Cho-2015-China-5835 (29. 2016.06)

A disposition imposing corporate tax by deeming the amount equivalent to the operating right of this case as a merger evaluation marginal profit is legitimate.

Since the business rights of this case are included in the accounts and the tax adjustment are not made, it constitutes the evaluated portion in excess of the book value of the merged corporation. In light of the fact that the defendant's taxation of the amount equivalent to the business rights of this case is not erroneous.

Article 17 of the Corporate Tax Act

Incheon District Court-2016-Gu 53665 ( November 16, 2018)

NoteOOO substituteO

O Head of tax office

2018.21

November 16, 2018

1. The plaintiff's claim is dismissed.

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

1. Details of the disposition;

A. On February 20, 2009, the Plaintiff entered into a merger agreement with ○○○ World Co., Ltd. (hereinafter referred to as “merged corporation”) which is the Plaintiff’s clinical processing customer, to enter into a merger agreement with 1:0.7 by applying mutatis mutandis the method of appraisal of unlisted stocks under the Inheritance Tax and Gift Tax Act. On February 25, 2009, the Plaintiff entered into a merger agreement with 21,000 shares on April 1, 2009, after a general meeting of shareholders for approval of the merger plan.

B. During this process, the Plaintiff, while acquiring the assets and liabilities of the extinguished corporation at the book value, appropriated KRW 916,951,670, which is the difference between the net asset value of the extinguished corporation and the merger cost (the issue value of the new stocks by merger), in the account book as the goodwill (hereinafter “instant goodwill”), and filed a corporate tax return for the business year 2009 without tax adjustment in the inclusion of the instant goodwill in the gross income.

C. The director of ○○○ Regional Tax Office conducted ex post facto verification of corporate tax against the Plaintiff and notified the Defendant of the taxation data so that the instant goodwill can be seen as a merger evaluation marginal profit. Accordingly, the Defendant included KRW 916,951,670 in the gross income for the business year of 2009, and included the depreciation cost of KRW 137,542,750 in the deductible expenses, and notified the Plaintiff of KRW 281,208,430 in the business year of 209 (hereinafter “instant disposition”).

D. Meanwhile, the Defendant included depreciation costs of KRW 183,390,324 in deductible expenses for each business year from 2010 to 2013, and decided to refund KRW 40,345,874, corporate tax for each business year 2010, corporate tax of KRW 40,345,874, corporate tax of KRW 36,678,067, corporate tax of the business year 2012, and KRW 36,678,067, corporate tax of the business year 2013.

E. The Plaintiff filed an objection and filed an appeal with the Tax Tribunal on December 14, 2015, but the Tax Tribunal rendered a decision to dismiss the appeal on June 29, 2016.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 and 2, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

Only when meeting the requirements prescribed in Article 24(4) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22184, Jun. 8, 2010; hereinafter referred to as the "former Enforcement Decree of the Corporate Tax Act"), a goodwill is limited to cases where it satisfies the requirements under Article 24(4) of the former Enforcement Decree of the Corporate Tax Act. The goodwill is limited to cases where (i) there is a business value ( intangible property value) due to the trade name, transaction relationship,

However, the plaintiff was succeeded to the assets and liabilities of the merged corporation at the book value, and the merger ratio was calculated based on the appraised value of the stock value under the Inheritance Tax and Gift Tax Act to avoid the issue of unfair merger with the plaintiff and the merged corporation, and there was no fact that the merged corporation has succeeded to the evaluation of the trade name, transaction relations, and other business secrets of the extinguished corporation, and the extinguished corporation has no excess profit-making capacity. Nevertheless, the disposition of this case recognized as the business rights

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Relevant legal doctrine (Supreme Court Decision 2017Du54791 Decided May 11, 2018, etc.)

