In the absence of a disparity between name and substance, the income shall be deemed to have accrued to the person to whom the income belongs.

In the absence of a disparity between the name and the substance, the income shall be deemed to have accrued to the nominal owner of the income. This principle shall be deemed to have been applied to the interpretation and application of a tax treaty having the same effect as the law, unless there is a special provision

Article 14(1) of the Framework Act on National Taxes

2015Guhap67991 Collection and revocation of disposition of corporate tax

○ Stock Company

○ Head of tax office

on 19, 2016

November 11, 2016

1. The Defendant’s imposition disposition of KRW 0,00,000 as corporate tax for the business year 201 against the Plaintiff and imposition of KRW 00,000,000 as corporate tax for the business year 200****.* The imposition disposition of KRW 00,00,000 as corporate tax for the business year 201 and the imposition disposition of KRW 0,000,000 as corporate tax for the business year 201 and the imposition disposition of KRW 00,000 as additional tax shall be revoked

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. AAA, L.L.C. (hereinafter referred to as the "A") is 20*.*.*. United States of America (hereinafter referred to as the "U.S.") and BB (hereinafter referred to as the "B") is a general company established in the Republic of Ireland (hereinafter referred to as the "A"). AA owns 100% of the shares of CCC Limited (hereinafter referred to as the "CCC") in the Republic of CCC, a member state of the European Union, and CCC owns 9.9% of the shares of BB.

(b) AA entered into a reuse contract with DD, a limited partnership company of the United States, and EE, a limited liability company of the United States, with which it has advanced technology-related patent rights, such as AA**.*.B, with DD, a limited partnership company of the United States, and EE, a limited liability company of the United States.*.B.

C. The Plaintiff entered into a contract for the use of the above patent right (hereinafter referred to as the “instant contract”) with the Plaintiff**.B, and paid the royalty of KRW 00,000,000 (hereinafter referred to as the “instant royalty”) to the Plaintiff **. *. *. *. *. *. *. *. *. *. *. *. *.B, the royalty of KRW 00,000 has been paid to the Republic of Korea and the Republic of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Income and Transfer Income (hereinafter referred to as the “instant royalty”) pursuant to Article 12(1) of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Income and Transfer Income between the Republic of Korea and the Republic of

D. In applying Article 12(1) of the Korea-U.S. Tax Convention (amended by Act No. 11607, Jan. 1, 2013); applying Article 98(1) of the former Corporate Tax Act and Article 14(1) 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 referred to as the “Korea-U.S. Tax Convention”), the Defendant is liable to withhold 15% corporate tax on the instant royalty from the Plaintiff under the premise that the beneficial owner of the instant royalty is not BB; *. *. 1. 200,000,000,000 corporate tax and corporate tax for the business year 20,000,000,000,000,000 won and additional tax for each business year (hereinafter referred to as the “Korea-U.S. Tax Convention”).

E. The plaintiff is dissatisfied with this and filed a petition with the Tax Tribunal for an adjudication on the disposition of this case*. The Tax Tribunal has made a decision to dismiss the plaintiff's petition*.

[Reasons for Recognition] No dispute exists, Gap evidence Nos. 2 through 5, Eul evidence No. 1 (including paper numbers) and the purport of the whole pleadings.

2. Whether the disposition is lawful;

A. The plaintiff's assertion

1) BB is the beneficial owner of the instant royalty, and thus, is not obligated to withhold corporate tax on the instant royalty pursuant to Article 12(1) of the Korea-ASEAN Tax Convention to the Plaintiff.

Therefore, the instant disposition should be revoked as it is unlawful on a different premise.

2) Even if not, the instant user fee is a fee for patent rights of U.S. corporations, etc. which are not registered in Korea, and thus, the Plaintiff is not obligated to withhold corporate tax on the instant user fee pursuant to Article 28 of the Adjustment of International Taxes Act (hereinafter “International Taxes Adjustment Act”) and Article 6(3) of the Korea-U.S. Tax Convention. Accordingly, the instant disposition on a different premise should be revoked as it is unlawful.

3) Meanwhile, the Plaintiff, as the beneficial owner of the instant royalty, believed that BB did not have an obligation to withhold corporate tax on the instant royalty pursuant to Article 12(1) of the Korea-U.S. Tax Convention, and there were justifiable grounds therefor. Accordingly, the imposition of additional tax on the instant royalty should be revoked on the ground that each of the instant disposition was unlawful.

B. Relevant statutes

Attached Form is as shown in the attached Form.

