Compared transactions presented by the Defendant are not in a situation similar to electronic service transactions between affiliates, but are not in a market price.

Compared transactions presented by the Defendant are not in a situation similar to electronic service transactions between affiliates, but are not in the market price, and it is difficult to conclude that the transactions between affiliates are abnormal in economic rationality.

2015Guhap75107 Revocation of Disposition of Corporate Tax Imposition

Doeng Co., Ltd.

O Head of tax office

December 1, 2016

on January 20, 2010

1. The Defendant’s disposition of imposing corporate tax amount of KRW 000 (including additional tax) on the Plaintiff on March 24, 201 on the part that exceeds KRW 000,000, and the part that exceeds KRW 00,000 (including additional tax) of the disposition of imposing corporate tax on the Plaintiff for the business year 201 on June 2, 201.

2. The costs of the lawsuit are assessed against the defendant.

Cheong-gu Office

The same shall apply to the order.

1. Details of the disposition;

A. The Plaintiff is a department belonging to the △△ Group, which is a holding company in △△.

The Plaintiff is an affiliated company belonging to △△△△△△ Co., Ltd. (hereinafter referred to as “△△△△△△”) and is also in the position of a related party as prescribed by Article 87(1)7 of the Enforcement Decree of the Corporate Tax Act. The Plaintiff is an enterprise that manufactures and sells petroleum and chemical products, and △△△△△△△ is an information technology service company that supports the construction plan and operation strategy of the information technology system, system design, development, construction, and operation.

B. On November 25, 1998, the Plaintiff entered into a service contract for the establishment and operation of the information system (hereinafter “instant contract”). From January 1, 1999 to December 31, 2009, the service period was from January 1, 2009 to December 31, 2009. Of the service amount, the daily wage for each software engineer published by the Korea Software Industry Association in accordance with the “Government Notice Standards for Software Business Price,” the daily wage for each software engineer’s software engineer’s software business cost was calculated in proportion to the number of inputs, taking into account the input time, and then the monthly wage was determined in proportion to the number of inputs. Thereafter, the instant contract was renewed on December 31, 200. Under the instant contract, the Plaintiff paid the total amount of the service cost to △△△△△△△△△△△△ in accordance with the instant contract.

C. Upon investigating corporate tax against the plaintiff, the director of the Seoul Regional Tax Office:

While paying a discounted amount from the notified unit price to △△△△△, the Plaintiff paid the service price based on the notified unit price to △△△△△△△△, the Plaintiff deemed to have unreasonably reduced the Plaintiff’s tax burden on the Plaintiff’s income through transaction with a person with a special relationship, and notified the Defendant of the taxation on the Plaintiff. Accordingly, pursuant to Article 52(1) of the Corporate Tax Act, Articles 8(1)7 and 89(1) and (5) of the Enforcement Decree of the Corporate Tax Act, the Defendant calculated the Plaintiff’s income for each class of 200-year labor cost per month (hereinafter “instant unit price”) based on the service transaction between ○○ Co., Ltd. (hereinafter “○○”) and △△△△△△△△△△△△△△△△△△△△△△△△△, based on the difference between the market price and the notified unit price, the Plaintiff again included the reported unit price in the gross income in the method of 200 business year.

D. The Defendant included the omitted amount of gross income, such as the recruitment fee, which was revealed as a result of the tax investigation, on March 24, 201, as to the Plaintiff, the Defendant issued a correction and notification (hereinafter “each disposition of this case”), respectively, of the corporate tax belonging to the business year of clause 200 on March 24, 201 (including additional tax), and of KRW 00 (including additional tax) of the corporate tax belonging to the business year of clause 201 on June 2, 201. Here, the portion excluding the omitted amount of gross income, such as the recruitment fee, among the increased portion of corporate tax belonging to the business year of clause 201, was increased by the Defendant additionally including the gross income belonging to the business year of clause 200, and accordingly, the amount of tax credit exceeding the minimum tax was carried over to the business year of clause 201 through 200.