Where a merged corporation succeeds to the evaluation of assets from a merged corporation, the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008; hereinafter referred to as the "former Corporate Tax Act") shall be imposed as a merger evaluation marginal profit from the value of the assets in excess of the book value of the merged corporation (proviso of Article 17 (1) 3, Articles 15 (2) and 12 (1) 1 of the former Enforcement Decree of the Corporate Tax Act). In addition, in the case of a merger, the business right appropriated by the merged corporation shall be deemed as depreciable assets only where the merged corporation succeeds to the evaluation of the assets of the merged corporation and succeeds to the succession of the merged corporation, with the value of its business due to the trade name, transaction relationship, and other trade secrets, etc. (hereinafter referred to as "trade

According to the relevant Acts and subordinate statutes, in order to impose the value of business rights as a merger evaluation marginal profit in the case of a corporate merger, the merged corporation is deemed to have paid the consideration by evaluating its business value by recognizing the trade name, etc. of the merged corporation as an intangible asset value that can obtain excess profits from the merged corporation. In this case, the evaluation of business value shall be objectively determined by comprehensively taking into account various circumstances, such as the details and motive of the merger, the current business status of the merged corporation and the merged corporation at the time of the merger, and the details of tax return after the merger, etc., and it shall not be inferred solely

In order to be taxed as a merger evaluation of merged corporations, first of all, it should be recognized as the assets of the merged corporation. Even if a corporation creates an intangible business right due to its internal business activities, it is not recognized as an asset under tax law, and it is recognized as an asset of the merged corporation only if it satisfies the requirements prescribed by the former Enforcement Decree of the Corporate Tax Act

Tax law and corporate accounting have different purposes and purposes and separately provided for in the corporate tax law, and the requirements for recognition of goodwill are also included in such cases at the time of merger. "Requirements for evaluation of business value of goodwill" under the Enforcement Decree of the Corporate Tax Act was introduced to recognize goodwill as limited at the time of the amendment of the Enforcement Decree of the Corporate Tax Act on December 31, 1998, and the framework of the merger taxation has been maintained in the Enforcement Decree of the Corporate Tax Act amended on June 8, 2010, which was amended to Article 80-3(2).

In the case of a merger, the issue of requirements for recognizing business rights as assets under tax law is different from the issue of whether it is appropriate to calculate the difference between the value of the business rights and the net asset value of the merger cost in determining the appropriateness of the detailed evaluation method. Therefore, requiring the evaluation of the business value of the trade name, etc. is inconsistent with the case affirming the appropriateness of the evaluation of the business rights according to the difference theory.

Article 15(2) of the former Enforcement Decree of the Corporate Tax Act merely cites Article 12(1)1 of the Enforcement Decree of the same Act as the calculation method, and does not relate to the conceptual capital reserve (Article 16(1)2(a) of the former Corporate Tax Act). The merged corporation’s simple difference between the net asset value transferred from the merged corporation and the face value of the merged shares cannot be the requirement for taxation.

2) Specific determination

A) As seen earlier, the merger marginal profit cannot be the requirement for taxation of merger marginal profit.

Therefore, it should be examined whether the value of business rights at the time of merger can be imposed as a merger evaluation marginal profit under the former Corporate Tax Act, not as the existence of merger marginal profit, and whether the merged corporation can be considered to have paid the consideration by evaluating the business value of intangible assets of the merged corporation.

B) In full view of the purport of the entire pleadings, the following facts can be acknowledged in the entries in Gap evidence Nos. 2, 3, 4, and Eul evidence Nos. 1 through 9.

(1) As of the end of 2008, an extinguished corporation accounts for KRW 615,131,000 of current assets, such as cash assets and sales bonds, among total assets as of the end of 657,893,00, which account for KRW 615,131,00,000. The tangible assets account for KRW 3,791,00,000, an average of 7.23% per year, even though the tangible assets are not in excess of KRW 3,791,00, and (2) reported a large amount of income without any consideration. (3) At the time of the merger, the management situation was significantly good in light of the earned income, sales, operating income, and net income for the business year of 2008, which was 208.

(2) The Plaintiff needs to secure cash liquidity and improve the operating profit ratio through a merger with an extinguished corporation with a large amount of assets, such as cash assets and sales bonds, and with a high operating profit ratio.

(3) The Plaintiff included KRW 916,951,670, which is the difference between the merger cost and the net asset value succeeded from the merged corporation, in the business right.

C) Examining the details and motive of the instant merger, the current business status of the merged corporation and the merged corporation at the time of the instant merger, and the circumstances after the instant merger in light of the aforementioned legal principles, it is reasonable to deem that the Plaintiff was merged with the Plaintiff by recognizing the total business value as an intangible property, such as the transaction relation held by the merged corporation at the time. In particular, the relevant laws and regulations need to govern the merger ratio, and it is possible to appropriately determine the assessed value of intangible property from the total price of the merger by deducting the net asset value from the total price of the merger. Therefore, in order to recognize it as a business right under the tax law

D) Therefore, the instant goodwill constitutes a merger evaluation marginal profit under the Corporate Tax Act, and thus, the prior Plaintiff’s assertion is without merit on a different premise.

