The early 2014 middle 1201

It is necessary to calculate the limit of foreign tax credit for the amount obtained by subtracting direct and indirect expenses from the total amount of foreign corporation fees received from the foreign corporation as income from overseas sources.

It is necessary to calculate the limit of foreign tax credit for the amount obtained by subtracting direct and indirect expenses from the total amount of foreign corporation fees received from the foreign corporation as income from overseas sources.

Article 57 (2) 1 of the Corporate Tax Act

2015Guhap272 Revocation of Disposition of Imposing Corporate Tax

Co., Ltd. 400

Head of the tax office

October 20, 2015

November 24, 2015

1. All of the plaintiff's claims are dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Cheong-gu Office

Corporate tax of the business year 2008, July 2, 2012, the Defendant against the Plaintiff KRW 412,869,780 (additional tax)

(including) The imposition of corporate tax for the business year 2010 and the imposition of tax of KRW 3,893,558,260 (including additional tax) and the imposition of KRW 2,035,56,990 (including additional tax) of the corporate tax for the business year 2009 July 11, 2012 shall be revoked in excess of KRW 172,783,880.

1. Details of the disposition;

A. The Plaintiff is a company that operates an online game portal site avoid 0, develops and sells games, etc.

B. The Plaintiff’s game distribution and sales business: (a) the Plaintiff supplied the game developed by the game developer to the domestic and foreign game distribution company and received the price (hereinafter “user fee”) from the domestic and foreign game distribution company; and (b) the game developer pays to the game developer an amount equivalent to a certain percentage of the user fee, which is the game sales revenue, as a fee (hereinafter “payment fee”).

C. The Plaintiff supplied a game to a foreign game distribution company directly in the Republic of Korea without having a separate foreign permanent establishment for the purpose of selling the game. The Plaintiff paid the tax to a foreign game distribution company in the manner that the foreign game distribution company pays the difference calculated under the tax laws and regulations of the pertinent country (i.e., the amount of corporate tax withheld x the rate of tax withheld x the rate of tax withheld x the rate of tax withheld x the

D. Meanwhile, in the event that the Plaintiff sold the game to the game distribution company located in China, the Plaintiff paid the amount calculated by multiplying the usage fee paid by the Chinese game distribution company by a certain ratio as the business income to China.

E. The Plaintiff’s fee paid for the game distribution business as above during the pertinent business year.

It has been included in gross income, and the payment fee as sales cost, and the sales tax as sales management fee has been included in each loss.

F. When filing a corporate tax return for the business year 2007 or 2010, the Plaintiff calculated a credit limit for foreign tax amount on the total amount of royalties paid by a foreign game distribution company, based on the foreign source income, when deducting the paid foreign tax amount under Article 57(1) of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same).

G. The defendant should consider the difference between the plaintiff's total fee paid by the foreign game distribution company and the payment fee, which is related to the fee, and the sales tax, as the income from overseas sources.

The amount of foreign tax paid to a foreign country by calculating a credit limit for total foreign income;

B. The court determined that the Plaintiff was excessively deducted, and the corporate tax of 412,869,780 won for the business year of 2008 and the corporate tax of 3,893,558,260 won for the business year of 2010 (including additional tax)

B) On July 11, 2012, the corporate tax of 2,035,556,990 was corrected and notified respectively.

In the business year 2007, July 2, 2012, corporate tax was corrected and notified, but October 8, 2015.

The calculation error was revoked on the ground of calculation error).

H. On October 15, 2012, the Plaintiff: (a) to the director of the Central Regional Tax Office of China for the pertinent business year 2008 corporate tax and 2010

In the disposition of imposition of corporate tax for a business year and the disposition of imposition of corporate tax for a business year 2009, the part exceeding 172,783,880 won, which is unrelated to the credit limit of foreign tax amount (hereinafter referred to as "the disposition of this case"). However, the Deputy Director of the Central Tax Office dismissed the above application on October 18, 2013. On January 15, 2014, the plaintiff filed an appeal with the Tax Tribunal for revocation of the disposition of this case, but the Tax Tribunal decided to dismiss the above claim on November 7, 2014.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 8, entry of Eul evidence 1, purport of whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

In the case of a corporation with no overseas permanent establishment such as the Plaintiff, the amount of withholding tax calculated by applying the total amount of fees to be paid by a foreign game distribution company as the tax base (=use fee 】 withholding tax rate) to the corporate tax, while in the case of a corporation with an overseas permanent establishment, corporate tax is paid with the amount of income

Therefore, in calculating a credit limit for foreign tax, royalties which are income amounts subject to foreign withholding, unlike in the case where a foreign permanent establishment exists in a foreign country;

The Defendant’s disposition that imposed corporate tax by calculating the amount calculated by deducting payment fees and operating expenses from user fees as the amount of income generated from overseas sources is unlawful.

