2015-China-0401 (2015.03.09)

Whether the applicant corporation may be subject to the grace period due to the amendment of statutes and exclusion from small and medium enterprises, etc.

In 2012, since a company under the grace period to be regarded as a small or medium enterprise is subject to the application of the grace period for small or medium enterprises, a disposition based on the premise that the provision of the grace period applied to the Plaintiff is invalidated due to the enforcement of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 201

Article 72 of the Corporate Tax Act: Refund by Retroactive Deduction of Losses; Scope of Small and Medium Enterprises under Article 2 of the Enforcement Decree of

Incheon District Court-2015-Gu 51051 (23. 2016.06.23)

SOO Co., Ltd.

O Head of tax office

oly 2016.23

1. The Defendant’s imposition disposition of KRW 741,64,160 against the Plaintiff on October 1, 2014 is revoked.

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

1. Details of the disposition;

(a) Application of the grace period for small and medium enterprises;

The Plaintiff, a corporation established for the purpose of construction business, etc. on February 27, 1986, was not a small or medium enterprise pursuant to the proviso to Article 2(1) of the former Enforcement Decree of the Restriction of Special Taxation Act [the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307, Feb. 4, 2009; Presidential Decree No. 22037, Feb. 18, 2010; Presidential Decree No. 21307, Feb. 4, 2009; Presidential Decree No. 21307, Feb. 4, 2009). However, in accordance with the main sentence of Article 2(2) of the Enforcement Decree of the same Act, the grace period was applied until the business year of 2009 and three subsequent taxable years, respectively.

(b) Amendment to the Enforcement Decree of the Framework Act on Small and Medium Enterprises and the Restriction of Special Taxation Act.

1) 조세특례제한법 시행령의 중소기업 요건은 중소기업기본법 시행령을 준용하고 있는데, 중소기업기본법 시행령은 2009. 3. 25. 대통령령 제21368호로 개정되면서 제3조 제2호에서 중소기업의 실질적인 독립성의 요건으로 ㈐목을 추가하여 '관계회사'(중소기업기본법 시행령 제2조 제3호 참조)에 속하는 기업의 경우에는 제7조의2에 따라 산정한 상시 근로자 수, 자본금, 매출액, 자기자본 또는 자산총액이 제3조 제1호에 따른 기준을 초과하는 기업이 아닐 것'을 규정하였고, 그 부칙 제1조 제1호는 제3조 제2호 ㈐목의 개정규정은 2011. 1. 1.부터 시행하도록 하였다.

2) 이후 조세특례제한법 시행령이 2010. 12. 30. 대통령령 제22583호로 개정되면서,제2조 제1항 제3호 전단에서 '실질적인 독립성이 중소기업기본법 시행령 제3조 제2호 ㈎목부터 ㈐목까지의 규정에 적합할 것'을 규정하면서, 후단에서 "이 경우 중소기업기본법 시행령 제3조 제2호 ㈐목을 적용할 때 '중소기업기본법 시행령 제3조 제1호에 따른 기준을 초과하는'은 '조세특례제한법 시행령 제2조 제1항 각 호 외의 부분 단서에 따른 기준에 해당하는'으로 본다"고 규정하여, 결국 '관계회사에 속하는 기업의 경우에는 중소기업기본법 시행령 제7조의2에 따라 산정한 상시근로자수등이 조세특례제한법시행령 제2조 제1항 각 호 외의 부분 단서에 따른 기준에 해당하는 기업이 아닐 것'을 중소기업의 요건으로 규정하였고, 같은 시행령 제2조 제2항 단서에서 관계회사의 상시 근로자수등이 중소기업 제외기준을 충족하는 경우에는 제외기준 충족 당해 연도와 그후 3년 동안 적용해주는 중소기업 유예기간을 적용하지 않도록 규정하였으며, 위 시행령 부칙 제1조에서 제2조 제1항 제3호 전단[중소기업기본법 시행령 제3조 제2호 ㈐목의 부분만 해당한다]의 개정규정은 2012. 1. 1.부터 시행하도록 하였다.

