C. Partners Asia (Attorneys White-chul et al., Counsel for the plaintiff-appellant)

Head of Yongsan Tax Office

December 20, 2013

1. The Defendant’s rejection disposition against the Plaintiff for correction of KRW 952,765,769 against the Plaintiff on March 20, 2012 is revoked.

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

The same shall apply to the order.

1. Details of the disposition;

A. Status of the parties

1) The Prior Industry Co., Ltd. owned 12 parcels and 12 parcels and 21 units and 22 units (hereinafter “○○ shop”) on the land of Yongsan-gu, Seoul and 12 units and 22 units (hereinafter “○○ shop”). However, around November 1997, the lessee of ○ shop was at risk of not being able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to receive

2) On January 22, 2002, the Plaintiff, a corporation established under the State of the Netherlands Act, entered into a consulting agreement with ○○○ on June 29, 2002, which wishes to accept, and ○○○○, provided advice on acceptance.

3) An accelerator et al. (hereinafter referred to as the “cellex”) and a monitorington Cod. (bhd.; hereinafter referred to as the “alington,” and, in cases where an accelerator and bowlington are mentioned in total, the company of this case (hereinafter referred to as the “instant company”) are a corporation established pursuant to the laws of Malaysia, incorporated pursuant to the laws of Malaysia, which will receive advice for acquiring the shares of the Plaintiff and Ro Forum on November 28, 2002 and pay contingent fees therefrom, and thereafter they are held by acquisition of shares of 21,250 (42.5%) respectively.

(b) Commencement, etc. of the auction procedure against the ○○ store;

1) The lessee union acquired the right to collateral security claims, etc. established at ○○ stores from around 1999 to April 2001, and secured the status of the principal creditor to the preferred industry. On September 19, 200, Seoul District Court decided to commence compulsory administration and decided to commence the auction on December 11, 200. On July 1, 2001, the lessee union received a decision to permit sale at the above auction procedure (the date of payment for the sale was July 24, 2002).

2) On the other hand, on July 16, 2002, the prior industry entered into a sales contract to sell ○○ Store and 140 billion won, and completed the registration of ownership transfer to ○○ Forum on the same day. On July 19, 2002, the prior industry deposited approximately KRW 99.6 billion with the lessee association as the principal deposit in Seoul District Court on July 19, 2002 in order to suspend the auction procedure after completing the registration of ownership transfer with respect to ○○ Store, and to cancel all the security rights established in ○○ Store. On July 22, 2002, the prior industry filed a lawsuit of demurrer against cancellation and claim on the ground of the above repayment deposit in the name of the prior industry, etc. (Seoul District Court Decision 2002Da46015). On the other hand, the prior industry filed an application for revocation of compulsory execution and application for suspension of compulsory execution with respect to ○ Store.

3) Accordingly, the auction procedure is suspended, and on February 4, 2003, the party who participated in the lawsuit for cancellation and objection of the above right to collateral security, but the lessee association filed an appeal and continued the appellate trial (Seoul High Court 2003Na16964). On April 30, 2003, in the case of the above application for revocation of compulsory administration, the creditor association made a favorable decision to the lessee association, and the compulsory administration against the ○○ shopping family was continued.

C. A share sales contract, etc. between the lessee and the instant company

1) In the event that the ○○○○○ Award was likely to cause trouble to the acceptance due to the foregoing involvement in the forum, etc., Nonparty 1, the representative director of the forum, and ○○○○○○○○○○○, continued consultation on the acceptance, but no particular progress was made. Accordingly, around September 2003, Nonparty 2, the representative director of the Plaintiff, proposed a negotiation on the sale of ○○○ Award, asserting that Nonparty 2, the representative director of ○○○○○, was delegated by Nonparty 1, while holding the name of the forum, corporate seal, etc., and obtained all rights from Nonparty 1.

2) After negotiations with the Plaintiff, the lessee union: (a) had the prior industry withdraw the lawsuit of cancellation of the right to collateral security and the lawsuit of objection filed against the lessee association; and (b) had the lessee association acquire the ownership of ○○○○ in the auction procedure; and (c) the lessee association decided to arrange the legal relationship related to ○○○ Family by purchasing the entire shares of 42,500 shares from the instant company holding 42,50 shares (21,250 shares x 2) and making it dissolved immediately after acquiring the forum from the instant company holding 42,50 shares of the said shares. Accordingly, on September 27, 2003, the lessee association agreed with the relevant parties, such as the Plaintiff, the instant company, and Subdivision. Among them, the content of the share sales contract between the lessee association and the instant company (hereinafter “instant share sales contract”).

