National High Court 2007 Jeon 4733 (Ob. 24, 2009)

propriety of the disposition imposing a tax on a corporation (in the case of a corporation) by deeming it an authorized corporation for the purpose of tax avoidance

If a domestic corporation, which is a withholding agent, fails to file a return on capital gains by taking account of non-taxation provisions in the country where the place of such capital gains, etc., after establishing a Belgium company for the purpose of tax avoidance by using the Korea Belgium Tax Convention, a disposition imposing tax on the domestic corporation

The contents of the decision shall be the same as attached.

1. The plaintiff's claim is dismissed.

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

The Defendant’s disposition of purifying 4,018,50,000 won for the business year of 2005 against the Plaintiff on July 12, 2007 and the disposition of collecting 489,682,000 won for the business year of 2004 and 330,535,000 won for each of the disposition of collecting 417,79,796,520 won for the business year of 2005 are revoked (each of the disposition of collecting 4,000 won for the business year of 2004 is deemed to be a clerical error in the “corporation tax” for each of the disposition of collecting 330,535,00 won for the business year of 205).

1. Basic facts

A. BB0, as a resident, established MHxembourg S.A.R.L, a Luxembourg, which is a Luxembourg, a Luxembourg branch agent, established MHN, a Luxembourg as a Luxembourg. On October 18, 1999, the said corporation again established Mando Holds N.V., a Belgium.

B. Mando Hrings N.V. constituted UBS Capital B.V., PPMV Nomines Lins Limited, and LLC with a consortium, and established the Plaintiff on October 26, 199.

C. The Plaintiff paid KRW 5,601,960,00 as dividends in the year 2004 and KRW 3,781,323,000 as dividends in the year 2005 (hereinafter “each dividend income of this case”), and the Plaintiff collected KRW 781,532,182,182 as corporate tax in the business year 204, and paid KRW 3,781,323,223,223 as corporate tax in the business year 205, by applying the limited tax rate (including resident tax) of Article 10-15% of the Convention between the Republic of Korea and the Kingdom of Belgium for the Avoidancedo Avoidanceing of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter “Korea-Belgium Tax Convention”).

D. On March 28, 2005, a corporation was established with AA Person Holdings. On November 25, 2005, AA Person Holdings filed an application for non-taxation and exemption of corporate tax with the Defendant, based on the non-taxation provisions for the transfer income under Article 13(3) of the Korea-Belgium Tax Convention, on the grounds that the Plaintiff’s shares (17.1% of the total Plaintiff’s shares) owned by Manddo Holdings N.V. were transferred to KRW 40,185,00,000 (hereinafter “instant shares transfer income”), and Manddo H Holdings N.V. submitted this application to the Defendant.

E. Afterma, February 7, 2006 AAA Holdings was merged with the Plaintiff.

F. The Defendant: (a) deemed that the Belgium, Belgium, N.V. and Luxembourg, a 100% shareholder of the above corporations, MHNxembour S.A.R.L. is merely a conduit company established for the purpose of evading taxes in Korea by using the Korea-Belgium Tax Convention, and thus, the instant dividends and the capital gains on transfer of the instant stocks are merely 30% of Belgium Lxemburg., S.R.L. 200, 305, 300, 500, 207, 305, 207, 405, 207, 405, 207, 305, 207, 405, 207, 305, 405, 207, 205, 305, 405, 207, 305, 305, 2004, 201.

G. On October 14, 2007, the Plaintiff filed an appeal against each of the dispositions of this case with the National Tax Tribunal, but the National Tax Tribunal dismissed the appeal on February 24, 2009.

[Ground of recognition] Facts without dispute, Gap evidence 1-1 to 3, Gap evidence 2, 3, Eul evidence 1-1 to 3, Eul evidence 1-3, Eul evidence 13 and 14, and the purport of the whole pleadings

2. Determination on the legitimacy of each of the dispositions of this case

A. The plaintiff's assertion

1) The Defendant issued each of the instant dispositions by deeming MHN Luxembourg S.A.R.L to be a Do government company. The actual holders of each of the instant dividend income and each of the instant capital gains to be the shareholders of MHN Luxembourg S.A.R.L., the Defendant rendered each of the instant dispositions by deeming that the instant dividend income and each of the instant capital gains to be the shareholders of MVA.L. and the instant disposition was the Kacific LPP, which is a corporation of Ireland, which is a corporation BB0, as a corporation of Ireland, and Manddo Holds N.V. and MHN Luxembembemgs S.R.L.L is not a corporation with a legal entity, but is not a Do government company, and the Pacific LP is not the actual holders of each of the instant dividend income and each of the instant stocks.