(c) Meeting the standards for exclusion of related companies from small and medium enterprises;

외부감사대상기업인 원고는 2011. 12. 31. 무렵 □□홀딩스 주식회사(이하'□□홀딩스'라 한다)의 주식 30%를 보유하고 있었고, 원고의 주식 50%를 소유하고 있는 최대주주인 김▨▨는 □□홀딩스의 주식 40%를, 김▨▨의 형제인 김◇◇는 □□홀딩스의 주식 30%를 각 보유하고 있었던바, 원고와 □□홀딩스는 구 중소기업기본법 시행령(2011. 12. 28. 대통령령 제23412호로 개정되어 2012.1. 25. 대통령령 제23527호로 개정되기 전의 것, 이하 '개정 중소기업기본법 시행령'이라 한다)의 관계기업에 해당하였는데, 원고와 □□홀딩스의 2009 내지 2012 사업연도 매출액 합계는 각 1,000억 원 이상이다.

(d) Corporate tax returns;

On March 2013, when the Plaintiff suffered loss in the business year 2012, the Plaintiff applied for a refund of corporate tax of KRW 638,969,010 paid in the business year 201 to the Defendant on the ground that the Plaintiff constitutes a small or medium enterprise under Article 25(1)1 of the former Corporate Tax Act (amended by Act No. 11603, Jan. 1, 2013; hereinafter referred to as the “former Corporate Tax Act”) pursuant to Article 72(1) of the former Corporate Tax Act (amended by Act No. 11603, Apr. 9, 2013).

(e) Disposition of imposition;

Pursuant to Article 2(1)3 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; Presidential Decree No. 24368, Feb. 15, 2013; hereinafter referred to as the "Enforcement Decree of the Restriction of Special Taxation Act"), the Defendant determined that the Plaintiff is not a small or medium enterprise and is not subject to the application of the grace period pursuant to the proviso to Article 2(2) of the Enforcement Decree of the Restriction of Special Taxation Act, and that on Oct. 7, 2014, the Defendant issued a disposition to notify the Plaintiff of the amount of corporate tax refunded pursuant to Article 75(5)2 of the former Corporate Tax Act (hereinafter referred to as the "disposition of this case") by adding the amount equivalent to the interest accrued to the corporate tax refunded by the Plaintiff (hereinafter referred to as the "disposition of this case").

(f) Procedures of the previous trial;

On October 16, 2014, the Plaintiff filed a petition with the Tax Tribunal for a trial seeking the revocation of the instant disposition, which was dismissed on March 9, 2015.

[Ground of recognition] Unsatisfy, Gap evidence 1, 2, Eul evidence 1 to 3

Each entry, the whole purport of the pleading, including

2. Whether the disposition is lawful;

A. Summary of the plaintiff's assertion

The instant disposition should be revoked on the grounds that it is unlawful for the following reasons.

① Whether an affiliated company satisfies the criteria for exclusion from small and medium enterprises under Articles 72(1) and 25(1)1 of the former Corporate Tax Act, Article 39(1) of the Enforcement Decree of the Corporate Tax Act, and Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act shall be determined as of December 31, 201, which is the end of the immediately preceding business year, just like whether the affiliated company is a parent or subsidiary company under Article 3-2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, and the provisions of subparagraph 2(c) of Article 3 of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010) revised to apply mutatis mutandis to the amendment by Presidential Decree No. 21368, Mar. 25, 2009; thus, Article 2(1)3 of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 1, 20120).

Nevertheless, the Defendant’s disposition that the Plaintiff did not constitute a small or medium enterprise by meeting the criteria for exclusion of affiliated companies in the business year 2012 is unlawful.

② On December 16, 2010, ○○○-do Governor expressed his/her intention to discontinue the supply and demand contract with the Governor of the Gyeonggi-do on December 10, 2010, by transferring all obstacles necessary for the development of hydroelectric power, which he/she had been engaged in as of December 16, 2010, and indicating his/her intention to discontinue the supply and demand contract. The sales of KRW 18,383,982 during the business year of 2011 were generated while managing the safety, and is not a company that continues to engage in the business for profit as of December 31, 201, which is the end of the immediately preceding business year to determine whether he/she is a related company. Therefore, the instant disposition that the Plaintiff did not become a small and medium enterprise is unlawful on the premise that the instant crowdfunding falls under the “related company.”