C. Determination on the first argument

1) Article 12(1) of the Korea-U.S. Tax Convention provides that "the usage fees derived from sources in a Contracting State acquired by a resident of the other Contracting State and beneficially owned shall be imposed only in that other Contracting State." Meanwhile, Article 14(1) of the Framework Act on National Taxes provides that "if the ownership of income, profit, property, act or transaction, which is subject to taxation, is merely nominal and there is a separate person to whom such income, profit, or transaction belongs, the person to whom such income, profit, property, or transaction belongs shall be liable for tax payment." However, the principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes, if there is a separate person to whom such income, profit, property, or transaction belongs, unlike the nominal person, should be the person to whom such income, or the person to whom such income, belongs is not the person to whom such income, on the ground of form or appearance, is not the person to whom such income, and where such disparity between name and substance arises from the purpose of tax evasion, the principle should be interpreted and applied to 14.

2) In full view of the respective descriptions and arguments set forth in Gap evidence Nos. 7 through 11, 16, 17, 19 through 23, 26 through 28, 40, 62, 65 through 70, and Eul evidence Nos. 15 (including additional numbers), the following facts may be acknowledged.

A) BB was limited to 2***.*. paid-in capital*.20 square meters, but prior to the conclusion of the instant contract, 2**.*.* A. A. A. around the time, its capital was already increased to 00,000 square meters.

(B) B) AB used office ( Address: R*************************************************************** last month rent 1,*********** last month rent 1,******** last month rent 1,**** last month rent *) located in Ireland 000, as a new office ( Address******,*****) located in Ireland 2** year from the date of the lease to the place of business.

(C) Directors of B******.****.**.**.*.*.*.*..*. 4 as of each criterion, 3, 2**.*.*.*. *. * until the date of its establishment****************. *. **. *. **. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. *. * *. *. *. *. * *. *. *. * *. *. *. *. *. *. *.

D) After the incorporation of BB 2***.* until *. Sales has been 000,000,000 dollars and net income after taxation has been ever been ever.

sale from 00,000,000***.* 2*. *. *. * 00,000 to *. *. *. 000,000 to *. 000,000 to *. 000,000 to *. ** *. * * 2* from *. *. * * * * 1.00,000 to * 1.00,000 to 1. * The sales have been made * * 00,000 to 0,000 to 2. * * *. * * * * * * * * * * 1.00,000 to * * 1. * 1.000 to 1. * * 1.000 after 1. * * by filing corporate tax return and payment* * *. *. *.

(e) B) AB entered into a patent license agreement similar to the instant contract with 2*******.**** Indiexed, 2**** indiexed, 2*** indiexed, 2*.** inception, 2** inception, 2*** inception, **.*.**.** in the Federal Republic of Germany corporate ********* in T**** in Korea, and further in Korea as well as in 2***.*.* in *.*. *. *. * in semiconductor chain GG Co., Ltd., and 2**. *. *. * in mobile phone manufacturing * in the same way as mobile phone chain Co., Ltd.

F) Meanwhile, according to the reuse contract between AA and B, BB should pay 85% out of them to A, if it is below $100,000 on the basis of net income for one year in each year, 90% out of them, 20,000 to USD 200,000,000 to USD 300,000,000, and 95% of them if it is above USD 300,000,000.

3) In full view of BB’s property, organization, human and material facilities, business activities, etc. revealed by the facts as seen earlier, BB is an independent entity and a person who actually controls and manages the instant user fee with business objectives, and is deemed to be a beneficial owner as prescribed by Article 12(1) of the Korea-Japan Tax Convention.

The defendant asserts that BB is merely a so-called "Domination company" of the European Union and therefore cannot be seen as a beneficial owner of the royalty of this case on the ground that BB pays most of its net income for 1 year to AB. However, the main business activities of BB do not expand the facilities by investing capital and manufacturing goods, but merely constitute a contract for use of patent rights permitted by a corporation other than the United States and AA to use the patent right, and thus there is no particular motive for reservation of net income in BB. The net income of BB remains enormous, and the remainder of net income except the net income paid to AA is significant. From AA’s perspective, BB is located in the European Union and is located in the European Union, and it is easy to enter into a contract with the company and patent rights in the European Union, and the rate of corporate tax in Ireland is lower than the United States, and it is possible to enjoy the benefits of deferred taxation by adjusting the timing for payment of royalties that can be paid from BB, and there is no room for the defendant to conclude that BB is not a beneficial owner of this case.

D. Sub-committee

Therefore, without examining the remaining arguments of the Plaintiff, the instant disposition should be revoked as it is unlawful.

3. Conclusion

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