Seoul Administrative Court-2015-Gu Partnership-6791 ( November 11, 2016)

Cho High-2014-Seoul Government-1670 (2015.06)

Whether domestic source income belongs to a U.S. corporation is the domestic source income

In the interpretation of the Korea-U.S. Tax Convention, it cannot be said that a patent infringement cannot occur outside the country where the patent right is registered, and thus, it cannot be said that the income paid by a U.S. corporation in relation to a patent that has not been registered in the Republic of Korea cannot be the consideration for its use, and thus it cannot be deemed as domestic source income

Article 98(1) of the Corporate Tax Act on domestic source income of nonresident

Seoul High Court-2016-Nu-7959 ( September 25, 2019)

aa

○ Head of tax office

Seoul Administrative Court Decision 2015Guhap67991 decided November 11, 2016

2019.08.21

2019.25

1.The judgment of the first instance shall be modified as follows:

A. On December 2, 2013, the Defendant rendered a disposition to collect the corporate tax of 2011 against the Plaintiff on December 2, 2013, the part exceeding the corporate tax of xx, xx, xx, xx, xx, xx, and xxx, xx, xx, and additional tax of x, xx, x, and xx, oo, oo, and oo, and the part exceeding the corporate tax of 2012 and the additional tax of o,o, o, o, o, and o, o, o, and o, o, o, o, o, from among the disposition to impose corporate tax of o, o, o, and o, x, x,

B. The plaintiff's remaining claims are dismissed.

2. Of the total litigation costs, 5% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

1. Purport of claim

The disposition taken by the defendant against the plaintiff on December 2, 2013 x corporate tax for 2011 x 】 】 】 】 】 】 】 】 】 】 】 collection disposition and additional tax 】 】 】 】 】 】 】 】 】 】 】 】 】 (i) corporate tax for the business year 2012, OOO,OO,OO, and OOO, respectively, shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

The reasoning for this Court’s explanation is as follows, except for the corresponding part of the judgment of the court of first instance, that is, “1. Details of the disposition” as stated in the second-third of the judgment of the court of first instance. Thus, this Court shall accept it as it is in accordance with Article 8(2) of the Administrative Litigation Act and the main sentence of Article 420 of the Civil Procedure Act.

○ 2. The following shall be added to the right side of two parts of the reasons for the second judgment:

○○는 ◇◇◇◇◇◇◇◇◇◇◇◇ Ⅰ, L.P. 및 ◇◇◇◇◇◇◇◇◇◇◇◇ Ⅱ, L.L.C. 등 5개의 펀드로부터 그들이 보유한 특허권의 관리를 위임받아 처리하는 미국 기업으로 2000년경 설립되었으며,

○ 2쪽 아래에서 9행의 "◇◇◇◇◇◇◇◇◇◇◇◇ Ⅰ, L.P." 오른쪽 "(이하 '☆☆☆1'이라 한다)"를 추가한다.

○ 2쪽 아래에서 8행의 "◇◇◇◇◇◇◇◇◇◇◇◇ Ⅱ, L.L.C." 오른쪽에 "(이하'☆☆☆2'라 한다)"를 추가한다.

○ 2. The following shall be added to the right side of the last two parallels:

Of the instant usage fees, user fees for patent rights registered in the Republic of Korea shall be among the usage fees for business year 2011

*************** and business year user fees of 2012****,***,***, and the remaining user fees are patent fees not registered in Korea.

○ The term "not later than the amendment" has been read as "before the amendment" (hereinafter referred to as "former Corporate Tax Act").

○ 3 11, one of the 11 places "the instant disposition", is "the instant disposition", and "if each of the above dispositions is separately referred to as "the imposition of additional tax", it shall be "the imposition of additional tax in this case."

○ 3 "(including paper numbers)" below 8 below means "(including paper numbers)"

(n) the term "as soon as the term has been".

2. Relevant statutes;

The reasons for this part of this Court are as stated in Section 8(2) of the Administrative Litigation Act and Article 420 of the Civil Procedure Act, since the reasons for this part are the same as the stated in Section 4 of the judgment of the court of first instance.

