Board of Audit and Inspection 2015Do346 ( December 22, 2017)

The portion included in the calculation of earnings is illegal because the business right appropriated as the difference between the merger cost paid at the time of the merger between listed corporations and the net asset fair value is deemed depreciable

The instant goodwill appears to be based on the combined accounting rules, and it is difficult to view that the Plaintiff recognized the trade name, transaction relations, and other trade secrets of the merged corporation as an intangible property value with excessive profits, and paid compensation by evaluating the value of the business, and there is no other evidence to acknowledge otherwise, the instant disposition is unlawful.

Article 17 of the Corporate Tax Act; Article 24 of the Enforcement Decree of the Corporate Tax Act

2017Guhap8893 Revocation of Disposition of Corporate Tax Imposition

000 Stock Company

00. Head of tax office

November 08, 2018

on October 10, 2010

1. On March 9, 2015, the imposition of the corporate tax of the Defendant against the Plaintiff on March 9, 2015, 2009 x,x,x,x, andx (including additional taxes) shall be revoked.

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 is a listed corporation established for the purpose of manufacturing and selling motor vehicle parts, and the OOOO (hereinafter “OOO”) is a listed corporation established for the purpose of manufacturing electrical and electronic equipment for motor vehicles.

B. The Plaintiff’s merger of x.x. x.O.O. (hereinafter “instant merger”) and completed the merger registration on x. x. x.

C. At the time of the merger between the Plaintiff and the OOO as of the date of the merger in this case, the merger rate of the Plaintiff was determined as 20x. x. x. x. (the date of the resolution of the board of directors for the merger was before the date of the conclusion of the merger, 200x. x. x. x. x. x. x. x. x. x. x. x. x. x. x. x. x. x. x. x. x were calculated based on the weighted average of the trading volume between the O and the trading volume of the O during the latest one week period from May 28, 2013 to the Financial Investment Services and Capital Markets Act (amended by Act No. 10063, May 28, 2013; hereinafter referred to as the "Capital Markets Act"); the plaintiff's average of the closing price of x. x. x. x. x. 200.

D. The Plaintiff, immediately after the instant merger, included the issue value of new stocks of the merger in the business account book (hereinafter referred to as the “business right of the instant case”) and the net asset value of the OOOOOO in the business right (hereinafter referred to as the “business right of the instant case”) pursuant to the accounting rules on the acquisition and merger of the instant case (hereinafter referred to as the “combined accounting rules”). x,x,x,x,x,x,x (x,x,x,x0).

E. The Plaintiff deemed that the instant goodwill, which was appropriated in the process of the instant merger, does not constitute “business right, which is a depreciable asset,” as stipulated in Article 24(4) of the Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22184, Jun. 8, 2010; hereinafter the same), and the value of the instant goodwill was included in deductible expenses and excluded the same amount from deductible expenses.

F. On the x. x. 201x. x. 201x. The director of the regional tax office notified the Defendant of the result of the investigation that the pertinent business right constituted a business right under Article 24(4) of the Enforcement Decree of the Corporate Tax Act, and that the above business right should be included in the gross income as a merger evaluation marginal profit. Accordingly, on the x. x. x. 201x. 200x. x. 200x, the Defendant corrected and notified the Plaintiff of the correction and notification of the corporate taxx,xx,xx,xx, andxx (including additional tax; hereinafter the same shall apply) (hereinafter referred to as the “disposition”).

G. The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Board of Audit and Inspection, but the Board of Audit and Inspection dismissed the request for review x.x.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

At the time of the merger of this case, it cannot be deemed that an intangible asset value based on approximately KRW x andx00 million was possessed by the OOO or the Plaintiff paid the price by evaluating the business value thereof. Therefore, the value of the instant goodwill cannot be taxed as a merger evaluation marginal profit by recognizing it as a business right under tax law, and the reasons are as follows.

1) Pursuant to the relevant provisions of the Capital Markets Act, the instant goodwill is an accounting goodwill created to adjust the difference in loans and loans arising in calculating the merger ratio based on the share price, and is not calculated separately by evaluating the intangible asset value of the OOO.

2) At the time of the instant merger, the Plaintiff deemed that the instant goodwill does not fall under the business rights under the tax law, and was not included in the gross income at the time of corporate tax return, and was not included in the deductible expenses as the depreciation costs in

3) The Plaintiff had sustained operating profits in the business sector A/S of the boilers and parts, and the OOO reduced operating income ratio, and recorded deficit in the business year 2008. At the time of the instant merger, the OOO did not have a business value to create excess earnings higher than that of the same company.

(b) Relevant statutes: Omitted;

(c) Fact of recognition;

1) The Plaintiff is an affiliated company of the ○○ Automobile Group, and the Mos Business and Parts Business. The Mos Business is a business manufacturing and selling motor vehicle parts by purchasing motor vehicle parts as raw materials. The parts business is a business selling A/S motor vehicle parts. The sales amount of each business division as of the 2008 business year are as listed below.

