Act on the separate accounting continues to exist in relation to the reduction of and exemption from the tax, the foregoing provision cannot be deemed as a creative provision, and it is merely a confirmation of the existing

6) The Plaintiff filed a separate accounting by dividing the tax reduction and exemption of a local factory and other business places, and filed a report by attaching the income classification statement at the time of filing a corporate tax return, and received points that the income amount was excessively appropriated on the premise of separate accounting in the course of the tax investigation, and thus, separate accounting was conducted in accordance with Article 143(1) of the Restriction of Special Taxation Act. In addition, it is difficult to view that there was only a point of view related to excessive appropriation of the income amount reduced or exempted at the

3. Conclusion

Therefore, the plaintiff's claim is reasonable, and it is so decided as per Disposition.