2) The interpretation of Article 14(1) of the Framework Act on National Taxes, which is merely an abstract provision of the Plaintiff who is not a taxpayer, is unlawful to unilaterally deny the resident judgment under the Korea-Belgium Tax Convention, which has the effect prior to the domestic tax law, by admitting the legal form of the transaction parties based on the substance over form principle, as the actual owner of each dividend income and each share transfer income of the instant case and imposing withholding obligations from the parties thereto.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Taxation on the domestic source income of a foreign corporation

A) Article 91 (2) of the Corporate Tax Act (amended by Act No. 7388 of Dec. 31, 2005) provides that "in the case of a foreign corporation with a domestic place of business and a foreign corporation with no income under subparagraph 3 of Article 93 of the Corporate Tax Act, the amount of each domestic source income under the classification of each subparagraph of Article 93 of the Corporate Tax Act shall be the corporate tax base for the business year of the concerned corporation." Article 93 of the same Act provides that "domestic source income of a foreign corporation shall be classified as follows." Article 17 (1) of the Income Tax Act (excluding income under Article 6 of the same Act) provided that "the dividend income under the former part of subparagraph 2" or "the income under Article 10 (a) of the Income Tax Act (excluding income under Article 6 of the same Act), which is generated from the transfer of stocks or investment certificates issued by a domestic corporation and other securities, the foreign corporation shall withhold 98 (1) of the same Act from the income of the concerned domestic place of business under Article 10 (30).

On the other hand, Article 10 of the Korea-Belgium Tax Convention stipulates dividend income.

1.Distributions paid by legal persons which are residents of a Contracting State to residents of the other Contracting State may be taxable in that other Contracting State.

2.However, such dividends may, however, be taxed in accordance with its laws in the Contracting State in which the paying corporation is a resident. However, if the receiver of the dividends is the beneficial owner of the dividends, the taxes so charged shall not exceed 15 per cent of the total amount of the dividends, and Article 13 shall be taxable in the Contracting State in which the property is situated. 2. The gains accruing from the transfer of the movables forming a part of the permanent establishment's business property in the other Contracting State and those accruing from the transfer of the said permanent establishment (on its sole basis or together with grasium) may be taxed in the other Contracting State, but the profits accruing from the transfer of the movables forming a part of the permanent establishment's business property in the other Contracting State shall be exempt from taxes in the other Contracting State, provided that the vessels or aircraft operated by an enterprise in the international traffic by a Contracting State and from the transfer of the vessels or aircraft attached to the operation of such vessels or aircraft.

3.The above-mentioned provisions stipulate that gains accruing from the transfer of property other than that referred to in paragraphs 1 and 2 above shall be taxed only in the Contracting State in which the transferor is a resident.

B) Article 6(1) of the Constitution provides that "any treaty entered into and promulgated by the Constitution and any generally accepted international law shall have the same effect as domestic law," so the Korea-Belgium Tax Convention entered into with the consent of the National Assembly shall have the same effect as that of the law, and in legal relations governed by the tax treaty, the relevant treaty shall take precedence over domestic law, as the relevant treaty takes the same effect as that of the domestic law.

2) Determination as to a person to whom income belongs and substance over form principle

Since Manda Holds N.V. received each dividend income and capital gains from shares in the instant case are Belgium corporations, the Plaintiff shall withhold corporate tax as corporate tax by applying the limited tax rate of 15% pursuant to Article 10 of the Korea-Belgium Tax Convention with respect to each dividend income in the instant case, and with respect to the capital gains from shares in the instant case, only in Belgium pursuant to Article 13(3) of the Korea-Belgium Tax Convention, it is imposed only on Belgium, and there is no taxation right in Korea, and thus, it should be deemed that AAA Holdings does not have any corporate

However, if non-residents with nationality other than Belgium establish a corporation in Belgium for investment purposes and operate a business with the purpose of capital gains in Korea within the name of the corporation, there is no normal business activity in Belgium, which is the corporation's place of residence, and only performed the role of the transaction parties for original investors without independent economic profit and business purpose, even in the transaction within the Republic of Korea of that corporation, and the actual transaction entity is the original investor, and only that is the sole purpose of the tax avoidance of original investors, the limited tax rate of 15% shall be applied to the dividend income pursuant to the Korea-Belgium Tax Convention and the non-taxation for the stock transfer income shall be recognized.

(4) Since the Constitution provides that "any citizen of the Republic of Korea is not subject to discrimination in all areas of political, economic, and cultural life" with respect to the establishment of a separate taxation treaty for the sake of fair distribution of tax burden to all citizens, the State is obligated to equally deal with the interpretation and application of the laws and regulations on taxation. One of the legal systems for the purpose of realizing the principle of equality in taxation can be said to be an exception to the interpretation of tax treaties that are effective under the Constitution, and thus, the substance over form principle should also be applied to the interpretation of the Korea-U.S. Tax Treaty, which is the basis for the prevention of tax evasion and the establishment of a separate taxation treaty."