3. Whether the application of the Korea-Japan Tax Convention with respect to the instant user fee under the substance over form principle under the Framework Act on National Taxes is denied

A. The parties' assertion

1) Plaintiff

Since BB, which is a Grandland, is the beneficial owner of the instant royalty, and the disparity between name and substance and the purpose of tax avoidance is not recognized, the application of the Korea-ASEAN Tax Convention with respect to the instant royalty cannot be denied by the substance over form principle under the Framework Act on National Taxes. Therefore, the Plaintiff is not obliged to withhold corporate tax on the instant royalty income pursuant to Article 12(1) of the Korea-ASEAN Tax Convention. Therefore, the prior disposition of this case on a different premise is unlawful and thus ought to be revoked.

2) Defendant

Since the BB, which is a Ireland, is not the beneficial owner of the instant usage fee, and the CCC, which is a U.S. corporation, is the actual owner of the instant usage fee income, the application of the Korea-Japan Tax Convention concerning the instant usage fee under the substance over form principle under the Framework Act on National Taxes is denied. Accordingly, the Plaintiff is obligated to withhold corporate tax on the instant usage fee income

B. Relevant legal principles

1) Article 12(1) of the Korea-U.S. Tax Convention provides that “a fee derived from the source in a Contracting State acquired by a resident of the other Contracting State and owned by a beneficial owner shall be taxed only in that other Contracting State.” Accordingly, even though the royalty income corresponding to the domestic source income under the Corporate Tax Act of Korea is not taxed in Korea if it is paid to a resident of Ireland who is a beneficial owner. In full view of the history, context, etc. of the introduction of the aforementioned provision, the beneficial owner refers to a case where the person who received the royalty income has a right to use and benefit without any legal or contractual obligation to transfer it again to another person. Such beneficial owner shall be determined by comprehensively taking into account all the circumstances such as the content and status of the pertinent business activities related to the pertinent income, the actual use and operation of the income (see, e.g., Supreme Court Decision 2017Du33008, Nov. 15, 201

2) Meanwhile, Article 14(1) of the Framework Act on National Taxes provides that “If the ownership of income, profit, property, act, or transaction subject to taxation is merely nominal and there is another person to whom such income, profit, act, or transaction belongs, the person to whom such income, etc., actually belongs shall be subject to the application of tax-related Acts.” However, the principle of substantial taxation under the aforementioned provision applies to the interpretation and application of a tax treaty having the same effect as the Act, barring any special provision excluding it (see, e.g., Supreme Court Decision 2016Du42883, Dec. 27, 2018). Therefore, even if a person to whom property belongs belongs is a beneficial owner of royalty income, such application may be denied if it is deemed as abuse of a treaty under the principle of substantial taxation under the Framework Act on National Taxes (see, e.g., Supreme Court Decision 2017Du3008, Nov. 15, 2018).

Whether such disparity between name and substance lies shall be determined by comprehensively taking into account the following: (a) details of the name use; (b) the degree and scope of involvement of the nominal owner; (c) internal responsibility and calculation relations; and (d) the location of independent management and disposition authority over the subject of taxation (see Supreme Court Decision 2011Du9935, May 16, 2014); (b) where the nominal owner is a corporation, the overall circumstances such as the purpose and details of the establishment; (c) business activities; (d) human and material facilities, including the place of the employee and the office thereof; (d) decision-making process related to the pertinent transaction; and (e) details of the movement of funds paid in consideration of the transaction; and (e) particularly, whether the purpose of tax avoidance is the main purpose

C. Determination

In light of the above legal principles, in light of the following facts and circumstances, which are acknowledged as a whole by taking into account the following facts and the purport of the pleading as to this case's health team, the parties to this case's evidence, Gap's evidence 6 through 9, 11, 15 through 17, 20 through 23, 26, 28 through 34, 67, 71, 87, 89, 89, 90, Eul's evidence Nos. 3, 10 through 15, and most of the use fees of this case were to perform the role of the parties to this case's form only and to transfer them to CCC according to the rate determined in advance under the contract, and there was no ability to actually control and manage the use fees of this case, and the difference between the name and substance was derived from the purpose of tax evasion, and the evidence submitted by the plaintiff cannot be deemed as the substantial attribution of the use fees of this case's income accrued to the plaintiff.

