A small and medium venture enterprise shall not be subject to tax reduction or exemption because it is difficult to deem that it starts for the first time.

The Plaintiff appears to have modified the method of creating detailed revenues within the same business scope, and cannot be deemed to have commenced a new business for the first time, and thus does not fall under the reduction or exemption of the small and medium venture enterprise.

Article 6 of the Restriction of Special Taxation Act: Reduction or exemption for Small or Medium Enterprise Enterprises

2018Guhap79612 Revocation of Disposition of Corporate Tax Imposition

○○ Co., Ltd.

○ Head of tax office

May 24, 2019

July 19, 2019

1. All of the plaintiff's claims are dismissed.

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

Cheong-gu Office

The Defendant’s imposition of KRW 00,00,000 of corporate tax for the business year of 2015 and KRW 000,000,000 of corporate tax for the business year of 2016 shall be revoked on December 1, 2017.

1. Details of the disposition;

A. The Plaintiff is a corporation established to run an Internet information service business, etc. on December 27, 2012, and the former Restriction of Special Taxation Act (Amended by Act No. 14390, Dec. 20, 2016; hereinafter the same shall apply)

In accordance with Article 6 (2) of the former Restriction of Special Taxation Act, the corporate tax base and tax amount for the business year from 2015 to 2016 have been reported and paid by applying the "tax reduction or exemption for the small and medium venture enterprise".

B. On December 1, 2017, the Defendant issued a notice of correction and notification of KRW 00,000,000 in total amount of corporate tax for the business year 2015, and KRW 00,000,000 in total for the business year 2016, on the ground that “the Plaintiff is merely a legal entity converted into an intervention business entity operated by KimO by KimO to expand its business (hereinafter “business start-up” under Article 6(2) of the former Restriction of Special Taxation Act”).

‘Disposition of this case’

C. The Plaintiff is dissatisfied with the instant disposition and filed an appeal with the Tax Tribunal on March 12, 2018.

However, the Tax Tribunal dismissed the plaintiff's claim on June 29, 2018.

[Reasons for Recognition] Facts without dispute, Gap evidence 1, 2, Eul evidence 1 (including paper numbers, hereinafter the same)

Statement, the purport of the whole pleading

2. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

On March 15, 2013, the Plaintiff obtained confirmation from the Korea Technology Finance Corporation under Article 25(1) of the Act on Special Cases Concerning the Promotion of Venture Businesses, and runs a publishing business, which is subject to reduction or exemption of the small or medium venture enterprise, from the Korea Technology Finance Corporation, and does not fall under the case where the Plaintiff and the individual business operator did not regard it as a business start-up under Article 6(6) of the former Restriction of Special Taxation Act, and thus, the tax reduction or exemption for the small or medium venture enterprise under Article

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Relevant legal principles

Article 6 (1) of the former Restriction of Special Taxation Act provides for the reduction or exemption of corporate tax for small and medium start-up enterprises, etc., and Article 6 (6) of the same Act provides for "where a person succeeds to a previous business through merger, division, investment in kind, or acquisition of the assets used for the previous business, or establishes a new corporation by converting the business operated by a resident into a corporation (main sentence of subparagraph 1), "where a person establishes a new corporation by starting a business again after discontinuance of business," "where a person conducts a business of the same kind as the previous business after discontinuance of business," "where it is difficult to deem that a new business is commenced for the first time due to expansion of business or addition of other types of business" (Article 6 (1) 4). The purport of the provision is to grant benefits from tax reduction or exemption only when a new business first commences and has the effect of creating a new business (see Supreme Court Decision 2011Du1549, Mar. 27, 2014).

(ii) the facts of recognition

(A) On February 28, 2004, KimO registered its business with the trade name "OOO" (the trade name of "MM" on March 5, 2007, hereinafter referred to as "MMM"), and after operating the Internet site 'www.'***.com and 'www.****.comb' (hereinafter referred to as "the site of this case") in operation of the above site, and by inserting the e-mail. MM continued to use the e-mail server and equipment related to the operation of this case** the Plaintiff's use of the e-mail server and e-mail as private business operator after the commencement of the business. MM continued to use the e-mail website of this case* the Plaintiff's use of the e-mail server and e-mail.

