Hudco Partners Korea Ltd. and 8 others (Law Firm Rate, Attorneys Kang Han-hun et al., Counsel for the plaintiff-appellant)

The Head of the District Tax Office (Law Firm, Attorneys Soh Ho-ho et al., Counsel for the plaintiff-appellant)

December 7, 2012

1. The Defendant’s disposition of imposition of corporate tax on July 7, 2008 to the Plaintiff Hudco Partners Korea Ltd. and the remaining Plaintiffs, as indicated in attached Table 2 “The details of corporate tax”, shall be revoked in all the disposition of imposition of corporate tax on February 13, 2012.

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 plaintiffs

(1) Plaintiff Hudco Partners Korea Ltd. (hereinafter “Hudco Partnership”) is a juristic person established under the laws of Bada to provide Lone Star Fund’s subsidiaries in Korea with investment opportunities. Plaintiff Lone Star Fund (Lone Star Fund IV, L.P.; hereinafter “Lone Star”) is a limited partnership established under the laws of the State of Deteawa, in which U.S. investors in the United States invest as limited partners, and Plaintiff Lone Star Fund (Lone Star Fund IV, L.P.; hereinafter “Lone Star”) is a limited partnership established under the laws of the State of Deteawa, in which the U.S. investors in the United States invest as limited partners. Plaintiff Lone Star Fund (Lone Star Limited Partnership), Lone Star Fund (Buuda, L.P.; hereinafter “Lone Star”) is an investment limited partnership (hereinafter “foreign limited partnership”) in which investors in the Republic of Korea invested in Korea.

(2) The Plaintiffs’ general partners (hereinafter referred to as “GP”) are Lone Star Partnership Partners IV (Loneoneone Star Partnership IV (Beruda); hereinafter referred to as “lsP”). LSP’s GP is Loneoneone Star Investment Co., Ltd., Loneoneone Star Investment Co., Ltd., Ltd (Beruda; hereinafter referred to as “lsMC”) in which Nonparty 1 (English name omitted) holds 100% equity interest.

B. The plaintiffs' investment structure

(1) The Plaintiffs jointly contributed funds to the foreign exchange bank, extreme Construction Co., Ltd. (hereinafter referred to as the “Sk Construction”), and Lone Star Lease Co., Ltd. (hereinafter referred to as the “Sk”) for the purpose of investing in each issued stocks of the Korea Exchange Bank, the Korea Exchange Bank, and the Korea Exchange Holdings L.P. (hereinafter referred to as the “KHL”), the Korea Exchange Holdings L. L.S. L.C. (hereinafter referred to as the “KS”), and the Korea Open Holdings L.P. (hereinafter referred to as the “KS”), the Korea Holdings L.C. (hereinafter referred to as the “K”) established in the Belgium, and again, in the Belgium (hereinafter referred to as the “Belgium”) under the Act.

(2) Plaintiff Hudco Partners, Lone Star U.S., Lone Star Community, Lone Star L.P. (hereinafter “Lone Star Korea”) and Lone Star Global Holdings (hereinafter “Lone Star Korea”) established by Luxembourg’s laws in succession through Lone Star Global Holdings (Loneone L.S.) and KHL (hereinafter “LSH”) and KHL, the rest of the Plaintiffs were the limited partnership established in Luxembourg countries, and the other Plaintiffs acquired the shares of Lone Star Korea’s Lone Star Ltd. (hereinafter “Lone L.C. 90% shares”) established by Luxembourg’s law, which are corporations incorporated by Luxembourg’s laws.

(3) Plaintiff Hudco partner, Lone Star U.S, Lone Star Community, and Lone Star Community, through KDH and LSGH, acquired the entire equity share of Lone Star Capital Investment S.L. Loneone L. L. L. L. L. L. L.C. (hereinafter “L.CI”). Of KH I and KH II’s equity, 9.9% of the equity share of L.C. L. and 0.1% of the remainder of L.C. were owned by L.C. respectively.