③ In a business year 2009, the Plaintiff constitutes an affiliated company of △ Hall Holdings and the Plaintiff’s annual sales in excess of KRW 100 billion, the Plaintiff had already been subject to the grace period from 2009 to the business year of 100 billion, but the total sales in the Plaintiff and △ Hall Holdings exceeded KRW 100 billion, but the former Enforcement Decree of the Restriction of Special Taxation Act [before the amendment by Presidential Decree No. 21307, Feb. 4, 2009; hereinafter “former Enforcement Decree of the Restriction of Special Taxation Act” (amended by Presidential Decree No. 22037, Feb. 18, 2010) was amended by Presidential Decree No. 21307, Feb. 4, 2009; hereinafter “the Enforcement Decree of the Restriction of Special Taxation Act”) was excluded from the application of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act by the Presidential Decree No. 21305, Mar. 23, 2009.

④ Article 3 Subparag. 2 (c) of the former Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 21368, Mar. 25, 2009; hereinafter “former Enforcement Decree of the Framework Act on Small and Medium Enterprises”) was added to the Presidential Decree No. 21368, Mar. 25, 2009. The above provision was enforced from January 1, 2012 from the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010) and the Plaintiff became a new small and medium enterprise. Accordingly, pursuant to Article 2 (5) of the Enforcement Decree of the Restriction of Special Taxation Act, the Plaintiff shall be deemed a small and medium enterprise for the taxable year in which the date on which the cause for not becoming a small and medium enterprise falls

(b) Related statutes;

It is as shown in the attached Form.

C. Determination

1) Whether the Plaintiff constitutes a "small and medium enterprise" under Article 2 (1) of the Enforcement Decree of the Restriction of Special Taxation Act

Article 72(1) of the former Corporate Tax Act provides for a refund of losses to small and medium enterprises based on deduction of retroactive losses, and Article 2(1) of the Enforcement Decree of the Restriction of Special Taxation Act provides that "an enterprise that mainly engages in construction business, etc. by specifying the scope of the above small and medium enterprises as its main business pursuant to delegation by Article 25(1)1 of the same Act and Article 39(1) of the Enforcement Decree of the same Act provides that "the substantial independence of such enterprise shall meet the requirements of Article 3(1)2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises" under Article 3(1)3 of the amended Enforcement Decree of the Restriction of Special Taxation Act, Article 2(1)2(c) of the amended Enforcement Decree of the Restriction of Special Taxation Act, and Article 2(1)2(1) of the amended Enforcement Decree of the Restriction of Special Taxation Act provides that "the Plaintiff shall not be obliged to pay corporate tax of 10 billion won or more at the time of the revision of the Framework Act on Small and Medium Enterprises."

2) Whether the Plaintiff is subject to exemption from the grace period under the proviso to Article 2(2) of the Restriction of Special Taxation Act

Article 2(2) of the Enforcement Decree of the Restriction of Special Taxation Act provides that where a small or medium enterprise falls under the requirements for exclusion from small or medium enterprise under the proviso to paragraph (1) due to expansion of its size or such of small or medium enterprise falls under the requirements for exclusion from small or medium enterprise under subparagraph 1, the taxable year to which the date on which the first reason occurred belongs and the next three taxable years shall not be included in the application of the grace period. In the case of the Plaintiff, whether the grace period is not applicable under the proviso to Article 2(2) of the Enforcement Decree of the Restriction of Special Taxation Act for reasons not meeting the requirements for substantial independence under Article 1(1)3. In light of the following circumstances recognized by the content and form of the relevant Acts and subordinate statutes, it is reasonable to view that the Plaintiff is not subject to the grace period under the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21368, Mar. 25, 200) and the Enforcement Decree of the Restriction of Special Taxation Act as the requirements for small or medium enterprise.