E. On June 20, 201, the Plaintiff appealed to the Tax Tribunal, but the Tax Tribunal dismissed the Plaintiff’s appeal on June 29, 201.

2. Summary of the plaintiff's assertion

The unit price of this case cannot be deemed as the market price because it is not the unit price transacted in situations similar to the contract of this case. Rather, the notified unit price should be deemed as the market price. Moreover, it cannot be said that the transaction under the contract of this case was conducted in lack of economic rationality. Therefore, Article 52(1) of the Corporate Tax Act, which is the provision denying wrongful calculation, and Articles 88(1)7 and 89(1) and (5) of the Enforcement Decree of the Corporate Tax Act, which are the provision denying wrongful calculation, cannot be applied to the Plaintiff. As such, some of the dispositions of

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

A. Relevant legal principles

Article 52 of the Corporate Tax Act provides that where a corporation’s wrongful calculation under Article 52 of the Corporate Tax Act is deemed to have avoided or reduced tax burden by abusing the various transaction forms listed in each subparagraph of Article 88(1) of the Enforcement Decree of the Corporate Tax Act without a reasonable method by a person having a special relationship, it shall be deemed that the person having a tax authority denies it and has the income which appears to be objective and reasonable by the method prescribed in the statutes. In light of the economic person’s position, it shall be limited to cases where it is deemed that the person having a tax authority neglected the economic rationality by calculating an unnatural and unreasonable act. Determination of whether the economic rationality exists should be made based on whether the transaction is abnormal in light of sound social norms or commercial practices, taking into account the various circumstances of the transaction.

Article 88(1)7 of the Enforcement Decree of the Corporate Tax Act provides for "a case where a corporation borrows or receives money, other assets, or services at an interest rate, rate, or rent higher than the market price as one of the grounds for denying wrongful calculation." According to Article 89(1) of the Enforcement Decree of the Corporate Tax Act, the "market price of services, which serves as the basis for determining whether a corporation is a case where services are provided by paying a higher price than the market price to a person with a special relationship." In the circumstances similar to the relevant transaction first, the relevant corporation shall be based on the price continuously traded with many and unspecified persons other than a person with a special relationship or on the price generally traded between third parties who are not a person with a special relationship. The burden of proving and proving the "market price, which serves as the basis for denying wrongful calculation, is against the tax authority claiming the denial of wrongful calculation (see, e.g., Supreme Court Decision 201

B. Key issue of the instant case

The instant unit price is based on the price of the service provided between △△△△△△, ○○, and Hybal. Therefore, the Defendant must prove whether the transaction between △△△△△△, ○○, and Mabalty was made in the transaction similar to the transaction based on the instant contract, and ② whether the instant unit price is “general transaction price” and further, prove that the transaction under the instant contract is “normally unfair” in light of sound social norms and commercial practice. If not, the instant disposition is deemed unlawful.

C. Determination on issues

1) Key issue ①

The term "similar situation" as stipulated in Article 89(1) of the Enforcement Decree of the Corporate Tax Act refers to a situation in which a contract, which forms the basis of the transaction in question, is similar in its content to a contract that forms the basis of comparable transaction, and a contract, which forms the basis of the transaction in question, is not deemed similar in its contents. It should be deemed that the specific situation at the time of each transaction, namely, the specific situation at which the parties are involved, such as the type of business operated by the parties

However, according to the evidence Nos. 20-1 and 21 of the evidence Nos. 20-1 and 20-21, the facts can be acknowledged that the contracts made between △△△△ and B, and other words similar to the contracts of this case, but it is insufficient to deem that each contract and each of the following transactions were made in a similar situation, and there is no evidence to acknowledge otherwise (the defendant submitted evidence No. 15-1, No. 16, and No. 17, and there is no evidence to acknowledge otherwise (the defendant submitted evidence No. 15-1, No. 16, and No. 17, which was publicly announced by △△△△△△△△, which was similar to the contracts of this case with ○○, although the evidence No. 15-1, and No. 16 stated that B entered into an information system with A, and No. 17 stated that △△△△△△△△△ entered into an information system contract with A).

