Seocho 2015west 1484 (Law No. 18, 2015)

Where a corporation under the grace period for small and medium enterprises falls under related enterprises, whether it is subject to exclusion under the Restriction of Special Taxation Act

Where an enterprise which has already been subject to the grace period for small and medium enterprises falls under a related company, it shall not lose the grace period that has already been subject to the grace period, and shall be small and medium enterprises until

Article 2 of the Enforcement Decree of the Restriction of Special Taxation Act

2015Guhap7210 Revocation of Disposition of Imposing Corporate Tax

00 Sashion Co.

00. Head of tax office

November 27, 2015

on October 27, 2016

1. Imposition of corporate tax for the year 2013 on December 1, 2014 by the Defendant on the Plaintiff

The disposition shall be revoked.

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

1. Details of the disposition;

A. The Plaintiff is a juristic person established on November 4, 1993 for the purpose of manufacturing and wholesale business of women on November 4, 1993 2010

The sales of KRW 00 billion in the business year, KRW 00 in the business year 201, KRW 00 in the business year 201, KRW 000 in the business year 2012, and KRW 00 in the business year 2013 have been achieved. The Plaintiff’s sales revenue did not constitute a small or medium enterprise in excess of KRW 100 in the business year 2010 for the first time, but the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; hereinafter “former Enforcement Decree of the Restriction of Special Taxation Act”) applied the grace period from 2010 to 2013 business years.

B. Meanwhile, the Enforcement Decree of the Restriction of Special Taxation Act applies mutatis mutandis to the requirements for small and medium enterprises.

The Enforcement Decree of the Framework Act on Small and Medium Enterprises is amended by Presidential Decree No. 21368 on March 25, 2009.

from January 1, 2011 to January 1, 2011, item (c) as the requirements for substantial independence of small and medium enterprises

I provided that companies belonging to "affiliated companies" meet the criteria of size of small and medium enterprises.

Since then, the former Enforcement Decree of the Restriction of Special Taxation Act was amended by Presidential Decree No. 22583 on December 30, 2010:

Article 3(2) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises under the former part of Article 2(1)3 and the proviso of Article 2(2)

Criteria for exclusion of the aggregate, etc. of sales of affiliated companies from small and medium enterprises by adopting the standards under item (c).

(1) In the case of meeting the exclusion criteria, the exclusion criteria shall not be applied to the small and medium enterprise grace period which has been applied for the year concerned and the subsequent three years, and Article 1 of the Addenda Article 2(1)3 of the Addenda.

The amended regulations were enforced from January 1, 2012.

C. The Plaintiff’s representative director’s 000 shares of the Plaintiff’s corporation (30%) on June 26, 2013

The transfer was made to 000(hereinafter referred to as '00').

D. The Plaintiff reported corporate tax for the business year 2013 to the Defendant and is in the grace period for small and medium enterprises.

The former Restriction of Special Taxation Act (amended by Act No. 12153, Jan. 1, 2014)

A tax amount to which special tax reduction or exemption and tax credit for research and human resources development expenses are applied pursuant to Articles 7 and 10

The decision was made.

E. On December 1, 2014, the Defendant issued a notice of correction and notification of KRW 000 of the corporate tax for 2013, when the Plaintiff and 000 were affiliated companies and when the sales of two corporations are combined, exceeding KRW 00,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 under Article 2(2) proviso of the former Enforcement Decree of the Restriction of

F. The Plaintiff dissatisfied with the instant disposition and brought an appeal with the Tax Tribunal on February 26, 2015.

B. On June 18, 2015, a decision of dismissal was issued.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, Eul evidence 1 and 2, the purport of the whole pleadings

2. Legitimate grounds for the instant disposition

A. The plaintiff's assertion

1) The Plaintiff had already caused the reasons that the annual sales revenue in 2010 exceeded KRW 100 billion and did not constitute a small or medium enterprise. However, the Plaintiff did not constitute a small or medium enterprise only with the introduction of the standards for related companies under the Enforcement Decree of the Framework Act on Small and Medium Enterprises and the Enforcement Decree of the Restriction of Special Taxation Act. Thus, the Plaintiff’s disposition of this case, which was not subject to the grace period on a different premise, does not constitute “a case where a small or medium enterprise becomes ineligible for a small or medium enterprise for any of the following reasons” under the proviso to Article 2(2) of the Enforcement Decree of the Restriction of Special Taxation Act.