(1) In applying Article 2(2) of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307 of Feb. 4, 2009), where a small or medium enterprise falls under the proviso of the same paragraph with the exception of its size or does not fall under a small or medium enterprise as it exceeds the standard under subparagraph 1 of the same paragraph due to the expansion of its size, etc., it shall be deemed to be a small or medium enterprise only once for the taxable year including the date on which the cause occurred and the subsequent three taxable years, and shall be deemed to be a small or medium enterprise in accordance with paragraph (1) of the same Article for each taxable year after the expiration of the said period. Accordingly, according to the language and text of the above provision, if a small or medium enterprise does not fall under a small or medium enterprise due to the expansion of size, etc., it shall be interpreted that it falls under the scope

Articles 2(1) and 21(2) of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26070, Feb. 3, 2015; Presidential Decree No. 26070, Feb. 3, 2015; Presidential Decree of the Restriction of Special Taxation Act excludes cases where a small or medium enterprise is not a small or medium enterprise beyond its related company’s standards, and the issue of whether to grant the grace period is the issue of legislative policies. The Enforcement Decree of the Framework Act on Small and Medium Enterprises amended by Presidential Decree No. 21368, Mar. 25, 2009, when a company falling under a small or medium enterprise is not a small or medium enterprise under the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21368, Dec. 31, 2011; Presidential Decree No. 22000, Dec. 2, 2010).

The latter part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act explicitly provides that "if a company during a grace period fails to meet the requirements of a small or medium enterprise due to its merger with another company during a grace period, a grace period shall not apply from the taxable year to which the date of merger belongs." In light of such provision, the former part of the proviso of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act cannot be seen as a provision to invalidate the grace period already given to the company during the grace period like the Plaintiff ( even if interpreted otherwise, the former part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act does not stipulate any provision concerning the invalidation of the grace period from the time of the grace period. Therefore, it is unreasonable to interpret that the effect of the grace period immediately after the occurrence of the cause is excluded from the effect of the grace period without any express provision concerning the exclusion from the effect of the grace period from the time. In this regard, it is difficult to interpret the former part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act as a grace period.

3) Sub-decisions

Therefore, the Plaintiff’s disposition based on the premise that the provision of the grace period for small and medium enterprises (amended by Presidential Decree No. 22583, Dec. 30, 2010) which was applied to the Plaintiff was invalidated due to the enforcement of the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010) is unlawful (as long as the Plaintiff’s assertion is accepted, the above assertion is not judged further).

3. Conclusion

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

public official law, order of law,

(1) The former Corporate Tax Act (amended by Act No. 11603, Jan. 1, 2013)

Article 25 (Non-Inclusion of Entertainment Expenses in Deductible Expenses)

(1) Entertainment expenses (not including the amount falling under paragraph (2) paid by a domestic corporation in each business year in excess of the sum of the following subparagraphs shall not be included in deductible expenses for the purpose of calculating the amount of income for the relevant

1. The amount calculated by multiplying twelve million won (eight million won in cases of small and medium enterprises prescribed by Presidential Decree) by the number of months in the relevant business year, and dividing it by 12;

Article 72 (Refund by Retroactive Deduction of Losses)

(1) Where any loss has occurred in a business year under Article 14 (2), a small or medium enterprise under Article 25 (1) 1 may apply for a refund of the amount calculated as prescribed by Presidential Decree within the limit of the corporate tax (referring to the corporate tax prescribed by Presidential Decree) levied on income in the immediately preceding business year. In such cases, with respect to the loss, it shall be deemed that the deduction has been made in the application of subparagraph 1 of Article

(2) A domestic corporation that intends to have its corporate tax refunded pursuant to paragraph (1) shall file an application with the head of the tax office having jurisdiction over the place of tax payment by deadline prescribed in

(3) Upon receipt of the application under paragraph (2), the head of a tax office having jurisdiction over the place for tax payment shall promptly determine the amount of refundable tax and refund it in accordance with Articles 51 and 52

(4) Paragraphs (1) through (3) shall apply only where the relevant domestic corporation reports the tax base and amount of corporate tax on the business year in which losses have occurred and the income for the immediately preceding business year by the reporting deadline under Article 60.

(5) In any of the following cases, the head of the tax office having jurisdiction over the place of tax payment shall collect the amount calculated by adding the interest amount calculated as prescribed by Presidential Decree to the refundable amount (in cases falling under subparagraph 1, the amount equivalent to the decreased deficit) as corporate tax for the

1. Where the losses are reduced by revising the tax base and tax amount of corporate tax for the business year in which losses incurred after refunding the corporate tax pursuant to paragraph (3);

2. Where a corporation which is not a small or medium enterprise under Article 25 (1) 1 has refunded corporate tax;

(6) Matters concerning the calculation of the amount of tax refunded following retroactive deduction of losses and other necessary matters shall be prescribed by Presidential Decree.