3. Conclusion

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

Relevant statutes

director of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008)

Article 16 (Constructive Dividends or Distributions)

(1) The amount falling under any of the following subparagraphs shall be deemed the amount of profit dividends or surplus earnings distributed from a corporation and subject to the application of this Act:

2. The value of stocks, etc. acquired through the transfer of all or part of corporation's surplus funds into capital or financing: Provided, That this shall not apply where amounts falling under any one of the following items are transferred to capital:

(a) Capital reserve fund under the provisions of Article 459 (1) 1, 1-2, 1-3, 2, 3 and 3-2 of the Commercial Act (excluding the excess amount provided for in the proviso to Article 17 (1) 1, and merger evaluation marginal profit or division evaluation marginal profit, etc. prescribed by Presidential Decree, and in cases of retirement profit of treasury stocks or treasury shares, limited to the transfer of capital after two years have elapsed from the date of retirement in cases where the market price under the provisions of Article 52 (2) does not exceed the acquisition value at

Article 17 (Non-Inclusion of Gains from Capital Transactions in Gross Income)

(1) The following profits shall not be included in gross income in calculating the income amount of a domestic corporation for each business year:

3. Merger marginal profits: Provided, That this shall not include merger evaluation marginal profits as prescribed by the Presidential Decree (hereinafter referred to as “merger marginal profits”);

(1) The former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22184, Jun. 8, 2010)

Article 12 (Calculation of Merger Evaluation Marginal Profit)

(1) "Merger evaluation marginal profit as prescribed by Presidential Decree" in Article 16 (1) 2 (a) of the Act means the amounts under subparagraphs 1, 3 (limited to surplus funds falling under the main sentence of Article 16 (1) 2 of the Act), and 4 (in cases of corporations other than stock companies, the amount calculated by the mutatis mutandis application thereof) calculated by adding the amounts under each of the following subparagraphs in sequential order until the amount under Article 459 (1) 3 of the Commercial Act (hereafter in this Article, referred to as "merger marginal profit") is reached: Provided, That in cases falling under Article 14 (1) 1

1. Where assets are evaluated and received by succession from an extinguished corporation, the portion of the value of the portion in excess of the book value (for cases falling under Article 14 (1) 1 (c), this shall mean the value of the balance of the book value and liabilities of the assets and liabilities of the succeeded extinguished corporation and the total cost of merger under Article 16 (1)

(3) In the application of the provisions of paragraphs (1) and (2), where a reserve fund under Article 459 (2) of the Commercial Act is succeeded to, the calculation shall be made as if no such succession had occurred.

Article 15 (Amount in Excess of Face Value of Issued Stocks)

(1) Profits under the subparagraphs of Article 17 (1) of the Act shall be the amounts falling under Article 459 (1) 1, 1-2, 1-3, 2, 3 and 3-2 of the Commercial Act.

(2) "Merger evaluation marginal profit as prescribed by Presidential Decree" in the proviso to Article 17 (1) 3 of the Act means the amount calculated under the provisions of Article 12 (1) 1 and (3).

Article 24 (Scope of Depreciable Assets)

(1) "Assets prescribed by Presidential Decree, such as buildings, machinery, equipment and patent rights" in Article 23 (2) of the Act means fixed assets under each of the following subparagraphs (excluding the assets under paragraph (2); hereinafter the same shall apply):

2. Intangible fixed assets falling under any one of the following items:

(a) Goodwill, design right, utility model right, trademark right;

(4) Among the business licenses appropriated by the merged corporation or the corporation newly established by division (including a counterpart corporation to a division and merger; hereafter the same shall apply in this paragraph) in cases of merger or division under paragraph (1) 2 (a), the trade name, trade relationship, and other trade secrets of the extinguished corporation or divided corporation (including a extinguished counterpart corporation to a division and merger; hereafter the same shall apply in this paragraph) evaluated and succeeded to by the merged corporation or the corporation newly established by division (limited to cases of division and merger; hereafter the same shall apply in this paragraph) shall

Finally.