Whether a bad debt is recognized as deductible expenses

In order to appropriate bad debts as deductible expenses, it shall be in an irrecoverable state after comprehensively examining whether each debtor's property status or business operation is made to discontinue extinctive prescription on the claim, and other matters.

Article 34 (Inclusion of Bad Debt Reserve Fund in Loss)

Article 62 of the Corporate Tax Act: Scope of Bad Debt

1. The plaintiff's claim is dismissed.

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

The part of the additional disposition of KRW 146,767,303 of the corporate tax for the business year 2000 imposed on the Plaintiff on May 2, 2005 and KRW 152,174,68 of the additional disposition of KRW 168,231,010 of the corporate tax for the business year 201 shall be revoked.

1. Details of the disposition;

A. The Plaintiff is a company that manufactures and sells synthetic resin products and pipes. The Plaintiff reported the amount of income (loss) from 1995 to 2002 as indicated in the following table, including the deficit amount of 863,170,435 won in the business year 1995, and reported only the deficit amount from 1995 to 1997. From 198 to 2001, the Plaintiff made a voluntary payment of the tax base by deducting the deficit amount in the same amount as the income amount respectively from the income amount in each business year to 001. The tax base for the 2002 business year was 0 won after deducting the deficit amount from the income amount in each business year to 661,358,542 won.

B. The Defendant determined income amount of KRW 361,196,942 among the Plaintiff’s losses for the business year 1995 (hereinafter “the instant bad debt”) as listed in the following chart, such as the reduction of deductible expenses for the reason that the extinctive prescription of the claim has not yet expired, and determined income amount of KRW 1,238,087,923 which may be deducted after the business year 1998 to 200, and then deducted KRW 328,728,762, KRW 402,986, KRW 734,04,60 for the business year 202, and KRW 734,202 for the business year 202 for the corporate tax base of KRW 200 for the business year 200 to KRW 208,230 for the business year 200, and notified the Plaintiff of the disposition of imposition of corporate tax and KRW 209 for each of the instant losses (the same shall apply).

Classification

Reported income (loss)

Losses carried forward

Amount reported to be deducted

Determination income (loss)

Losses carried forward

Amount determined to be deducted

Tax Base

195

-863,170,435 won

-99,113,711

0 won

196

-527,297,470 won

-526,77,470 won

0 won

1997

-622,580,742

-612,196,742

0 won

1998

67,185,859 won

67,185,859 won

67,185,859 won

67,185,859 won

0 won

199

1,094,208,621 won

1,094,208,621 won

1,109,814,948 won

1,109,814,948 won

0 won

200

455,001,737 won

455,001,737 won

455,001,737 won

128,272,975 won

326,728,762 won

201

397,460,456 won

397,460,456 won

403,702,986 won

403,702,986 won

202

727,736,374 won

6,377,832 won

734,044,600 won

734,044,600 won

[Reasons for Recognition] Unsatisfy, each entry of Gap evidence 1 to 5 (including each number), and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

(1) The plaintiff's assertion

The issue of the instant bad debt, which the Defendant was not a deductible expense in the business year 1995, was a disposition of non-deductible and reservation that the extinctive prescription of the Plaintiff’s claim has not yet expired at the time of 1995. Thus, the disposition of this case which did not deduct the instant bad debt as losses even though it should be deducted as losses for the business year in which the extinctive prescription of the said claim became due, and even if it should be deducted as losses carried forward within five years before the starting date of the business year

(2) The defendant's assertion

As for the business year 196-1998, the date of the disposition of this case, the exclusion period for national tax under Article 26-2(1) of the Framework Act on National Taxes, the date of the disposition of this case, the Defendant cannot correct the tax base. Therefore, where the period for filing a request for correction for the amount not included in deductible expenses has expired, the Defendant cannot make a correction of the tax base. Therefore, even if the Plaintiff could have appropriated the amount in return as deductible expenses before the business year, even if the amount in return could have been appropriated as deductible expenses before the business year, the subsequent tax base should not be deducted.

If the bad debt of this case can be recognized as losses because it is not subject to the exclusion period of national tax, even if the bad debt of this case can be recognized as losses, the plaintiff must prove the fact that the plaintiff made a recovery effort, etc. after the date of occurrence of the claim, and if the plaintiff disposed of bad debt without making any effort to recover the claim and only putting the expiration of the extinctive prescription into bad debt, the plaintiff shall be deemed to have voluntarily renounced the claim and shall be deemed to have been excluded from deductible expenses. Since the plaintiff failed to submit objective documentary evidence as to the bad debt of this case, the disposition of this case which did not deduct the bad debt of this case

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

(1) Determination on the expiration of the exclusion period for national taxes

On the other hand, the plaintiff did not dispute the losses for the business year 196 to 1998, but rather consider the losses omitted in the amount of the tax base return for the business year in the above year as the tax base and amount of tax for each business year 2000 and 2001. This is irrelevant to the tax base and amount of tax for each business year under the Framework Act on National Taxes. In addition, under Article 13 of the Corporate Tax Act, the disposition in this case is a disposition imposing corporate tax on the plaintiff for the business year 2000 and 2001, and the losses carried forward within five years from each business year may be successively deducted from each business year under Article 13 of the Corporate Tax Act, so the amount after the business year 1996 may be treated as losses carried forward for the business year 2001, so the defendant's assertion that the exclusion period of

(2) Determination as to whether the instant bad debt was included in deductible expenses

As seen earlier, losses omitted may be successively included in the business year within five years after the inclusion of deductible expenses in the deductible expenses of the pertinent year. However, according to the Plaintiff’s 11 period (from January 1, 1994 to December 31, 1994), according to the Plaintiff’s 11 period of settlement of accounts (27,916,141 won of credit sales amount, 27,916, and 141 won of non-performing bill sales amount) as stated in the separate sheet, including 342,381 won of pipeline sales amount to ○○○ commercial company, which is the issue of the instant bad debt amount, and 29 companies of non-performing debt sales amount and 3 companies of non-performing debt sales amount of the instant case, the Plaintiff held around December 27, 1995 and resolved on December 31, 196 of non-performing debt amount of the instant case to recognize the Plaintiff’s total bad debt amount of the instant case as 342,381 won of non-performing debt amount of the instant case.