【Enforcement Decree of the Corporate Tax Act

Article 39 (Scope, etc. of Small and Medium Enterprises)

(1) "Small and medium enterprises prescribed by Presidential Decree" in Article 25 (1) 1 of the Act means enterprises under Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act (hereinafter referred to as "small and medium enterprises").

(2) The number of months referred to in Article 25 (1) 1 of the Act shall be calculated based on the calendar months, and any number of days that falls short of one month shall be deemed one month.

(1) The former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 21307, Feb. 4, 2009; Presidential Decree No. 22037, Feb. 18, 2010)

Article 2 (Scope of Small and Medium Enterprises)

(1) The term "small and medium enterprises prescribed by Presidential Decree" in the main business of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises that meet the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the number of regular employees is at least 1,00, 100 won, equity capital is at least 100 billion won, and sales are at least 100 billion won, or total assets are at least 500 billion

1. The number of employees who ordinarily use, capital or sales shall not exceed the size under the provisions of attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises (hereafter in this Article, referred to as the "scale of small

2. Deleted;

3. Actual independence shall meet the provisions of subparagraph 2 of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises. In such cases, the ownership of stocks under subparagraph 1 of attached Table 2 of the same Decree shall include direct and indirect ownership (excluding indirect ownership through a collective investment scheme under the Financial Investment Services and Capital Markets Act).

(2) In the application of the provisions of paragraph (1), where a small or medium enterprise falls under the proviso to the part other than the said paragraph due to the expansion of its size, etc. or becomes not a small or medium enterprise as a result of exceeding the standards under subparagraph 1 of the said paragraph, only the first one time for the taxable year to which the date on which such cause occurred belongs and the next three taxable years thereafter, shall be deemed a small or medium enterprise, and it shall be determined by the relevant taxable year after the said period (hereafter in this Article, referred to as the "period of grace") expires: Provided

1. Merger with an enterprise other than a small or medium enterprise under the Framework Act on Small and Medium Enterprises;

2. Merger with a corporation under the grace period;

3. Cases falling under the enterprises other than those referred to in paragraph (1) 3.

4. Where the establishment date exceeds the standards for small and medium enterprises as of the end of the taxable year within two years.

(5) In applying paragraph (1), if a company becomes a small or medium enterprise by amending attached Tables 1 and 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall be deemed a small or medium enterprise starting from the taxable year in which such cause occurs, and if it becomes a small or medium enterprise, it shall be deemed a small or medium enterprise for the taxable year

Addenda No. 21307, Feb. 4, 2009

Article 1 (Enforcement Date)

This Decree shall enter into force on the date of its promulgation.

Article 3 (Application Scope of Small and Medium Enterprises)

The amended provisions of Article 2 (1) shall begin to apply to the taxable year ending after this Decree enters into force.

(1) Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010)

Article 2 (Scope of Small and Medium Enterprises)

(1) The term "small and medium enterprises prescribed by Presidential Decree" in the main business of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises meeting all the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the number of regular employees is at least 1,00, the number of regular employees is at least 100 billion won, the equity capital is at least 100 billion won, and the total assets are at least 100 billion

1. The number of employees who ordinarily use, capital, or sales shall not exceed the size under the provisions of attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises (hereafter in this Article, referred to as the "scale of small

2. Deleted;

3. Actual independence shall meet the provisions of subparagraph 2 (a) through (c) of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises. In such cases, the ownership of stocks under subparagraph 2 (b) of Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises shall include direct and indirect ownership (excluding indirect ownership through a collective investment scheme under the Financial Investment Services and Capital Markets Act), and the ownership exceeding the standards under subparagraph 1 shall be deemed to meet the standards under the proviso to Article 2 (1) of the Enforcement Decree of the Restriction of Special Taxation Act in the application of subparagraph 2 (c)

(2) In the application of the provisions of paragraph (1), where a small or medium enterprise falls under the proviso to the part other than the said paragraph due to its expansion, etc. or comes not to fall under the small or medium enterprise as a result of its exceeding the standards under subparagraph 1 of the said paragraph, it shall be deemed the first taxable year to which the date on which such cause occurred belongs and three taxable years thereafter, and it shall be determined by the relevant taxable year after the said period (hereafter referred to as the "period of grace" in this Article) expires: Provided, That the grace period shall not apply where the small or medium enterprise is not a small or medium enterprise due to any of the following causes,

1. Merger with an enterprise other than a small or medium enterprise under the Framework Act on Small and Medium Enterprises;

2. Merger with an enterprise under the grace period;

3. Cases falling under the enterprises other than those referred to in paragraph (1) 3.

4. Where the establishment date exceeds the standards for small and medium enterprises as of the end of the taxable year within two years.