C) At the time of the establishment of the Plaintiff, the individual proprietor MM representative KimO owned 100% of the Plaintiff’s shares and was the Plaintiff’s representative director.

D) The main sales office and sales ratio of the Plaintiff in 2012 before establishment of the Plaintiff of MM and the Plaintiff in 2013 are as follows:

E) The current business status of MM and the Plaintiff before and after the establishment of the Plaintiff is as follows.

F) In 2012, MM paid approximately KRW 0 million business income to 000 web novels or electronic book writers. The Plaintiff paid KRW 00 million business income to 000 in 2013, and 85 persons, from among those who received business income from the Plaintiff in 2012 and 2013, are the same business income.

G) At the time of the registration of the business place of MM, the type of business is "services/information provision (business code: 72400)," and the Plaintiff's type of business was "services/Internet information provision (business code: 72400)" at the time of establishment, which was changed to "retail/Internet information provision (business code: 525101)" on November 21, 2014.

[Ground of recognition] Facts without dispute, Gap evidence 10, Eul evidence 2 to 21, the purport of the whole pleadings

3) Specific determination

However, considering the following circumstances revealed by the evidence and the purport of the entire pleadings as seen earlier, it is difficult to view that the fact that the Plaintiff first started a new business and started a “business start-up with the effect of creating an original business by starting a new business.” Accordingly, the Plaintiff’s assertion on a different premise cannot be accepted.

A) In a business entity running a business through the Internet site, the address and personal guidance of the site, members affiliated with the site, and studs on the website are the most important assets of the business entity. The Plaintiff acquired the above assets from MP and MF actually discontinued after the establishment of the Plaintiff.

B) According to the aforementioned circumstances and the content of the notice posted on the official announcement of the instant website, the Plaintiff appears to have been converted into the Plaintiff as a corporate chain following the business run by MP and then added the business expansion and type of business.

C) At the time of the establishment of the Plaintiff, MM representative KimO was one shareholder, and there was no change in the ownership structure, and the type of business code was also the same as MM with 724000.

D) Article 5(15) of the former Enforcement Decree of the Act on Special Cases concerning Taxation (amended by Presidential Decree No. 27767, Jan. 6, 2017) provides that the classification of the same type of business shall follow the subdivision of the Korea Standard Industrial Classification when Article 6(6) of the former Enforcement Decree of the Restriction of Special Taxation (amended by Presidential Decree No. 27767, Jan. 6, 2017) provides that MM is engaged in web novels and electronic book online service business, such as providing web novels service at the site of this case, and sending and selling in electronic books. The Plaintiff also engages in web novels and electronic book service business, such as collecting user fees or collecting electronic books, or selling electronic books, etc., so the same type of business constitutes 6391" and 63988's "other information service business" among other information service business.

E) The Plaintiff, like MM, gained profits from the distribution advertisement using the instant website.

F) The Plaintiff asserts to the effect that since the Plaintiff started the platform business through the paid web novels after the establishment of the Plaintiff, the Plaintiff should be deemed to have commenced the new business for the first time. However, upon examining the trends in the contents of the notice on the website of this case after the commencement of the business, MM also expanded the business area by e-bok’s paid-in and mobile phone-related materials, etc., and the contents of the notice on the website of this case, the Plaintiff’s establishment appears to have been made in the extension line of the scope of the MM business area. The Plaintiff appears to have been in a situation naturally predicted in the event that the Plaintiff gains profits from the sale of web novels or electronic books, etc. before the establishment of the Plaintiff, it appears that there was a rise in the Plaintiff’s sales revenue through the web novels theory, and it is difficult to view the Plaintiff to have commenced a new business other than the Plaintiff’s business for the first time, as alleged by the Plaintiff.

3. Conclusion

The plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.