① DDD 주식회사(이하 'DDD'라 한다)는 2004년부터 B와 사이에 B가 보유하고 있는 특허권의 침해에 따른 손해배상 및 그 사용료에 관한 협상을 진행해 오다가 2010. 11. 11. 최종적으로 BBB과 사이에 위 협상에 따른 계약을 체결하였다. 원고는 2008년부터 B와 사이에 B가 보유하고 있는 특허권의 침해에 따른 손해배상 및 그 사용료에 관한 협상을 진행해 오다가 2011. 11. 3. 최종적으로 BBB과 사이에 이 사건 계약을 체결하였다. 주식회사 FFF(이하 FFF이라 하고 DDD, 원고, FFF를 함께 일컬을 때는 '원고 등'이라 한다)는 2010년부터 B와 사이에 B가 보유하고 있는 특허권의 침해에 따른 손해배상 및 그 사용료에 관한 협상을 진행해 오다가 2011. 8. 31. 최종적으로 BBB과 사이에 위 협상에 따른 계약을 체결하였다. 그런데 BBB는 DDD와의 계약이 체결되기 불과 몇 개월 전인 2010. 6. 21. 설립되었고, 대표적인 조세회피국가인 키프로스에 설립된 EEE를 통하여 BBB 지분 99.9%를 보유하고 있던 CCC는 원고 등과의 협상이 진행 중이던 2010. 11. 8. BBB과 사이에 PPP, QQQ가 보유한 특허권을 재허여하기로 하는 내용의 계약을 체결하였다. 이러한 관련 계약들의 체결 경과 및 위 각 계약에 따라 DDD가 지급한 사용료는 O억 O,OOO만 미국달러(이하 '달러'라고만 한다), 원고가 지급한 사용료는 O,OOO만 달러, FFF가 지급한 사용료는 △,△△△만 달러라는 거액일 뿐만 아니라, BBB의 특허사용료 관련 계약금액 중 대한민국 회사들이 차지하는 비중은 2010년도 전세계 기준 약 99%(아시아 지역 기준으로는 100%), 2011년도 전세계 기준 약 55%(아시아 지역 기준으로는 100%), 2012년도 전세계 기준 약 93%(아시아 지역 기준으로도 약 93%)에 이르는 점, 한・아일랜드 조세협약에 의하면 사용료 관련 법인세가 부과되지 않는 반면, 한・미 조세협약에 의하면 15%의 세율로 사용료 관련 법인세가 부과될 수 있는 점, 유럽 지역에 있는 아일랜드 법인인 BBB이 아시아 지역에 있는 한국 등의 회사와 계약을 체결하는 경우 미국 법인인 CCC보다 접근성이나 언어적 측면에서 더 유리하다고 보기 어려운 점 등에 비추어 보면, 조세 회피 목적이 아니라면, 미국 법인인 CCC가 대한민국 회사들인 원고 등과 직접 계약을 체결하지 않고 굳이 아일랜드 법인인 BBB를 설립한 후 이를 통하여 위와 같이 복잡한 다단계 형태의 계약을 체결한 것을 설명하기 어렵다.

② DB filed a lawsuit seeking the cancellation of the disposition imposing corporate tax and additional tax on BB’s income in March 20, 2012 (the first instance court 2013Guhap13564) on the following grounds: (a) although DB did not have the obligation to withhold corporate tax on DB; (b) even if DB’s beneficial owner of royalty income is deemed to be CCC, the cost of using the patent right not registered in Korea is not domestic source income; and (c) DD has fulfilled its duty of care to identify beneficial owner of royalty income; (d) thereby, it did not fall under the case of BB’s determination of the Seoul High Court 200 tax base for the reasons that CB’s domestic source income payment was unfair; (b) the first instance court 200 court excluding the Seoul High Court 200 BB’s domestic source income from the reasons that CB’s judgment did not apply to BB’s domestic source income in light of the purpose of establishment and operation status of BB, the process of human and material transactions, and the income decision.