3) Details of the instant sales contract

On September 27, 2003, the lessee union entered into a contract with the instant company to purchase KRW 42,500 (85%) of 132.8 billion in the purchase price. The 100 billion in the purchase price shall be paid on October 31, 2003, in lieu of the payment for taking over the obligations to the Ro Forum Electric Cable Co., Ltd. (hereinafter “Korea Electric Cable”) and to the affiliated companies of the Korea Electric Cable. Of the remaining 3.2 billion won, the 10 billion in the purchase price was paid on January 15, 2004, and 10 billion in the remaining 3.2 billion won, on February 15, 2004, and 12.8 billion in the purchase price was paid on March 15, 2004; and at the same time, at the same time, at the rate of 15 billion in the purchase price to be paid at the agreed rate of KRW 5.0 billion in the purchase price to the company or the designated parties of this case.

D. Transfer, etc. of share purchase price bonds to the Plaintiff of the instant company

1) On December 8, 2003, the Plaintiff entered into a separate consulting agreement with the instant company for the collection of the purchase and sale price of shares to the lessee association. On December 10, 2003, the Plaintiff acquired the claim from the instant company and the instant company and the lessee association of the instant company under the share purchase and sale contract (==10 billion won on January 15, 2004 + 10 billion won on February 15, 2004 + 12.8 billion won on March 15, 2004) with respect to the ownership of the remaining share purchase and sale price claim (hereinafter “the instant claim”). On December 10, 2003, the Plaintiff agreed to ensure that the lessee association acquired the claim from the instant company, and the lessee association agreed to the agreement for the registration of the establishment of the mortgage (hereinafter “the maximum debt amount”). The lessee association agreed to the agreement for the registration of the establishment of the mortgage (hereinafter “the instant claim”).

2) On December 17, 2003, the lessee association completed the registration of creation of a mortgage (hereinafter “registration of creation of a mortgage”) consisting of the lessee association, the mortgagee, the mortgagee, and the maximum debt amount at KRW 50 billion. Meanwhile, the lessee association did not pay KRW 10 billion to the instant company by January 15, 2004.

(e) The Seoul High Court Decision 2006Na115404

On September 16, 2005, the lessee union filed a lawsuit against the Plaintiff claiming that the claim of this case secured by the instant right to collateral security was set-off, deducted, or repaid against the Plaintiff, etc., and that the claim of this case was extinguished by the set-off, reimbursement, etc. against the Plaintiff. The appellate court of the instant case (Seoul High Court 2006Na115404) decided on December 15, 2008 that the lessee association did not pay 10 billion won to the instant company on January 15, 2004, since the lessee association did not pay 10 billion won of the share purchase price to the Plaintiff pursuant to the instant agreement, the Plaintiff did not file an appeal against the Plaintiff at the rate of 32.8 billion won from the lessee association to the date of full payment (Seoul High Court 2006Na15404) and the Plaintiff did not file an appeal against the Plaintiff and the Plaintiff association, which was subject to the registration of the establishment of the mortgage of this case.

F. The defendant's rejection of correction request against the plaintiff

1) According to the instant judgment, the lessee union paid KRW 32.8 billion to the Plaintiff the annual rate of KRW 11,909,572,105 calculated from August 20, 2006 to the date of payment (hereinafter “instant income”) with the annual rate of KRW 11,909,572,105 (hereinafter “instant income”), deeming the instant income as damages for delay as falling under other income, and withheld and paid KRW 2,381,914,421 by applying the tax rate of 20%.

2) On February 6, 2012, the Plaintiff filed a claim for correction to refund KRW 952,765,768, which was excessively withheld out of KRW 2,381,914,421 withheld and paid by the lessee association to the Defendant for the business year 2,381,914, and 421, on the ground that the instant income ought to be withheld at a tax rate of 12%, not as other income, but as other income. However, on March 20, 2012, the Defendant rejected the Plaintiff’s claim for correction (hereinafter “instant disposition”).

3) The Plaintiff appealed and filed an appeal with the Tax Tribunal on May 9, 2012, but was dismissed on May 9, 2013.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 10, purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

The instant income constitutes interest income stipulated in Article 13 of the Convention between the Republic of Korea and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment (hereinafter “Korea-U.S. Tax Treaty”), and Article 93 Subparag. 1 of the former Corporate Tax Act (amended by Act No. 9898, Dec. 31, 2009; hereinafter the same shall apply). Accordingly, the instant disposition taken on a different premise is unlawful.

