Research and development expenses re-entrusted shall be subject to tax credit regardless of whether they hold the exclusive department of re-entrusted enterprises.

Research and development expenses corresponding to the sub-entrusted portion are also eligible for tax credit, and it is reasonable to view that research and development expenses corresponding to the sub-entrusted portion are eligible for tax credit even if the entrusted company does not hold

Article 10 of the Restriction of Special Taxation Act, Article 9 of the Enforcement Decree of the Restriction of Special Taxation Act

2012Guhap35733 Revocation of Disposition of Corporate Tax Imposition

AA Life Insurance Corporation

Head of the tax office;

March 26, 2013

August 22, 2013

1. The Defendant’s disposition of imposition of corporate tax from April 1, 2005 to March 31, 2006 against the Plaintiff was revoked.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, as a juristic person operating life insurance business, concluded a contract between April 1, 2004 to April 31, 2005 (hereinafter "205 business year") and April 1, 200 to March 31, 2006 (hereinafter "206 business year") to entrust the construction of a computer system with the trustee companies such as BBS dd Co., Ltd. (hereinafter "trustee"), and paid the total amount of 0.0 (hereinafter "the research and development costs of this case") to the defendant 200. 20. 2. 2. 2. 1. 2. 2. 2. 2. 200 O's re-entrusted research and development expenses paid to the defendant for the above 60 O's business year to the 20. 3. 20 O's re-entrusted research and development expenses to the defendant. 20 O's re-entrusted research and development expenses were not subject to the tax credit for the above 20 O's. 26 2.

[Reasons for Recognition] Gap evidence Nos. 1, 2, 3 (including branch numbers), Eul evidence Nos. 1 to 4, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

According to the former Restriction of Special Taxation Act and the Enforcement Decree of the same Act, if research and development expenses falling under each item of the research and development expenses refer to "expenses for the entrustment of technology development services to a domestic or foreign research institute or a dedicated department," and if research and development expenses are paid to a trustee with a dedicated department in terms of the legislative intent and literal interpretation of the provisions on the tax credit for research and development expenses, all of the expenses are subject to the tax credit for research and development expenses. However, the defendant considers that the trustee does not constitute the tax credit for research and development expenses for the portion re-entrusted to another company that is not the dedicated department by the dedicated department, and without reasonable grounds, the defendant'

In addition, it was not revealed whether the costs incurred in the entrustment of research and development services alleged by the Plaintiff were used for research and development activities, and research and development costs corresponding to the re-entrusted portion by the trustee is not eligible for tax credit. Even if research and development costs corresponding to the re-entrusted portion are eligible for tax credit, the costs paid to the re-entrusted entity that

B. Relevant statutes

The entries in the attached Table-related statutes are as follows.

C. Determination

1) Organization of issues

According to Article 10(1)1 of the former Restriction of Special Taxation Act, Article 9(2) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 19811, Dec. 30, 2006; hereinafter the same), [Attachment 6] subparagraph 1(b) and 2 of the attached Table 1 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 19811, Dec. 30, 2006; hereinafter the same), expenses incurred by a domestic corporation that is not a small or medium enterprise to entrust technological development services, etc. to a domestic or foreign research institute (limited to the case of research on a child in science and technology) or a dedicated department shall be subject to the tax credit as research and development expenses. In this regard, the question is whether the Plaintiff’s entrusted service constitutes a research and development service, ② whether the entrusted company should directly perform research and development

2) Whether research and development services are applicable

Article 9(5) of the former Restriction of Special Taxation Act does not have a separate definition on "research and development", but Article 9(5) of the current Restriction of Special Taxation Act provides that research and development refers to activities to achieve scientific or technical development, and activities to develop a new service and service delivery system. ① The service entrusted by the Plaintiff is an activity to achieve technical development by establishing a systematic and comprehensive system to achieve the optimal and efficient operation of information and communications technology, ② The National Tax Service interpreted that the service entrusted by a domestic corporation that operates a financial and insurance business constitutes a research and development service (the corporate tax and corporate tax-675 of July 14, 2010). ③ The Defendant excluded the service cost paid by the re-entrusted business from the tax credit amount on the premise that the service entrusted by the Plaintiff is a research and development service, ④ although the term "pre-paid or new" under Article 9(5) of the current Restriction of Special Taxation Act is included in the research and development service, it is reasonable to interpret that the research and development entrusted by the Plaintiff does not meet the requirements of the patent re-entrusted service.

In light of the principle of no taxation without law, or the requirements for non-taxation or tax reduction and exemption, the interpretation of tax laws and regulations shall be interpreted as the text of the law, barring special circumstances, and shall not be extensively interpreted or analogically interpreted without reasonable grounds (see Supreme Court Decision 2002Du6781, May 27, 2004).

In light of the above legal principles, in full view of the following circumstances, it is reasonable to view that research and development expenses falling under the portion re-entrusted by the trustee is subject to the tax credit for research and development expenses.