③ On the other hand, the Plaintiff asserted that BB did not establish BB for the purpose of tax avoidance on the ground that BB entered into a patent re-permission agreement with GG and paid corporate tax to the Japanese tax authority. If CCC entered into a direct contract with the GG, then the Plaintiff did not pay corporate tax. From 2010 to 2012, the total sales through contracts with the respective countries were USD 824,45,820. Of them, sales through transactions with the Japanese companies in BB were USD 14,70,000, and the sales through transactions with the GG companies in Japan, which were 10% of the royalty income, were 0.18% of the total sales from 1,470,000,0000, which was paid by the GGG to Japan, and this is the case where BB entered into a contract with the Republic of Korea only based on a patent license agreement with the Republic of Korea.

On the other hand, if BB traded with four Korea companies from 2010 to 2012 USD 696,922,629, it appears that the CCC had a direct transaction with Korean companies, and this constitutes a case where the CCC is withheld at a rate of 15% with respect to the royalty income pursuant to the Korea-U.S. Tax Convention, the relevant tax amount constitutes USD 104,538,394 and approximately 12.68% of the total sales of BBB (this point is about 71 times the pertinent Japanese withholding tax amount) and the B or CCC had no reason to view the Japanese companies to be subject to withholding tax in order to benefit from withholding the royalty income from the Republic of Korea through the Korea-U.S. Tax Convention. Furthermore, if Japan is a party to the contract, it is difficult to view the Japanese companies to have been exempt from withholding taxes to have no more official reasons to view the Japanese companies to have been exempt from withholding taxes, and thus, it is difficult for the BCC to view the Japanese companies to be exempt from withholding tax.

④ In addition, BB paid the corporate tax of USD 4,820,068 to the Ireland tax authority from 2011 to 2012. However, since most of the royalty income was transferred to CCC through a contract with CCC, it appears that BB paid the corporate tax of Ireland with a relatively low tax burden on only some of the remaining extremely high income. Therefore, it is difficult to deem that BB paid corporate tax in Ireland did not have the purpose of evading Korean tax to CCC, etc. solely on the basis that BB paid corporate tax in Ireland.

⑤ Even if the Plaintiff entered into the BB Tax Agreement with the CCC and applied the Korea-U.S. Tax Convention to the instant royalty, the Plaintiff asserted that only the cost of using the patent registered in Korea (the cost of using the patent paid by the Plaintiff for the use of the patent falls under approximately 0.717%) would be subject to taxation in Korea, and that the Plaintiff’s burden of establishing and operating the BB for the purpose of avoiding such tax burden is contrary to the empirical rule. However, at the time of August 31, 2011, the date of entering into the instant tax agreement, the Korea-U.S. Tax Convention, the nature of the patent right, and the patent right royalty under the Korea-U.S. Tax Convention, were registered in Korea to the Plaintiff for the purpose of using the patent in Korea (see, e.g., Supreme Court Decision 2005Du8641, Sept. 7, 2007).

④ At the time of its establishment, BB was limited to 20 U.S. capital, and the board of directors held on September 16, 201, held on September 16, 201, decided to increase BB’s capital to 25,020 U.S. capital. Since June 30, 201, BB increased to 547,587 U.S. capital, however, in light of the developments leading up to the establishment of BB and the developments leading up to the instant contract and the instant contract, etc., it is difficult to view BB as a corporation with substantial substance without any tax avoidance purpose solely based on such increase of capital.

