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All appeals are dismissed.
The costs of appeal are assessed against each appellant.
Reasons
The grounds of appeal are examined.
1. Plaintiff’s ground of appeal
A. Article 57(1)1 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same) provides that the amount of foreign corporate tax may be deducted from the amount of corporate tax for the pertinent business year within the limit of the amount calculated by multiplying the amount of corporate tax for the pertinent business year by the ratio of foreign source income to the amount of corporate tax for the pertinent business year, if the amount of foreign corporate tax paid or to be paid on income generated from overseas is included in the tax base of a domestic corporation for each business year (hereinafter “foreign corporate tax”).
As such, Article 57(1)1 of the former Corporate Tax Act provides that the amount of foreign corporate tax may be deducted from the amount of corporate tax for the pertinent business year in order to adjust international double taxation, setting the limit of deduction as “amount calculated by multiplying the amount of corporate tax for the pertinent business year by the percentage of the amount of corporate tax for the pertinent business year multiplied by the ratio of income generated from overseas sources to the tax base for the pertinent business year,” and permits the deduction of
The purpose of this is to prevent foreign corporate tax from being paid as part of corporate tax to be paid on domestic source income if the source country provides for a higher corporate tax rate than that of the Republic of Korea in the source country where the foreign source income is generated, and if the foreign corporate tax amount is allowed to be fully deducted.
The text and purport of Article 57(1)1 of the former Corporate Tax Act, and Article 14(1) of the former Corporate Tax Act’s income for each business year of a domestic corporation does not ask whether the source is a domestic source or a foreign source, and deducts the total amount of losses incurred during the business year from the total amount of gross income for the business year.