B. Determination

Article 57 (1) 1 of the former Corporate Tax Act (amended by Act No. 10423, Dec. 30, 2010; hereinafter the same shall apply) where the tax base of a domestic corporation for each business year includes income generated from sources in foreign countries, and the amount of foreign corporate tax paid or payable on such income generated from foreign countries (hereinafter referred to as "foreign corporate tax") exists, the amount of foreign corporate tax shall be limited to the amount calculated by multiplying the corporate tax for the relevant business year by the ratio of income generated from foreign countries to

It provides that corporate tax can be deducted from corporate tax for the relevant business year.

As such, Article 57(1)1 of the former Corporate Tax Act provides that the amount of foreign corporate tax may be deducted from the amount of corporate tax for the pertinent business year in order to adjust international double taxation, setting the credit limit as “amount calculated by multiplying the amount of corporate tax for the pertinent business year by the ratio of income generated from overseas to the tax base for the pertinent business year,” and allowing the deduction of the amount of foreign corporate tax only within the scope of the amount of corporate tax to be paid to the Republic of Korea on income generated from overseas sources. If the source country provides for a higher corporate tax rate than that of the Republic of Korea in the country where income generated from overseas sources, the amount of foreign corporate

because it is a result of requiring the payment of foreign corporate tax as part of the corporate tax to be paid.

The purpose is to prevent it.

In light of the language and purport of Article 57(1)1 of the former Corporate Tax Act, and Article 14(1) of the former Corporate Tax Act provides that income for each business year of a domestic corporation shall be the amount calculated by deducting the total amount of deductible expenses belonging to the business year from the total amount of gross income belonging to the business year without asking whether the source is domestic or foreign, and from the total amount of gross income belonging to the business year, the amount of income generated from overseas shall be calculated by deducting the total amount of deductible expenses related thereto from the total amount of gross income accrued overseas belonging to the business year of the domestic corporation pursuant to Article 57(1)1 of the former Corporate Tax Act when calculating the limit of foreign corporate tax amount pursuant to Article 57(1)1 of the former Corporate Tax Act. The same applies to cases where a domestic corporation bears corporate tax calculated by multiplying the amount of income generated from overseas by a specified withholding tax rate on the income generated from overseas because it did not have a permanent establishment in the source

In light of the above legal principles, even if the Plaintiff, who did not have a health stand or a foreign permanent establishment, bears corporate tax calculated by multiplying the royalty, which is the revenue amount, from a foreign country, by a certain withholding tax rate, on the royalty that the Plaintiff acquired by selling the game in a foreign game distribution company, the foreign corporate tax amount pursuant to Article 57 (1) 1 of the former Corporate Tax Act shall be calculated from the royalty, which is the revenue amount, minus the relevant expenses.

In the event that the Plaintiff sold a game in a foreign game distribution company, the amount of money equivalent to a certain percentage of the usage fees paid by the game distribution company was paid to the game developer as the payment fee, and in the case of Chinese sales, the amount calculated by multiplying the usage fee by a certain percentage was paid as the business income. Therefore, the payment fee and the business tax constitute the expenses related to the payment, which are paid in direct proportion to the usage fee, which is the revenue amount.

In addition, even if the Plaintiff, who did not have a foreign permanent establishment, paid the withholding tax calculated based on the total amount of the usage fees as corporate tax on the usage fees received by the foreign game distribution company, as corporate tax, when calculating the limit of deduction of foreign corporate tax pursuant to Article 57(1)1 of the former Corporate Tax Act, the amount of foreign source income should be calculated by deducting the payment fees and business taxes related to

Therefore, the Defendant’s disposition imposing corporate tax is legitimate by calculating the difference between the Plaintiff’s total fee paid from a foreign game distribution company and the payment fee, which is related to the Plaintiff’s expense, as the amount of income generated from overseas sources.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit. It is so decided as per Disposition.