7) The director of BB was three as of June 30, 201 and December 31, 201, respectively, and the representative director from the date of establishment to December 31, 2013, bB continued to take charge of Ireland, and held several meetings of the board of directors. According to the minutes of the board of directors of BB, three directors (cc, d, d, bb) were at the time of 2011, and the board of directors was initiated by two or three directors. Among them, ccc is registered as the executive of CCC, db is merely 25 companies, and bB was registered as the executive officers of 5 companies, and it is difficult to readily conclude that BB’s executive officers and employees were operating BB’s corporate tax and additional taxes for the same business year after the conclusion of the contract of 20 years and 20 years after the conclusion of the contract of 20 years and 30 years after the conclusion of the contract with the Plaintiff.

④ The registered address of BB was indicated as the address of the office of KK, which is an accounting firm, and the FF, which owns the 99.9% shares of BB in form, is also consistent with the address of the office of K K KF. BB as the lessee. On September 29, 2010, the agreement was prepared to lease the office located in Ireland 1,842 monthly rent from October 1, 2010 to December 31, 201, and the agreement was prepared to rent the new office located in Ireland 1,842 annual rent from February 11, 201 to December 31, 2011, it is difficult to view that the Plaintiff was an employee at the time of the establishment of BB’s respective facility under the direction of the Plaintiff at the time of the instant agreement to rent the new office located in Ireland 1,51,772.50 annual rent from February 11, 2011 to December 22, 2011.

9) In addition, according to BB’s minutes of the board of directors meeting (Evidence 7) of September 16, 2010, it is reasonable to view that BB attended the board of directors and agreed that BB would be operated in accordance with the SCC plan, and that BB actually operated the CCC. The minutes of the board of directors meeting of the BB on June 9, 2011 are merely a simple reference to the conclusion of the agreement with the Plaintiff, and the board of directors does not seem to have discussed or decided important matters concerning the conclusion of the instant contract.

(10) BB appears to have earned sales from NN, French corporate TTT, Canadian located in Finland before entering into the instant contract with the Plaintiff and to have concluded a contract for re-permission of patent rights with DD, EE. However, BB is not only having transferred almost all of the patent fees received from CCC to CCC, the parent company, but also 85% of the royalty income received from the Plaintiff to CCC. In particular, if the Plaintiff pays the royalty income generated in the Republic of Korea under the Korea-Japan Tax Convention, it is unclear whether BB is a business necessity to be established in Ireland, so it is difficult to conclude the instant contract merely because the sales performance was before and after the instant contract, and it is difficult to view that BB has no substantial purpose of tax avoidance. Moreover, it is difficult to prove that BB had no substantial purpose of tax avoidance. Moreover, it seems that BB had no special purpose of tax avoidance.

(11) As seen earlier in a lawsuit related to DD, the date of concluding the contract for patent use at issue is November 11, 2010 and the date of payment of the user fee pursuant thereto is November 30, 2010. As long as the judgment of the appellate court rendered on May 24, 2018 by the Supreme Court’s dismissal ruling on December 27, 2018, which ruled that BB is merely a Do Governor and thus does not constitute a person subject to actual attribution of patent user fee income, it is reasonable to deem BB does not constitute a person subject to actual attribution of patent user fee income at least as of November 30, 2010, barring any special circumstance. Furthermore, in light of the purpose of establishment of BB as seen earlier and its background and timing of concluding the contract of this case, it is difficult to view BB as the date of signing the contract of this case from November 30, 2010 to the date of payment of the user fee of this case, and its physical facilities as of November 31, 2013, 2012.

(12) Meanwhile, according to a re-permission agreement for patent rights concluded between CCC and BB, BB should pay 85% of them to CCC each year, 90% of them, 90% of them, 93% of them if they are more than 100 million US dollars but not more than 200 million US dollars for one year, and 95% of them if they are more than 300 million US dollars.B appears to have paid 85% of the instant royalties received from the Plaintiff through the instant contract to CCC under a patent re-permission agreement with CCC. BB appears to have been obligated to transfer a certain percentage of net income pursuant to the prior agreement with CCC, and BB appears to have no ability to control and manage most of them, and was also likely not to have any risk to profit.