(5) In applying paragraph (1), if a company becomes a new small or medium enterprise by amending subparagraph 2 (a) and (b) of Article 3 and attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall be deemed a small or medium enterprise from the taxable year to which the date on which the cause occurs belongs; and if it is no longer a small or medium enterprise, it shall

The Addenda No. 22583, Dec. 30, 2010

Article 1 (Enforcement Date)

This Decree shall enter into force on January 1, 201: Provided, That this Decree shall enter into force on January 1, 201, but the former part of Article 2 (1) 3 (the mid-term season)

The amended provisions of subparagraph 2 (c) of Article 3 of the Enforcement Decree of the Framework Act on Business and the latter shall enter into force on January 1, 2012.

/ The former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 23590, Feb. 2, 2012; Presidential Decree No. 23590, Feb. 15, 2013

Decree No. 24368 of the Act

Article 2 (Scope of Small and Medium Enterprises)

(1) The term "small and medium enterprises prescribed by Presidential Decree" in the main business of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises meeting all the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the number of regular employees is at least 1,00, the number of regular employees is at least 100 billion won, the equity capital is at least 100 billion won, and the total assets are at least 100 billion

1. The number of employees who ordinarily use, capital or sales shall not exceed the size under the provisions of attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises (hereafter in this Article, referred to as the "scale of small

2. Deleted;

3. Actual independence shall meet Article 3 (1) 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises. In such cases, the ownership of stocks under Article 3 (1) 2 (b) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises shall include direct and indirect ownership (excluding indirect ownership through a collective investment scheme under the Financial Investment Services and Capital Markets Act), and in applying Article 3 (1) 2 (c) of the same Decree, it shall not meet the standards in attached Table 1 or any of the items of paragraph (1) 1 shall be deemed to meet the standards in the proviso to Article 2 (1) of the Enforcement Decree of the Restriction of Special Taxation Act other than each subparagraph.

(2) In the application of the provisions of paragraph (1), where a small or medium enterprise falls under the proviso to the part other than the said paragraph due to its expansion, etc. or comes not to fall under the small or medium enterprise as a result of its exceeding the standards under subparagraph 1 of the said paragraph, it shall be deemed the first taxable year to which the date on which such cause occurred belongs and three taxable years thereafter, and it shall be determined by the relevant taxable year after the said period (hereafter referred to as the "period of grace" in this Article) expires: Provided, That the grace period shall not apply where the small or medium enterprise is not a small or medium enterprise due to any of the following causes,

1. Merger with an enterprise other than a small or medium enterprise under the Framework Act on Small and Medium Enterprises;

2. Merger with an enterprise under the grace period;

3. Cases falling under the enterprises other than those referred to in paragraph (1) 3.

4. Where the establishment date exceeds the standards for small and medium enterprises as of the end of the taxable year within two years.

(5) In applying paragraph (1), if a company becomes a new small or medium enterprise by amending the provisions of Article 3 (1) 2, attached Tables 1 and 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall be deemed a small or medium enterprise from the taxable year in which such cause occurs to the small or medium enterprise; and if it becomes a small or medium enterprise, it shall be deemed a small

(1) Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26070, Feb. 3, 2015)

Article 2 (Scope of Small and Medium Enterprises)

(1) The term "small and medium enterprises prescribed by Presidential Decree" in the main business of Article 5 (1) of the Restriction of Special Taxation Act (hereinafter referred to as the "Act") means enterprises meeting all the following requirements (hereinafter referred to as "small and medium enterprises"): Provided, That where the total amount of assets is at least 500 billion won, such enterprises shall not be deemed small and medium enterprises:

1. Sales by type of business shall not exceed the scale prescribed in attached Table 1 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises (average sales, etc. shall be deemed sales; hereafter the same shall apply in this Article);

2. Deleted;

3. Actual independence shall meet Article 3 (1) 2 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises. In such cases, in calculating the ratio of indirect ownership of stocks, etc. under Article 3 (1) 2 (b) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, it shall be excluded herefrom, and in applying Article 3 (1) 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, an enterprise whose average sales, etc. do not meet the standards in attached Table 1 shall be deemed an enterprise whose sales sales, etc. do not meet the standards in attached Table 1.