① Article 10(1)1 of the former Enforcement Decree of the Restriction of Special Taxation Act provides that a person may receive tax credits if the expenses prescribed by the Presidential Decree exist among the expenses for research and development. Article 9(2) [Attachment Table 6] 1(b) of the Enforcement Decree of the same Act provides that a person entrusted with research and development to a domestic or foreign research institute (limited to research in the field of science and technology) or a dedicated department of technology development (hereinafter “this case’s provision”). According to the literal interpretation, if the expenses paid by the Plaintiff fall under the expenses for the entrustment of technology development to a domestic or foreign research institute or dedicated department of technology development, it is reasonable to interpret that a person entrusted with research and development cannot be excluded from the tax credits if the expenses incurred by the entrustment are re-entrusted to another dedicated department (Article 6(2)1 of the Enforcement Decree of the Restriction of Special Taxation Act). Since Article 6(2) of the same Enforcement Decree of the same Act provides that a person entrusted with research and development should not be re-entrusted to another dedicated entity.

(4) In determining whether to grant a tax credit for the portion entrusted to a third party under his/her own responsibility, excluding the tax credit for the portion entrusted to him/her by a trustee is against the principle of self-responsibility by having the truster take responsibility for the economic decision that he/she did not raise to him/her, and imposes on the truster an obligation to verify the costs corresponding to the portion entrusted to a third party and to deduct the costs subject to the tax credit, and the taxpayer bears an obligation that is not prescribed by statutes.

⑤ The legislative purport of the instant provision is to facilitate research and development by granting taxpayers more benefits from tax credit on investment in research and development funds (see, e.g., Supreme Court Decision 2000Du3115, Jan. 22, 2002). Since large-scale computer development services are a convergence technology development that makes it impossible for a single company to carry out all research and development services depending only on its human resources and technology, it is inevitable to re-consign part of electronic development services to another company. Therefore, excluding research and development expenses equivalent to the re-entrusted portion by a trustee is an interpretation that does not take into account the legislative purport of the instant provision and the reality according to the trends of technology convergence

4) Whether the re-trustee is eligible for a tax credit where the re-trustee does not hold a research institute or a dedicated department

In light of the aforementioned legal principles, it is reasonable to view that the case is eligible for tax credit even if the re-entrusted company does not hold a research institute or a department in charge, comprehensively considering the following circumstances:

① The provision of this case provides that the expenses incurred by the Plaintiff for the entrustment of technology development services to a domestic or foreign enterprise’s research institute or a dedicated department is subject to the tax credit for research and development expenses if the expenses incurred by the Plaintiff fall under the expenses incurred by the entrustment of technology development services to a domestic or foreign enterprise’s research institute or a dedicated department. Thus, the trustee company (a domestic or foreign enterprise’s research institute or a dedicated department) is not required to perform all entrusted research and development services in its dedicated department, and may have another department or dedicated

② In the case of large-scale computer development services, the integration and linkage of individual systems is the key factor of development. Since the trustee company is important in the role and responsibility of the trustee company, such as performance liability, defect repair liability, delay of performance, maintenance and repair liability, liability for damages, etc., the provisions of this case stipulate the ownership of the department exclusively in charge of the trustee company as the requirement of tax credit for research and development expenses. On the other hand, the re-trustee does not directly bear any liability against the plaintiff, and the trustee company is ultimately liable to the plaintiff. Therefore, it does not seem that there is no need for the trustee company to hold the department in charge of research and development expenses (the same applies to the case where the trustee company allows other departments than the exclusive department to perform part of research

(3) If the outcome of a service performance falls under research and development services, and such research and development services were conducted under the responsibility for the calculation of an entrusted enterprise according to an entrustment contract with a trustee holding a dedicated department, it may not be deemed that it does not go against the legislative intent of the provisions on tax credit for research and development expenses, and it is difficult to deem that the Plaintiff, the truster, has abused the provisions on tax credit for research and development expenses

④ Meanwhile, Subparag. 1 (b) of the Enforcement Decree of the Restriction of Special Taxation Act [Separate Table 6] amended by Presidential Decree No. 24368, Feb. 15, 2013 (amended by Presidential Decree No. 24368) explicitly excluded expenses for research and development services performed by a research institute or a department in exclusive charge of a domestic or foreign company (limited to the part directly performed by the responsible department, etc.) from those eligible for tax credit (the foregoing amended provision applies from the first taxable year beginning after January 1, 2013).

⑤ The Seoul High Court Decision 2010Nu25635 cited by the Defendant is a matter of whether expenses incurred in self-research and development (the personnel expenses of the staff employed by the department in exclusive charge, etc. prescribed by Ordinance of the Ministry of Strategy and Finance) are eligible for the tax credit for research and development expenses, and the case of entrusted research and development differs in terms of the subject, requirements, etc. of the tax credit for research and development expenses, and it is inappropriate to invoke them as it is in this case [in the case of self-research and development, the expenses incurred in itself (the personnel expenses of the staff of the department in exclusive charge) shall be subject to the tax credit for research and development expenses, and in the case of entrusted research and development, the expenses incurred in accordance with the consignment agreement concluded with an independent third party (the expenses incurred by the entrustment to the research institute or the department in exclusive charge of the domestic company

3. Conclusion

The plaintiff's claim is justified and accepted.