(13) The Plaintiff, while recognizing the beneficial owner of BB in the Federal Republic of Germany (hereinafter referred to as "Japan") or Japan, applied the tax agreement with Ireland, BB is not the Do government company, and the beneficial owner. However, in Japan, CCC can impose BB at the rate of 10% on the resident of Ireland compared to the non-taxation, and there is no reason to deny Japan tax authorities to recognize BB as the beneficial owner. Since Germany also excludes both under the tax agreement with the United States or Ireland from the German source income, there is no particular benefit to recognize BB as the Do government. Moreover, even if Germany or Japan recognizes the beneficial owner of BB at the time of entering into the instant contract or the instant royalty payment as a corporation established for the purpose of evading the tax of the Republic of Korea, it does not interfere with the recognition of the user fee of this case.

4. Whether the user fee of this case can be deemed domestic source income under the Korea-U.S. Tax Convention

A. The parties' assertion

1) Plaintiff

Even if the application of the Korea-U.S. Tax Convention is denied and the Korea-U.S. Tax Convention is applied with respect to the royalty for patent rights not registered in the Republic of Korea among the instant royalty, there is no obligation to withhold corporate tax pursuant to Article 28 of the Adjustment of International Taxes Act and Article 6(3) of the Korea-U.S. Tax Convention with respect to the Plaintiff regarding the royalty for patent rights not registered in the Republic of Korea among the instant royalty for patent rights. Therefore, the part on the royalty for patent rights not registered in the Republic of Korea among the instant disposition is unlawful and thus, should be revoked.

section 3.

2) Defendant

Of the royalty income of this case, not only the royalty income for patent rights registered in Korea, but also the country;

The royalty income for the patent right that has not been registered within this year constitutes the domestic source income of the CCC, and the Plaintiff is obligated to withhold corporate tax on the entire royalty income of this case.

B. Relevant legal principles

1) Article 2(1)2 of the former Corporate Tax Act provides that a foreign corporation shall be liable to pay corporate tax only when there is any domestic source income with respect to the foreign corporation. Articles 2(5) and 98(1) provide that a person who pays a foreign corporation a certain amount of domestic source income under Article 93 subparag. 8, etc. shall withhold the relevant corporate tax.

However, Article 93 of the former Corporate Tax Act provides that "domestic source income of a foreign corporation shall be classified as follows." Article 93 of the former Corporate Tax Act provides that "if the relevant patent right, etc. is registered overseas and is used in the Republic of Korea for the use of any of the following rights, assets, or information (hereafter referred to as "rights, etc." in this subparagraph) or the price therefor is paid in the Republic of Korea, the price therefor and the income accruing from the transfer of such rights, etc.: Provided, That where a double taxation agreement on income prescribes whether the relevant income falls under domestic source income based on the place of use, the price for the rights, etc. used overseas shall not be deemed domestic source income, regardless of whether the relevant patent is paid in the Republic of Korea. In such cases, where the relevant patent right, etc. is registered overseas and it is used in the Republic of Korea for the manufacture, sale, etc. of such rights,

On the other hand, Article 14 (4) of the Korea-U.S. Tax Convention provides that "user fees" shall be "for the purposes of this Convention," that "the copyright of literary, artistic and scientific works or the copyright, patent, design, drawing, drawings, secret or secret, trademark or other similar property or rights, knowledge, experience, function, vessel or aircraft in compensation for the use or right of use of the vessel or aircraft" in subparagraph (a) provides that "for the right to use or use the property provided for in paragraph (4) of Article 14, the user fees provided for in paragraph (4) of the same Article shall be treated as income at source in a Contracting State only if it is paid for the right to use or use the property in a Contracting State:

