In December 30, 2003, by amending Article 132(1)3 of the Act on Special Cases concerning the Restriction of Taxes, the amount of tax credit for research and human resources development expenses for small and medium enterprises was excluded from the application of the minimum tax, and whether the portion carried over to the taxable year after the amendment is excluded from the application of the minimum tax (affirmative)

Articles 10(1), 132(1)3, and 144(1) of the former Restriction of Special Taxation Act (Amended by Act No. 7003, Dec. 30, 2003); Article 132(1)3 of the former Restriction of Special Taxation Act (Amended by Act No. 7839, Dec. 31, 2005); Article 2(1) of the Addenda of the Restriction of Special Taxation Act

Plaintiff, Ltd.

The superintendent of the tax office

Seoul High Court Decision 2006Nu18890 decided March 21, 2007

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

Article 10(1) of the former Restriction of Special Taxation Act (amended by Act No. 7003, Dec. 30, 2003; hereinafter “the former Restriction of Special Taxation Act”) provides that where a national has expenses for research and human resources development as prescribed by the Presidential Decree (hereinafter “research expenses, etc.”) for each taxable year not later than the taxable year ending on or before December 31, 2003, a national may select one of the amounts calculated by multiplying the research expenses, etc. incurred for the pertinent taxable year by 15/100 (50/10 for a small or medium enterprise) and the amount equivalent to 40/100 of the excess amount by the annual average of the research expenses, etc. incurred for the pertinent taxable year retroactively from the commencement date of the pertinent taxable year, and Article 132(1)3 provides that a national shall be subject to the minimum tax credit under Article 10 and the amount equivalent to the deduction under Article 14(1)3 of the former Restriction of Special Taxation Act shall be the minimum tax credit for each taxable year after the pertinent taxable year.

Meanwhile, Article 132(1)3 of the former Restriction of Special Taxation Act (amended by Act No. 7003, Dec. 30, 2003; hereinafter “amended Act”) provides that “The amount of tax credit under Article 10 (limited to the amount obtained by subtracting the amount calculated by multiplying the amount of tax credit calculated by the ratio of the amount derived from personnel expenses for a master or doctor’s degree prescribed by the Presidential Decree to the amount of tax credit for the pertinent taxable year of a person who is not a small or medium enterprise)” shall be subject to the minimum tax, and the research expenses, etc. for small or medium enterprises were excluded from the minimum tax, and Article 2(1) of the Addenda of the amended Act provides that the amended provisions concerning corporate tax shall apply from the taxable year beginning after the enforcement of the amended Act.

In full view of the contents, purpose of legislation, process of amendment, etc. of the above provisions, whether the carried-over tax credit carried-over to the taxable year that begins after the enforcement of the amended Act is subject to the minimum tax in the pertinent taxable year is related to corporate tax for the pertinent taxable year, and should be determined under Article 132 (1) of the amended Act that applies from corporate tax for the pertinent taxable year pursuant to Article 2 (1) of the Addenda of the amended Act. Therefore, if the carried-over tax credit amount is a small and medium enterprise, it shall not be subject to the minimum tax amount, and

According to the reasoning of the judgment below, the court below acknowledged the facts as stated in its reasoning after compiling the adopted evidence, and determined that Article 10 of the amended Act was excluded from the minimum tax amount subject to the revised Act, and Article 132 of the amended Act was not applied to the minimum tax amount under Article 144 of the amended Act to relieve taxpayers who are not entitled to the minimum tax amount under Article 132 (1) 3 of the amended Act, and Article 132 (1) 4 of the amended Act was not applied separately from Article 134 of the amended Act to the minimum tax amount under Article 132 (1) 4 of the amended Act. The court below held that, in the case of small and medium enterprises, the tax credit amount under Article 10 of the amended Act was not applied to the minimum tax amount under Article 132 (1) 3 of the amended Act, and Article 132 (1) 4 of the amended Act was not applied to the minimum tax amount under Article 132 (1) 4 of the amended Act.

In light of the above legal principles, relevant statutes, and records, the judgment of the court below is just, and there is no error of law as otherwise alleged in the ground of appeal.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Young-ran (Presiding Justice)