(2) In the application of paragraph (1), where a small or medium enterprise falls under the proviso to the part other than the subparagraphs of the same paragraph due to expansion of its size, etc. or becomes no longer a small or medium enterprise due to its failure to meet the requirements under Article 3 (1) 1 or 3 (limited to the provisions of Article 3 (1) 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises) and becomes a small or medium enterprise, it shall be deemed a small or medium enterprise for the taxable year to which the date on which the first cause of such cause occurred belongs and the next three taxable years thereafter, and it shall be determined as to whether it falls under a small or medium enterprise pursuant to paragraph (1) for each taxable year after the relevant period (hereafter referred to as the "period of grace" in this Article) expires:

1. Merger with an enterprise other than a small or medium enterprise under the Framework Act on Small and Medium Enterprises;

2. Where it merges with an enterprise under a grace period;

3. If it fails to meet the requirements under paragraph (1) 3 (excluding Article 3 (1) 2 (c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises).

4. Where the establishment date exceeds the standards for small and medium enterprises as of the end of the taxable year within two years.

(1) Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 21368, Mar. 25, 2009)

Article 2 (Definitions)

The terms used in this Decree shall be defined as follows:

3. The term "related company" means a group of companies with which an individual or a company subject to external audit under Article 2 of the Act on External Audit of Stock Companies (hereinafter referred to as "company subject to external audit") is in a parent-subsidiary relationship under Article 3-2: Provided, That a stock-listed corporation under Article 9 (15) of the Financial Investment Services and Capital Markets Act, which is obligated to prepare consolidated financial statements pursuant to subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies and Article 1-3 of the Enforcement Decree of the same Act, or which is included in consolidated financial statements, shall be deemed a group of companies in a parent-subsidiary relationship under Article 3-

Article 3 (Scope of Small and Medium Enterprises)

Small and medium enterprises under Article 2 (1) of the Framework Act on Small and Medium Enterprises (hereinafter referred to as the "Act") shall meet all of the following standards:

1. A company whose type of business and the number of regular workers, capital or sales of which meet the criteria set forth in attached Table 1: Provided, That any of the following enterprises shall be excluded herefrom:

(a) An enterprise with at least 1,00 full-time workers;

(b) A corporation whose total assets (referring to the total assets indicated on the balance sheet as of the end of the immediately preceding business year) are 500 billion

(c) An enterprise whose equity capital is at least five billion won.

(d) An enterprise whose average sales during the immediately preceding three business years are not less than 1,50 billion won.

2. An enterprise whose substantial independence of its ownership and management falls under all of the following items:

(c) In cases of an enterprise belonging to an affiliated company, the number of regular workers, capital stock, sales amount, equity capital or total assets (hereinafter referred to as "regular workers, etc.") calculated under Article 7-2 shall not exceed the standards under subparagraph 1.

Article 3-2 (Parent-subsidiary Relationship)

(1) The term "parent or subsidiary relationship" means, where an enterprise or individual controls another enterprise as at the end of the pertinent business year as described in any of the following subparagraphs, the relationship between the enterprise or individual (hereinafter referred to as a "parent company") and the other company (hereinafter referred to as a "subsidiary company"):

1. Where a parent company or a person in a relationship with a parent company owns 50/100 or more of the total number of outstanding voting stocks or total amount of investment (hereinafter referred to as "stocks, etc.") of the subsidiary company, alone or jointly, by any of the following persons:

(a) A person who holds not less than 30/100 of voting stocks, etc. of a parent company and is the largest shareholder or the largest shareholder of the parent company (hereinafter referred to as the "major investor");

(b) A relative (referring to the spouse (including a person in a de facto marital relationship), relative by blood within the eighth degree, and relative by marriage within the fourth degree) of a person falling under item (a);

Article 7-2 (Calculation of Number of Workers, etc. of Related Companies)

(1) The calculation of the number of regular workers, etc. of parent companies and subsidiary companies belonging to related companies shall be as specified in attached Table 2.

