Review Corporation 2010-003 (2010.05.04)

Notice of changes in the amount of income concerning interest on the recognition of provisional payment;

It is alleged that a corporation inevitably distributed its shares to the representative for the purpose of avoiding risk, and that the recognition of provisional payments is improper, but there is no evidence to acknowledge it.

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 imposing corporate tax of KRW 608,159,500 for the Plaintiff on December 1, 2009 shall be revoked.

1. Details of the disposition;

A. From December 11, 2008 to February 3, 2009, the director of the Central Regional Tax Office conducted a tax investigation (hereinafter referred to as the "tax investigation of this case") against the plaintiff for the period from the business to the business year 2007 as the period of investigation (hereinafter referred to as the "tax investigation of this case"), and notified the plaintiff that the plaintiff's representative director's provisional payment interest rate for the provisional payment, which is not related to the business affairs of EA, should be included in the gross income and disposed of as bonus, and that the plaintiff should correct the correction of the amount of 2,205,269,000 won including corporate tax from the business year 205 to the business year 207 after the inclusion of the paid interest in deductible expenses (hereinafter referred to as the "previous disposition"). The plaintiff paid all corporate tax, etc. imposed according to the above notification.

B. After that, the Chairman of the Board of Audit and Inspection conducted an institutional management audit with respect to the director of the Central Regional Tax Office from May 13, 2009 to June 2, 2009. In the above audit, it was pointed out that it was improper to exclude the pertinent business year from the subject of additional collection even though the director of the Central Tax Office investigated the pertinent tax investigation for the business year 2003 and the business year 2004.

C. On November 24, 2009, the director of the Central Regional Tax Office notified the Defendant of the recognition of the provisional payment without office (hereinafter “the instant payment”) for the business year of 2004 for which the exclusion period of imposition has not elapsed on November 24, 2009 according to the pertinent audit and cadastral matters, and notified the Defendant of the rectification of corporate tax as to KRW 795,126,000 and the amount equivalent to the interest paid, KRW 522,77,00,00. The Defendant corrected and notified the Plaintiff of the rectification of corporate tax of KRW 608,159,500 for the business year of 204 (hereinafter “instant disposition”).

D. On the other hand, the director of the Central Regional Tax Office of China made the above notification, and at the same time notified the Plaintiff of the change in the income amount of the interest on the recognition of the provisional payment, and on December 10, 2009, the Plaintiff withheld income tax on the notified amount of change in income, and paid voluntarily.

E. The Plaintiff dissatisfied with the instant disposition and filed a request for review with the Commissioner of the National Tax Service on February 17, 2010, but the said request for review was dismissed on May 4, 2010.

[Reasons for Recognition] Unsatisfy, Gap evidence 1-1, 2, Eul evidence 1-3, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

(1) Whether business is not related

In light of the above, the Plaintiff made equity investment in order to secure funds for a new business operation by using surplus funds, and merely made a decentralization investment in the name of the Plaintiff and the representative director of the Plaintiff in the name of EA for the purpose of avoiding risk, and thus, the instant provisional payment cannot be deemed as a provisional payment irrelevant to the business.

(2) Abuse of taxation right

① In light of the fact that: (a) the Plaintiff did not take into account the circumstances of such a company in the circumstances where the Plaintiff suffered a serious loss of property and operating loss due to the factory fire in 2007; (b) the instant disposition was again made for the business year 2004, which was not subject to the tax investigation in this case despite the previous disposition; and (c) applying the interest rate exceeding 10% per annum to the person who is recognized as provisional payments, bonus disposal, and deductible expenses of paid interest, the application of the tax authority’s exemption of deductible expenses is excessively excessive compared to the current interest rate, etc., the instant disposition was abused

(3) Violation of tax principles

The plaintiff did not include any income in relation to the provisional payment of this case, and the disposition of this case is obviously contrary to the general tax principles.

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Determination as to the assertion of non-business relevance

However, in light of the following: (a) it is unclear that the specific reason for the Plaintiff to divide shares investment into the representative director’s name and the company’s name; (b) it is not clear that profits, etc. accrued from shares investment by the representative director’s name were reflected in the Plaintiff’s account book; (c) if the Plaintiff made a share investment by lending the representative director’s name as alleged by the Plaintiff, there may be a problem of gift tax on the shares held in title trust to the representative director; and (d) the Plaintiff paid corporate tax imposed by the previous disposition

(2) Determination as to the abuse of taxation right

In addition, (1) The provisional payment for the representative director of the Plaintiff was made continuously from the business year of 2003 to the business year of 2007, which was before the taxable period subject to the investigation of the tax investigation of this case, and the provisional payment of this case was made within the exclusion period under the Framework Act on National Taxes, and (2) the Defendant calculated the recognition interest rate for the provisional payment of this case by applying the interest rate for the provisional payment of this case in accordance with the Enforcement Decree of the Corporate Tax Act and the Enforcement Rule of the same Act.

(3) Determination as to the assertion of violation of tax principles

According to the above facts, the disposition of this case is deemed to have been legally imposed in accordance with the related Acts and subordinate statutes, such as the Corporate Tax Act. Thus, the plaintiff's assertion on this part is without merit.

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.