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3) Determination as to each of the instant dividend incomes and capital gains from stocks

A) Accordingly, when the Defendant recognizes a person to whom the instant dividend income and capital gains accruing from the transfer of stocks are actually attributed as Manddo Hablings N.V., a resident in Belgium, the Defendant shall be deemed to be the resident in the other Contracting State under Article 10 of the Korea-Belgium Tax Treaty, and the transferor and beneficial owner under Article 13(3) of the Korea-Belgium Tax Treaty, and may exercise the authority to impose taxes pursuant to the said provisions. The Defendant may exercise the authority to impose taxes on the instant dividend income and capital gains from the transfer of stocks if it recognizes that the person to whom the instant dividend income and capital gains from the transfer of stocks are actually attributed as MHN Luxembourg S.A.R.L., the Defendant may exercise the authority to impose taxes in accordance with the tax treaty concluded with the above country if it recognizes that the person to whom the instant dividend income and capital gains from the transfer of stocks are the resident in the Belgium as MHNL under the Korea-Belgium Tax Treaty, as the resident in BB0,000, as a domestic law.

B) In full view of the following circumstances, Gap's evidence 2, Eul's evidence 2, Eul's evidence 2, Eul's evidence 6, 7, 9 through 13, 16, 17, 20, 21 evidence 22-1 through 7, Eul's evidence 24-1 through 14, and Eul's evidence 24-1 through 14, the whole purport of the pleadings can be considered as a whole, and the following circumstances can be considered: Manddo Herings N.V. and MHN Luxemburg S.R.L. It is a Do government company established to avoid the exercise of the Korea's taxation right; although it has been in the external form of a juristic person, it is nothing more than a personal gift of a person behind the corporate personality, or it is not a case where it is used as a means to avoid the application of laws against the person behind the corporate personality, and it is nothing more than a case where it is actually used as a dividend income and business part of the PP.

① In collaboration with CVC Capital Capital Workers, which is an investment manager of Pcific LP as to the value of the property of the CV Capital Capital branch, the investment manager of the CV Capital Capital branch, the N.V., signed various reports and contracts related to the underwriting contract for the part of the AAC headquarters business of the AAmer headquarters, and signed on the contract, etc., the CVC Capital Capital branch B.V., the Asia-Pacific LP as to the acquisition contract for the part of the AAmer headquarters business of the AAmer headquarters, determined the investment conditions, etc. by participating in the contract with the AAmer headquarters as a party to the AAmer headquarters business, and Manddoolds N.V. was established immediately before the acquisition contract was concluded, and did not participate in the conclusion of the said contract.

② At the time of acquisition of the part of the AA Machinery Headquarters’s business, Mando Holdlings N.V. The amount of investment corresponding to the shares was provided by the Pacific LP, which is the value of the property of the branch partners of the CV Capital.

③ On May 2001, the e-mail prepared by the Plaintiff, ordering the Plaintiff to immediately transmit dividends deposited in the accounts of Manddo Hrings N.V. to the Kacific LP account. On October 2001, 201, the Belgium Licambbbb, a legal company, and an attorney-delivery affiliated with theO, directly transfers dividends to the accounts of Pacific LP, a legal company, to the Belgium. However, Manddos N.V., is likely to be treated as a government company, and thus, the Plaintiff consulted to transfer dividends directly to the accounts of Pacific LP, a legal company, to the Belgium.

④ At the address of Manddo Hrings N.V., only has the offices of CVC Capital Total Partners (Benux) N.V. There is no independent place of business, and Manddo Holds N.V. The phone number recorded in the data for inquiry is the phone number of Inc. (Benux) N.V. employees of the CVC Capitalnzers (Benux) N.V.

⑤ The directors of Mando Hrings N.V. consisting of three Marteen Riis, Mark Grizlle, and Geert Duyck. However, Maarte Riis are directors who exercise overall control over the investments in Japan and Asian region under the investment advisory jurisdiction in Hong Kong located in Hong Kong. Mark Grize is a director of CVC Luxembourgs, and Geert Duyck is a director of CVC Capital Total Partners (Berux) N.V.

(6) Manda Hrings N.V. is the Plaintiff’s stocks, and there was no fact that most of the assets were used for the purpose of working expenses necessary for personnel and business management.

7) Belgium is exempt from the source tax in Korea in accordance with the Han-Belgium Tax Convention on the stock transfer margin, between Belgium and Luxembourg, and between Luxembourg and BB0, and between Luxembourg and BB0, from the source tax on the dividend income. Belgium is exempted from the income tax on the capital gains; income tax on the source income exceeding a certain size in Luxembourg is repaid; BB0, Luxembourg pays income tax and source tax on the overseas source income of the foreign investment company; and Luxembourg, BB0, Luxembourg and BB0, Luxembourg are recognized as a representative tax have no source tax on the individual income tax and the source tax on the income of the foreign investment company; and even the taxation company is recognized as a representative tax have no source tax on the individual income tax or a source tax on the income tax.

4) Determination as to the legitimacy of each of the dispositions of this case

Therefore, it is legitimate to consider the actual owner of each dividend income and each share transfer income of this case as CVC Capital LP, a resident, and to take each of the dispositions of this case against the plaintiff according to the domestic law.

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.