Rather, comprehensively taking account of the overall purport of the statement and argument as to Gap evidence No. 11, ○○ may recognize the fact that the status of transaction between △△△△△△△ and the plaintiff as of June 7, 2005 and the transactional situation between △△△△△△△△△△△△△△△△ and the plaintiff are different from the transactional situation between △△△△△△△△△△△△△△△△△△△△△△ and the plaintiff, and the establishment and establishment of an independent computer system around September 200 of 200.

2) Issues 2

The evidence presented by the Defendant alone is insufficient to view the instant unit price as a usual transaction price, and there is no other evidence to acknowledge it otherwise. Rather, as seen earlier, since ○○○ completed the first stage of installation of a self-based computer system around April 200, there is only special circumstance that could have been lower than the publicly notified unit price of labor cost for Grade 5 of 200, and in full view of the purport of the entries and arguments in the evidence No. 5 of 200, the Korea Software Industry Association made an investigation of 4,076 of 200, 3,531 of Grade 5, 3,969 of Grade 3,9, 5,470 of Grade 5, and there is no other evidence to acknowledge that the said unit price was less than the publicly notified unit price of △△△△△△△△△△’s trade with the same unit price of labor cost as the price of △△△△△△△ Party’s trade with the same price of 200.

3) Issues 3

The Defendant asserts that the instant contract term itself is set at 10 years, and that the Plaintiff and △△△△△△△ may waive the intent to receive the service by reflecting the “market price” under the Corporate Tax Act, and that the transaction based on the instant contract is an abnormal transaction lacking economic rationality in light of sound social norms and commercial practices.

In light of the fact that the instant contract is a long-term contract term, but the concept of the construction and operation of the information technology system in Korea was severeded, and that it can be seen that setting the contract term for a long-term period is helpful for the stable and efficient management of the Plaintiff’s computer system when considering the overall construction and operation of the information technology system, etc., it is difficult to readily conclude that the instant contract term is a abnormal transaction that lacks economic rationality solely on the basis of the fact that the instant contract term is ten years.

Rather, as seen earlier, the fact that the instant contract was concluded on November 25, 1998 is the fact that the Plaintiff faithfully performed the terms and conditions of the contract. However, it is doubtful whether the Plaintiff’s payment of the service price based on the publicly notified unit price to △△△△△△ is merely an abnormal transaction lacking economic rationality. As alleged by the Defendant, even if there was a practice that discounts the publicly notified unit price in 200 terms and conditions as claimed by the Defendant, the Plaintiff should have demanded that △△△△△△△△△△△ in contravention of the contract demand a discount of the publicly notified unit price. Moreover, it is doubtful whether the △△△△△△△△△△ should have accepted the Plaintiff’

D. Sub-committee

Therefore, Article 52(1) of the Corporate Tax Act, which is the provision denying unfair calculation, and Articles 88(1)7 and 89(1) and (5) of the Enforcement Decree of the Corporate Tax Act, which are the provision denying unfair calculation, cannot be applied to the Plaintiff. The Defendant’s portion of the tax amount affecting the Defendant’s re-calculated the Plaintiff’s income amount for the business year of 200 years based on the unit price of this case exceeds KRW 00 in the disposition imposing corporate tax for the business year of 200 on the Plaintiff (including additional tax), and the portion of the disposition imposing corporate tax for 200 won for the business year of 200 e.g., the amount exceeding KRW 00 in the disposition imposing corporate tax for

5. Conclusion

Therefore, the plaintiff's claim of this case shall be accepted for the reasons and it is so decided as per Disposition.

Justices Kim Byung-soo

Judges Yu Sung-sung

Judges Kim Young-young