2) The latter part of the proviso of Article 93 subparag. 8 of the former Corporate Tax Act stipulates that even if a foreign corporation registered a patent right outside of Korea and does not register the patent right in Korea, income received in return for the use thereof shall be deemed domestic source income. However, Article 28 of the International Tax Adjustment Act provides that "in regard to the classification of domestic source income of a nonresident or a foreign corporation, tax treaties shall prevail notwithstanding Article 119 of the Income Tax Act and Article 93 of the Corporate Tax Act, with regard to the classification of domestic source income of the nonresident or foreign corporation," and it cannot be determined pursuant to the Korea-U.S. Tax Convention as to whether income received in return for the use thereof is deemed domestic source income if the patent right of the U.S. corporation registered outside of Korea was used for the manufacture, sale, etc. of domestic source income in Korea (see Articles 6(3) and 14(4) of the Korea-U.S. Tax Convention and its language and text, Article 28 of the Korea-U.S. Tax Convention cannot be deemed domestic source income.

C. Determination

1) Rental fee income for a domestic registered patent

In light of the above legal principles, the royalty income for the domestic registered patent among the royalty income of this case constitutes the U.S. corporation's domestic source income, and the plaintiff is obligated to withhold corporate tax on this part.

2) Rental fee income for a domestic unregistered patent

A) In light of the above legal principles, the royalty income for the patent right registered abroad among the royalty income in the instant case but not registered in the Republic of Korea does not constitute the U.S. corporation’s domestic source income. Therefore, the Plaintiff is not obligated to withhold corporate tax on this portion.

B) On the other hand, the Defendant asserts that the portion equivalent to the cost of using the patent right, which was initially registered in a foreign country, which was not registered in the Republic of Korea, constitutes “other income under Article 93 subparag. 10 (a) and (j) of the former Corporate Tax Act,” and thus, is subject to taxation as domestic source income. However, in light of the content of the contract of this case, it is reasonable to deem that CCC is a royalty income under Article 93 subparag. 8 of the former Corporate Tax Act since it is the amount that CCC granted the Plaintiff the right to use the patent of this case and received as the consideration. However, as seen earlier, in the interpretation of the International Tax Adjustment Act and the Korea-U.S. Tax Convention, it cannot be viewed as a royalty for using the patent right registered in a foreign country but not registered in the Republic of Korea. In addition, in order to fall under other income, it should fall under “money received in connection with real estate and other assets in the Republic of Korea or business operated in the Republic of Korea”, and there is no evidence to find that the instant royalty satisfied.

5. Whether the imposition of additional tax in this case is legitimate

(a) Additional tax concerning the income from user fees for domestic unregistered patents;

As seen earlier, the royalty income for patent rights registered abroad but not registered in Korea does not constitute domestic source income, and the Plaintiff is not obligated to withhold corporate tax on this portion of the income. Therefore, the imposition of penalty tax on the failure to withhold corporate tax on this portion of the corporate tax is unlawful.

(b) Additional tax related to the income from domestic registered patents;

1) The parties' assertion

A) Plaintiff

The Plaintiff, as the beneficial owner of the instant royalty, believed that BB was not obligated to withhold corporate tax on the royalty income of this case pursuant to Article 12(1) of the Korea-U.S. Tax Convention, and there were justifiable grounds therefor. Accordingly, the imposition of additional tax on the royalty income for domestic registered patent among the instant disposition is unlawful, and thus, should be revoked.

B) Defendant

The Plaintiff could have known or sufficiently known that BB is not the beneficial owner of the instant royalty, or that the application of the Korea-ASEAN Tax Convention with respect to the instant royalty under the substance over form principle under the Framework Act on National Taxes was denied, and thus, it cannot be deemed that there is justifiable reason to not withhold the royalty income for domestic registered patent among the instant royalty income.