(4) Plaintiff Hudco partner, Lone Star U.S., Lone Star Community, and Lone Star Community acquired the entire equity shares of Lls through SH and LSGH. Of H and LSH equity, 9.9% of LCR and the remainder0.1% of the equity shares were owned by LCR, respectively.

(c) Income generated and tax payment;

(1) As to the foreign exchange bank

(A) LH acquired KRW 41,6750,00 from October 2003 to September 2005 KRW 2,154,848,454,930 of the shares of the foreign exchange bank, and received dividends from the foreign exchange bank around April 2007. At the time, the foreign exchange bank at the time paid KRW 416.75 million out of the dividends pursuant to Article 10 of the Convention between the Republic of Korea and Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Korea-Belgium Tax Treaty”).

(B) Since June 22, 2007, LH sold 87,707,328 shares out of the shares of institutional investors, etc. to KRW 1,192,819,660,800, through the Seoul branch of LH on June 22, 2007. At that time, the Seoul branch of LH-based securities at the time paid KRW 131,210,162,680 out of the above sales amount.

(2) As to extreme construction

(A) From May 2003 to December 2004, KH acquired 26,265,078 shares of Kudong Construction, and paid 23,404,194,050 shares as dividends in 2004, and 19,69,126,450 won in 205, and 26,265,395,950 won in 2006. At the same time, KH withheld paid 15% out of dividends pursuant to Article 10 of the Korea-Belgium Tax Treaty.

(B) Since then, on August 21, 2007, KH sold all shares in 660 billion won in the eroding Holdings Co., Ltd., but did not separately pay taxes, claiming the application of the Korea-Belgium Tax Treaty.

(3) As to Lone Star Lease

(A) H and LSH acquired 7,544,595 shares of Lone Star from November 2002 to December 2005 KRW 58,96,862,070, and received dividends of KRW 5,658,446,250 in 2006. At the time, Lone Star Lease withheld and paid KRW 848,76,920 equivalent to 15% of the dividends pursuant to Article 10 of the Korea-Belgium Tax Treaty.

(B) On August 9, 2007, H and ls sold all the shares owned in Filisung Co., Ltd. (hereinafter “ Filicy”) at KRW 294,46,366,941, but did not separately pay taxes by asserting the application of the Korea-Belgium Tax Treaty.

D. Defendant’s imposition and rectification of income tax and corporate tax

(1) After conducting a tax investigation on the Plaintiffs from August 22, 2007 to May 23, 2008, the director of the Seoul Regional Tax Office: (a) the actual owner of dividend income (hereinafter “instant dividend income”) and capital gains from stocks such as foreign exchange banks (hereinafter “instant dividend income”); and (b) the Plaintiffs are not intermediate holding companies in Belgium; and (c) the Plaintiffs acquired the instant income by carrying out business activities with a permanent establishment in Korea; and (d) the Plaintiffs were notified the Defendant of imposing tax on the instant income.

(2) Accordingly, on July 7, 2008, the Defendant merely owns LK, KH, H, H, and LSH on the stockholders’ list of stocks, such as a foreign exchange bank, and merely is a Doing Company established for the purpose of tax avoidance. The actual partner of the stocks is the Plaintiffs, who are its superior investors. The Plaintiff Lone Star U.S. established under the U.S. law has the “permanent establishment” under Article 9 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 Promotion of International Trade and Investment (hereinafter “Korea-U.S. Tax Treaty”). The rest of the Plaintiffs had the “domestic place of business” under Article 91(1) of the former Corporate Tax Act (amended by Act No. 9267 of Dec. 26, 2008) or Article 120 of the Income Tax Act, and the Plaintiffs determined the total corporate tax amount of the Plaintiff’s income tax and the Plaintiff’s income tax amount of Nonparty 2 and Nonparty 24.71 billion.