2) Whether a company was established in a specific business year should be determined on the basis of the share relationship as of the end of the immediately preceding business year. The Plaintiff’s representative director transferred the Plaintiff’s shares from June 26, 2013 to June 26, 2013, and the Plaintiff’s share relationship with the Plaintiff in the corporate tax assessment process for the business year 2013, based on only the share relationship between the Plaintiff in 2012 and 000, and thus, the Plaintiff and the Plaintiff cannot be deemed as a related company. Nevertheless, on a different premise, the Defendant’s disposition that deemed that the Plaintiff and 000 constituted a related company in the year 2013 is unlawful

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) Determination on the first argument

Article 2 (2) of the amended 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 of paragraph (1) due to expansion of its size, etc. or fails to meet the standards for size of small or medium enterprise under subparagraph 1, the first taxable year to which the date on which such cause occurred belongs and the next three taxable years shall be seen as small or medium enterprise, and the proviso provides that the grace period shall not apply to cases where it does not fall under a small or medium enterprise due to a cause not meeting the requirements for substantial independence under subparagraph 3 of paragraph (1).

In light of the following circumstances recognized by the above facts and the contents and form of the relevant statutes, it is reasonable to view that the Plaintiff’s existing grace period granted to the Plaintiff is not invalid, even if the Plaintiff is not a small or medium enterprise under Article 2(1) of the Enforcement Decree of the Restriction of Special Taxation Act by introducing the related company standards as the requirements for small or medium enterprises under the Enforcement Decree of the Framework Act on Small and Medium Enterprises and the amended Enforcement Decree of the Restriction of Special Taxation Act.

(1) Article 2 (2) of the former Enforcement Decree of the Restriction of Special Taxation Act shall apply only once for the first time when a small or medium enterprise comes not to fall under a small or medium enterprise as it falls under the proviso to the part other than each subparagraph of the same paragraph due to expansion of its size or exceeds the standards

The taxable year including the day on which the cause occurred and the following three taxable years shall be regarded as a small and medium enterprise, and the determination of whether it falls under a small and medium enterprise according to the provisions of paragraph (1) for each taxable year after the said period expires. According to the language and text of the above provision, if a small and medium enterprise ceases to fall under a small and medium enterprise due to the expansion of its size, etc., it is reasonable to interpret it as a small and medium enterprise without undergoing a separate process of determining whether it falls under a small

② In addition, the language and text of the relevant statutes and Article 2(2)3 of the Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 26070, Feb. 3, 2015) excludes cases where a small or medium enterprise is not a small or medium enterprise in excess of the standards for related companies, the issue of whether to grant a grace period is the legislative policy. Article 3 subparag. 2(c) of the Enforcement Decree of the Framework Act on Small and Medium Enterprises (amended by Presidential Decree No. 21368, Mar. 25, 2009) of the Enforcement Decree of the Restriction of Special Taxation (amended by Presidential Decree No. 21368) is the issue of whether a small or medium enterprise is not a small or medium enterprise subject to the grace period under the former provisions as of the enforcement Decree of Article 2 of the Addenda (amended by Presidential Decree No. 26070, Dec. 31, 2011).

③ Furthermore, the latter part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act explicitly states that the grace period becomes null and void only in cases where a company under a grace period fails to meet the requirements for a small and medium enterprise due to its merger with another company under a grace period. In light of such provision, the former part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act is difficult to regard the provision of the former part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act as a provision for the invalidation of a grace period already granted to a company under a grace period like the Plaintiff (i.e., the former part of Article 2(2) proviso of the Enforcement Decree of the Restriction of Special Taxation Act as a provision for the invalidation of a grace period, since it is unreasonable to interpret that the effect of a grace period immediately after the lapse of a grace period without any express provision for the exclusion from the effect of a grace period from time. In this regard, it is difficult to interpret the former part of Article 2(2) proviso of the Restriction of Special Taxation Act as a grace period.

2) Sub-committee

As long as the Plaintiff’s first argument is accepted and the grace period is determined to apply to the Plaintiff, the Plaintiff’s remainder of the argument is no longer determined.

3. Conclusion

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