2) Relevant legal principles

The principle of substantial taxation applies to withholding tax on domestic source income under Article 98(1) of the former Corporate Tax Act. Thus, barring any special circumstance, a person who pays domestic source income is obligated to withhold corporate tax on the income based on the actual person to whom the income actually accrues after investigating whether there is another person to whom the income actually accrues, barring any special circumstance. However, a person who pays domestic source income is liable to withhold corporate tax on the income upon a request made by the tax authority for public interest, such as securing tax revenue early and promoting tax collection efficiency, whereas no other investigation authority granted by the tax law, such as the right to questioning and inspection, exists. In light of the fact that the person who pays domestic source income does not have the authority to investigate in the course of transaction or payment of income, even if it is difficult to find the fact that there is another person to whom the income actually accrues, even if the person who pays domestic source income was faithfully investigated and secured in the course of paying the income amount (see Supreme Court Decisions 2011Du3159, Apr. 11, 2013; 2013Du233317).

3) Determination

앞서 본 사실 및 앞서 든 증거들에 변론 전체의 취지를 종합하여 알 수 있는 다음과 같은 사정들, 즉 △ 원고가 이 사건 각 특허권 재허여와 관련된 논의를 시작한 시점은 2008년 무렵인데, BBB은 그 이후인 2010. 6. 21. 설립된 점, △ 이 사건 사용료의 대상인 특허의 상당 부분이 미국에서 등록된 특허이고 위 각 특허의 권리자인 PPP, QQQ로부터 관리를 위임받은 CCC는 미국에 소재한 법인임에도 대한민국에서 법인세 관련 원천징수를 하지 않는 아일랜드에 BBB이 설립된 점, △ 원고와 BBB 사이의 이 사건 계약 내용을 보면 향후 이 사건에서 쟁점이 된 법인세액 및 지연손해금까지 BBB이 지급하기로 예정되어 있었던 점, △ BBB의 감사보고서만 보더라도 설립 당시 BBB의 실제 자본이 20유로에 불과하고 그 발행주식의 99.9%를 CCC가 실질적으로 보유하고 있으며, 3명 이외에는 직원이 없었던 사정을 알 수 있었던 점, △ 이 사건 계약 체결 당시에는 BBB의 자본이 547,587유로로 증가하였으나 여전히 그 발행주식의 99.9%를 CCC가 실질적으로 보유하고 있었던 점, DDD 관련 소송에서도 그 항소심은 DDD가 사용료를 지급하는 과정에서 성실하게 조사를 하였음에도 불구하고 사용료 소득의 실질적인 귀속자가 BBB이 아니라는 사실을 알 수 없었다고 인정되지 않는다는 취지의 판결(서울고등법원 2015누47043호)을 선고하였고, 위 항소심 판결은 대법원의 상고 기각 판결의 선고로 확정된 점 등에 비추어 보면, 원고가 제출한 증거만으로는 국내원천소득을 지급하는 원고가 거래 또는 소득금액의 지급과정에서 성실하게 조사를 하였음에도 불구하고 사용료 소득의 실질적인 귀속자가 아일랜드 법인인 BBB이 아니라 CCC 등 미국 법인이라는 사실을 알 수 없었다고 인정하기에 부족하고, 달리 이를 인정할 증거가 없다. 따라서 원고의 위 주장은 이유 없다.

6. Conclusion

A. Comprehensively taking account of the foregoing, among the pertinent fees, the user fees for the business year of 2011, which falls under the user fees of a patent registered in Korea O,OO,OO,OO, and 2012 x user fees x (the user fees for the business year of 201 x (the source x the source of a foreign corporation's domestic source income pursuant to Article 6 (3) of the Korea-U.S. Tax Convention x the remainder of user fees is not a foreign corporation's domestic source income. Therefore, the Plaintiff is obligated to withhold only the user fees for the patent registered in Korea. Accordingly, the Defendant on December 2, 2013 against the Plaintiff on December 2, 2013 x, the corporate tax, OO,O,O xO xO x x x x 0 x additional tax x x x 00 x additional tax x x x 201 local tax x x x x x 201 year of the market evaluation.

B. If so, the plaintiff's claim is justified within the above scope of recognition, and the remaining claims shall be dismissed as it is without merit. Since the judgment of the court of first instance is unfair with a different conclusion, the defendant's appeal is partially accepted and the judgment of the court of first instance is modified as above.