However, in order to determine the corporation's claim as bad debts, it should be deemed that the credit account and outstanding amount are either a check or bill, the extinctive prescription of which has been completed under the Commercial Act, or for which six months have passed since the date of the default, and that its claim cannot be recovered. Thus, in light of the following facts: (a) whether the plaintiff already treated the issue of this case as bad debts in 1995 before the expiration of the extinctive prescription against the claim of this case, such as the credit account receivable and the bill of this case, and the bill of this case, and thereafter, the debtor have made efforts to discontinue the extinctive prescription against each of the above claims; and (b) whether there is any irrecoverable condition such as the debtor's financial status or the business operation in other places, the above facts alone cannot be deemed as irrecoverable claims; and (c) there is no other evidence to acknowledge this.

Therefore, under the premise that the issue of this case cannot be included in deductible expenses, the defendant's disposition of this case is legitimate in calculating the tax base and imposing corporate tax without deducting it as a loss carried forward of the business year 200, 2001.

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.

[Related Acts]

Article 26-2 of the Framework Act on National Taxes Exclusion Period for Imposition of National Tax

(1) National taxes may not be levied after the period as provided in the following subparagraphs expires: Provided, That where mutual agreement procedures are in progress under the provisions of a treaty concluded for the avoidance of double taxation (hereinafter referred to as “tax treaty”), Article 25 of the Adjustment of International Taxes Act shall apply:

1. Where a taxpayer evades a national tax, or receives a refund or deduction by fraudulent or other unlawful means, for ten years from the date on which the national tax is assessable;

2. If the taxpayer fails to file a written tax base return within the statutory due date of return, for seven years from the date on which the national tax is assessable for the year;

3. If it does not fall under subparagraphs 1 and 2 above, for five years from the day on which the national tax is assessable; and

Article 12-3 of the Enforcement Decree of the Framework Act on National Taxes, the starting date for exclusion of national taxes

(1) The date when the national tax is assessable as provided in Article 26-2 (4) of the Act shall be the day falling under each of the following subparagraphs:

1. In cases of filing a return on the tax base and amount of national tax, the day following the due date of filing or the due date for filing a return on the tax base and amount of the national tax (hereinafter referred to

○ Article 13 of the Corporate Tax Act

The corporate tax base on the income of a domestic corporation for each business year shall be the amount calculated by deducting the amount under the following subparagraphs in sequential order from the income of a domestic corporation for each business year:

1. The amount of losses incurred during each business year within the five years prior to the first day of the current business year which were not thereafter deducted in the calculation of the tax base;

2. Non-taxable income under this Act and other Acts; and

3. Amount of income deduction under this Act and other Acts.

○ Income for each business year under Article 14

(1) The income of a domestic corporation for each fiscal year shall be the total amount of losses incurred during the fiscal year deducted from the total amount of earnings during the fiscal year.

(2) The amount of losses of a domestic corporation for each fiscal year shall be the total amount of earnings during the fiscal year deducted from the total amount of losses incurred during the fiscal year.

Indication of Bonds

Sub-items

Year of Occurrence

o Ma Mame Name

amount of gold

non-higher

Account Sales

1993

○○ Commercial

342,381

〃 4

1994

○ Industry

8,064,128

〃 4

1994

○ ○ Dok

2,059,635

〃 4

1993

○○ Comprehensive

3,824,400

〃 4

1994

○○ Commercial

1,317,475

〃 4

1993

○○ Housing

3,008,940

〃 4

1994

○ Pipe

70,709,832

〃 4

1994

○○ Commercial

5,125,668

〃 4

1994

○○ Commercial

9,440,657

〃 4

1993

○ Industry

1,717,100

〃 4

1993

○ ○ Plastic

6,667,93

〃 4

1994

○ Industry

34,050

〃 4

1994

○ ○ Metal

12,104,320

〃 4

1994

○ ○ Integrated Plastic

704,000

〃 4

1994

○ Construction

2,471,900

〃 4

1993

○

1,922,989

〃 4

1994

○○ Commercial

15,159,926

〃 4

1994

○○ Commercial

18,403,721

〃 4

1993

○○ Commercial

546,823

〃 4

1993

○○ Commercial

1,201,903

〃 4

1993

○○ Commercial

36,657,748

〃 4

1993

○ Sales

9,303,360

〃 4

1994

○ Comprehensive Sales

6,813,182

〃 4

1994

○ ○ Mountainpers

2,037,332

〃 4

1993

○ ○ Construction Materials

933,600

〃 4

1994

○○ Unemployment

106,209,799

〃 4

1994

○ Public Administration

5,223,031

〃 4

1993

○○ Commercial

475,288

〃 4

1993

○○ Lighting

504,680

Defaulted Bills

1993

○ ○ Construction Business

9,199,000

〃 4

1994

○○ Unemployment

8,935,141

〃 4

1993

○

9,777,000

Consolidateds

361,196,942