2) The defendant's assertion

The income of this case constitutes damages for delay due to delay in the payment of the purchase and sale price of stocks, i.e., damages for losses, and where a tax treaty concluded by the Republic of Korea does not have separate provisions on other income, other income can be imposed in accordance with the tax law of the country in which the income is generated, and the country in which the person who acquired other income can also be taxed in accordance with the tax law of the country in which the person who acquired the other income. In this case, the country in which the person has acquired the other income is also entitled to prevent double taxation in accordance with the tax law of the country in which the tax treaty of the Republic of Korea does not have separate provisions on other income. As such, the defendant can be taxed on the income of this case in accordance with the domestic law because the

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

In light of the following circumstances, it is reasonable to see that the instant income constitutes interest income, and solely based on the circumstance alleged by the Defendant, it is difficult to deem the instant income as other income. Therefore, the instant disposition based on the premise that the instant income falls under other income, not interest income, is unlawful.

① Article 11(3) of the OECD Model Tax Convention provides that income accrued from all kinds of claims, regardless of whether it has the right to participate in collateral and profit-making, and, in particular, income from government bonds, public bonds, or debentures, and from sources of income, public bonds, or debentures, and the amount of penalty due to delayed payment shall not be regarded as interest. However, the OECD Model Tax Treaty note provides that a Contracting State may delete the said proviso from bilateral negotiations and treat the amount of penalty due to delayed payment as interest. However, according to Article 13(6) of the Korea-U.S. Tax Treaty, the term “interest used in this Convention” means income arising from all kinds of claims not accompanied by the right to participate in collateral and all other debt obligations, and income arising from the delayed payment and income accruing from all kinds of claims, and the amount of penalty arising from the delayed payment shall not be regarded as income arising from the loan of the Contracting State.

② The instant income falls under interest income under the Korea-U.S. Tax Treaty as it constitutes “income derived from all kinds of claims” under Article 13(6) of the Korea-U.S. Tax Treaty, and Article 93 subparag. 11(b) of the former Corporate Tax Act and Article 132(10) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 22577, Dec. 30, 2010), given that the Plaintiff was transferred from the instant company the instant claim (i.e., the amount of damages for breach or termination of a contract on the right to property), and thus, constitutes “the value of money or goods paid in excess of damages to the payment itself which constitutes the original content of the contract, regardless of its title, as compensation for damages paid by breach or termination of a contract on the right to property, and thus, constitutes other income.

③ However, Article 6(1) of the Constitution of the Republic of Korea provides that “any treaty concluded and promulgated under the Constitution and any generally accepted international law shall have the same effect as domestic law.” As such, a tax treaty concluded with the consent of the National Assembly shall have the same effect as that of domestic law, and with respect to the legal relationship governed by a tax treaty, the pertinent treaty shall take precedence over domestic law since the pertinent treaty is in the special position of domestic law. In addition, Article 28 of the Constitution provides that “in relation to the classification of domestic source income of a nonresident or a foreign corporation, the tax treaty shall take precedence over domestic law, notwithstanding Article 119 of the Income Tax Act and Article 93 of the Corporate Tax Act, shall apply preferentially to the classification of domestic source income of a foreign corporation.” Therefore, the instant income is an interest income under the

④ The National Tax Service determined that the amount of income similar to the instant income, i.e., the domestic corporation having no domestic place of business, calculated by the interest rate agreed in advance according to the fact that it did not pay transaction fees, royalties, etc. under the technology introduction agreement to a foreign corporation with no domestic place of business on the agreed date for payment (see, e.g., State business 4607-378, August 14, 200

⑤ Under the U.S. tax law, the Defendant asserts that damages for delay and damages constitute other income. However, according to the data submitted by the Plaintiff, it is determined that the U.S. tax law classifys damages for delay as interest income, barring special circumstances, considering specific facts in light of specific facts. According to such determination, the instant income is deemed as falling under interest income under the U.S. tax law. Thus, the Defendant’s above assertion

3. Conclusion

Therefore, the plaintiff's claim of this case is reasonable, and it is decided as per Disposition by admitting it.

[Attachment Form 5]

Judges Ba-hee (Presiding Judge)