(2) Where a parent company and subsidiary company under paragraph (1) own stocks with mutual voting rights, the larger ratio of the owned voting stocks shall be deemed the ratio owned by the relevant parent company.

(3) The number of regular workers, etc. under paragraph (1) shall be the number of regular workers, etc. of parent companies and subordinate companies in the immediately preceding business year belonging to the related company.

Presidential Decree No. 21368, Mar. 25, 2009

Article 1 (Enforcement Date)

This Decree shall enter into force on March 27, 2009: Provided, That the following amended provisions shall enter into force on the date specified in the following subparagraphs, respectively:

1. The amended provisions of subparagraph 3 of Article 2, subparagraph 2 (c) of Article 3, Article 3-2, Article 7-2, and attached Table 2: January 1, 201;

2. The amended provisions of Article 3 subparagraph 1 (c) and (d) and subparagraph 3 of Article 9: January 1, 2012;

(1) The former Enforcement Decree of the Framework Act on Small and Medium Enterprises (Amended by Presidential Decree No. 23412, Dec. 28, 2011; Presidential Decree No. 23527, Jan. 25, 2012)

Article 2 (Definitions)

The terms used in this Decree shall be defined as follows:

3. The term "related corporation" means a group of companies with which an enterprise subject to external audit under Article 2 of the Act on External Audit of Stock Companies (hereinafter referred to as "company subject to external audit") is in a parent-subsidiary relationship by controlling another domestic company pursuant to Article 3-2;

Article 3 (Scope of Small and Medium Enterprises)

(1) Small and medium enterprises under Article 2 (1) 1 of the Framework Act on Small and Medium Enterprises (hereinafter referred to as the "Act") shall meet all of the following standards:

1. A company whose main type of business and the number of regular workers, capital, or sales meet the criteria set forth in attached Table 1: Provided, That any of the following enterprises shall be excluded herefrom:

(a) An enterprise with at least 1,00 full-time workers;

(b) Enterprises whose total assets are not less than five hundred billion won.

(c) Enterprises whose equity capital is not less than one hundred billion won.

(d) An enterprise whose average sales during the immediately preceding three business years are not less than 1,50 billion won.

2. An enterprise whose substantial independence from its ownership and management does not fall under any of the following items:

(c) An enterprise whose number of regular workers, capital, sales, equity capital or total assets (hereinafter referred to as "regular workers, etc.") calculated pursuant to Article 7-4 does not meet the standards referred to in attached Table 1 or which falls under any item of paragraph (1) 1 in cases of an enterprise belonging to the related enterprise;

Article 3-2 (Parent-subsidiary Relationship)

(1) "Parent-subsidiary relationship" means a relationship between a company and another domestic company (hereinafter referred to as a "parent company") as at the end of the immediately preceding business year, if the company controls another domestic company as at the end of the immediately preceding business year as if it falls under any of the following subparagraphs: Provided, That a stock-listed corporation under Article 9 (15) of the Financial Investment Services and Capital Markets Act that is obligated to prepare consolidated financial statements pursuant to subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies and Article 1-3 of the Enforcement Decree of the same Act, and a domestic company included in the consolidated financial statements shall be deemed a parent company

1. Where a parent company independently or jointly with a person who falls under any of the following items, owns at least 30 percent of the stocks, etc. of the subsidiary company, and is the largest investor:

(a) A person who owns not less than 30/100 of the stocks, etc. of a parent company solely or jointly with relatives and is the largest investor;

(b) Relatives of individuals falling under item (a);

Article 7-4 (Calculation of Number of Workers, etc. of Related Enterprises)

(1) The calculation of the number of regular workers, etc. of a parent company and subsidiary company belonging to related enterprises shall be as specified in attached Table 2

(2) Where a parent company and subsidiary company under paragraph (1) own stocks with mutual voting rights, the larger ratio of the owned voting stocks shall be deemed the ratio owned by the relevant parent company.

(3) The number of regular workers, etc. referred to in paragraph (1) shall be the number of regular workers, etc. of parent companies and subordinate companies in the business year immediately preceding the business year belonging

Finally,