2) OOO was an affiliated company of the OO Motor Group. The main manufacture was multimedia products and electric parts, and the sales of each product as of the business year 2008 are as listed below:

3) On April 6, 2009, the Plaintiff published important matters regarding the instant merger, and the main contents are as follows.

4) Sales, operating profit and loss ratio, etc. of OOO prior to the merger of this case are as listed below [Attachment 1]. The return on assets invested by OOO (the ratio of assets used for business and after-sales profit) and the average return on assets invested by OOO, which are the industrial classification of OOOO, is as listed below [Attachment 2].

5) The Plaintiff’s sales, profit and loss ratio, etc. before and after the instant merger are as listed in the following table.

Table Omission of the Table

D. Determination

1) Relevant legal principles (see, e.g., Supreme Court Decisions 2017Du43173, May 11, 2018; 2015Du41463, May 11, 2018; 2017Du54791, May 11, 2018)

A) The Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter the same) shall be imposed on the merged corporation as a merger evaluation marginal profit where the merged corporation succeeds to the evaluation of assets from the merged corporation (proviso of Article 17(1)3; Articles 15(2) and 12(1)1 of the Enforcement Decree of the Corporate Tax Act). In the case of a merger, the business right appropriated by the merged corporation shall be deemed as depreciable assets, limited to where the merged corporation succeeds to the evaluation of the assets of the merged corporation and succeeds to the evaluation of the assets of the merged corporation, which are of business value due to the trade name, transaction relation, and other trade secrets, etc. of the extinguished corporation (hereinafter referred to as “trade name, etc.”).

B) According to the relevant Acts and subordinate statutes, in order to impose the value of business rights as a merger evaluation marginal profit in the case of a merger of corporations, the merged corporation is deemed to have paid compensation by evaluating its business value by recognizing the trade name, etc. of the merged corporation as intangible property value that can obtain excess profits from the merged corporation. The evaluation of business value in this case shall be objectively determined by comprehensively taking into account various circumstances, such as the process and motive of the merger, the current business status of the merged corporation and the merged corporation at the time of the merger, and the details of tax returns after the merger, etc., and the business rights shall not be inferred solely

(1) In order to be taxed as a merger evaluation marginal profit of a merged corporation, it shall be recognized as the assets of the merged corporation in the first place. Even if a corporation creates an intangible business right through its internal business activities, it shall not be recognized as an asset under tax law, and it shall be recognized as an asset of the merged corporation only in cases where it satisfies the requirements prescribed in

Tax law and corporate accounting have different purposes and purposes and separately provided for in the corporate tax law. In the event of a merger, the requirements for recognition of goodwill are also such cases. "Requirements for evaluation of the business value of goodwill" under the Enforcement Decree of the Corporate Tax Act was introduced to recognize business goodwill restricted at the time of the amendment of the Enforcement Decree of the Corporate Tax Act on December 31, 1998, and the framework for the merger taxation has been maintained to Article 80-3 (2) of the Enforcement Decree of the Corporate Tax Act amended on June 8, 2010.

② In the case of a merger, the issue of requirements for recognizing a business right as an asset under tax law is different from the issue of whether it is appropriate to calculate the amount of the business right as the difference which exceeds the net asset value of the merger price when determining the appropriateness of the detailed method of assessment. Therefore, requiring the evaluation of the business value of the trade name, etc. is inconsistent with the case affirming the appropriateness of the evaluation of the business right based on

(3) The taxation of a merger evaluation marginal profit is imposed upon the acquisition of profits generated from tangible and intangible assets held by a merged corporation prior to the merger. Article 15(2) of the former Enforcement Decree of the Corporate Tax Act merely accepts Article 12(1)1 of the Enforcement Decree of the same Act as the calculation method, and does not relate to the conceptual capital reserve (Article 16(1)2(a) of the Corporate Tax Act). The merger marginal profit, which is the simple difference between the net asset value transferred by the merged corporation and the face value of the merged new stocks, cannot be the requirement for taxation.

2) Specific determination

A) In light of the above legal principles, the instant goodwill appropriated as goodwill in the account book by the Plaintiff, in full view of the following circumstances acknowledged by the health team, the facts acknowledged as above, and the purport of the entire pleadings, is merely deemed to be based on the combined accounting rules, and it is difficult to deem that the Plaintiff recognized the trade name, transaction relations, and other business secrets of the OOOOO as an intangible value with excessive profits, and paid the price by evaluating the business value. Thus, the instant goodwill cannot be deemed to have satisfied the requirements for the recognition of the operating right under tax law.

① As seen earlier, the issuance price of the new stocks issued in the merger of this case exceeds the net asset value of the OOO or the Plaintiff appropriated the difference as the instant goodwill in the account book according to the combined accounting rules cannot be deemed to have a significant existence of business rights or substantial evaluation thereof under tax law. Rather, the Plaintiff calculated the instant goodwill under the premise that the instant goodwill does not constitute a business right under tax law and adjusted the value of the instant goodwill into 0 "0" after calculating the instant goodwill, based on the premise that the instant goodwill does not constitute a business right under tax law, and then excluded the same amount from deductible expenses. In addition, the Plaintiff did not consider the instant goodwill as an intangible asset subject to depreciation.

② As of April 2, 2009, the date of resolution by the board of directors for the merger of this case, which was the day before April 3, 2009, the date of conclusion of the merger contract, is the initial date of April 2, 2009. From April 2, 2009, the closing price of April 2, 2009, the trading volume of the previous one week starting from April 2, 2009, and from April 2, 2009, the closing price calculated by the weighted average of the trading volume of the previous one week from April 2, 2009 and the closing price calculated by the weighted average of the trading volume of the previous one month from April 2, 209, the lower of the closing price of the Plaintiff and OOOOOO was to calculate the merger ratio by comparing the value of stocks of the Plaintiff and OOOOOOOOO, it is difficult to view that there is no direct relation to the appraisal of business rights nor it is more than the net operating value of the Plaintiff.

③ In particular, the share price of OOO has increased from March 2, 2009 to April 3, 2009 to 40% from March 2, 2009 to April 2, 2009, based on the closing price. The merged value of OOOO was calculated based on the average of the closing prices calculated on April 2, 2009 and the last one week thereafter, based on the average of the average of the closing prices calculated for the last one month. However, it is difficult to view that there was an increase in intangible property value, such as the trade name, transaction relations, and other trade secrets of OOO only once a month.

④ The instant merger was conducted between the OO Motor Group’s affiliates, namely, for the purpose of facilitating the cost reduction, etc. due to the integration, and the OOO was engaged in the production of the former parts, but it was not able to make sufficient investments in research and development expenses due to financial crisis, etc. In spite of the financial crisis due to the sale of A/S parts, it is possible for the Plaintiff to invest in research and development expenses of the former part because it had a stable cash flow despite the financial crisis. The instant merger appears to have been made in the above motive.

⑤ On the other hand, the Plaintiff appeared to have a stable sales and operating profit and loss at the time of the instant merger, while the OOO had a 33.1 billion won operating profit for the business year of 2007, but the operating profit for the business year of 2008 was reduced to KRW 26.3 billion, and the net profit prior to the reduction of corporate tax costs at the time of the instant merger reaches KRW 74.6 billion, and it is difficult to deem that there was an excessive profit and loss since it is difficult to view that the return on investment assets of OOO was higher than that of other companies.

⑥ 특히, 이 사건 합병 당시 원고의 주주는 ◆◆자동차(17.76%), ◇◇◇(7.74%), OO◎◎(6.28%) 등이었고, OOOOO의 주주는 ◆◆자동차(8.91%), OO자동차(16.77%), OO◎◎(6.73%) 등이었으며, 원고와 OOOOO 모두 OO자동차그룹의 계열회사인바, 원고가 이 사건 합병으로 인하여 OOOOO의 상호나 거래관계 기타 영업상의 비밀 등을 이용할 필요성이 있었다고 보기 어렵다. 피고는 합병 이후 원고의 영업손익률이 증가하였고 OOOOO이 다수의 지적재산권을 보유하고 있어 이러한 사업상 가치를 평가하여 승계한 것이라고 주장하나, 합병과정에서 OOOOO의 지적재산권이나 다른 자산에 관한 평가가 이루어지지 않은 이상 위와 같은 사정만으로는 이 사건 영업권을 세법상 합병법인의 자산으로 인정하기 어렵다.

7) In addition, the Defendant recognized the instant goodwill as depreciable assets by filing a claim for correction after the instant disposition, and argued that the Plaintiff recognized the instant goodwill as an goodwill under the tax law, and thus, the Plaintiff was aware of the instant goodwill, but the time when the Plaintiff filed a request for correction as above was made after the instant disposition. However, the Plaintiff’s request for correction was made after the instant disposition, and solely appears to be a follow-up measure to pay corporate tax in accordance with the instant disposition, and such circumstance alone does not mean that the Plaintiff assessed the instant goodwill as an goodwill under the tax law. In particular, as seen earlier at the time of the instant merger, the Plaintiff did not recognize the instant goodwill as an goodwill under the tax law, and did not depreciation, etc. by recognizing it as an goodwill under the tax law

B) Therefore, the instant disposition that included the value of the instant goodwill in the gross income as a merger evaluation marginal profit on the premise that the instant goodwill is an operating right under the tax law is illegal, and the Plaintiff’s assertion is with merit.

3. Conclusion

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

(i) an intermediate stage for assembling parts required for the assembly of motor vehicles;