(3) At the time, the Defendant served a tax payment notice on the remaining tax amount after deducting the amount corresponding to the above Plaintiffs from the determined tax amount, among the determined tax amount, which was withheld and paid for the Plaintiffs and the remainder of the Plaintiffs other than Lone Star U.S... Upon receipt of the request for the transfer of national tax refund to transfer the refund amount from the rest of the Plaintiffs to Plaintiff Lone Star U.S. instead of refunding the excess amount, as the tax amount withheld and paid exceeds the determined tax amount. The Plaintiff Lone Star U.S. received the request for the appropriation of national tax refund from the rest of the Plaintiffs to appropriate the determined tax amount of the Plaintiff Lone Star U.S.’s national tax refund amount to the determined tax amount of the national tax refund amount. The Plaintiff Lone Star U.S. received the request for appropriation of national tax refund from the rest of the Plaintiffs to the Plaintiff Lone Star U.S., and did not notify the rest of the Plaintiffs.

(4) On January 27, 2012, when a foreign limited partnership company falls under a foreign corporation under the Corporate Tax Act and the Supreme Court Decision (2010du5950) rendered on February 13, 2012, the defendant revoked ex officio the imposition of income tax on the remaining plaintiffs, other than Plaintiff Hudco Partnership, and again made a resolution to revise the corporate tax base and tax amount that impose corporate tax of KRW 17.3 billion in total, as stated in attached Table 2 “the details of imposing corporate tax”, and refunded the excess tax paid to the plaintiffs other than Plaintiff Hudco Partnership, Lone StarSS, and Lone Star Community.

(5) On April 9, 2012, the Defendant revised ex officio the corporate tax amount of Plaintiff Hudco Partnership and refunded the overpaid tax amount (hereinafter “instant disposition,” including the disposition imposing corporate tax imposed on the Plaintiffs, as indicated in attached Form 2 “The details of imposition of corporate tax”).

(e) Request for a trial and decision to the Tax Tribunal;

The Plaintiffs filed an appeal with the Tax Tribunal on July 7, 2008 against the Defendant’s disposition of imposing income tax and corporate tax on July 1, 2008, but was dismissed on June 24, 2010, and again filed an appeal against the disposition of imposing corporate tax on March 26, 2012, but did not receive any decision until 90 days from the date of the appeal.

[Reasons for Recognition] Facts without dispute, Gap evidence Nos. 1 through 6, 12, 15 through 19, 21 through 28, Eul evidence Nos. 1 through 4, 21, 92 through 100, and the purport of the whole pleadings

2. Determination on this safety defense

A. Main Safety Defenses

(1) On July 7, 2008, Plaintiff Hudco Partners, Lone Star S, Lone Star S, Lone Star S, and other plaintiffs submitted a request for transfer of national tax refund to the Defendant on July 7, 2008 when the already paid tax amount exceeds the determined tax amount, and the Plaintiff Lone Star S also submitted a request for appropriation of national tax refund to the Defendant to appropriate the national tax refund transferred by the above Plaintiffs to its income tax, and the Defendant did not separately send the tax payment notice to the above Plaintiffs. Accordingly, the legal relationship related to the tax imposed on the above Plaintiffs is all terminated in the above manner. Accordingly, there is no interest in dispute over the instant disposition, and the Defendant cannot be deemed to have imposed any taxation on the above Plaintiffs because it did not separately send the tax payment notice to the above Plaintiffs. Thus, the instant lawsuit against the Plaintiffs is unlawful.

(2) On July 7, 2008, Plaintiff Hudco Partnership applied to the Defendant for the payment of KRW 61,890,006 of the corporate tax refund for the business year 2006 to KRW 30,809,960 of the corporate tax for the business year 2004, and KRW 31,080,046 of the corporate tax for the business year 2005. Accordingly, the Defendant appropriated the corporate tax refund for the corporate tax refund for the business year 2006 to the corporate tax amount for the business year 2004 and the corporate tax amount for the business year 2005, and only paid the corporate tax amount for KRW 60,576,031 of the corporate tax for the business year 204 and KRW 740,782,375 of the corporate tax for the business year 207 to the Plaintiff Hudco Partnership for the revocation of the corporate tax for the business year 2006.

B. Determination

(1) The appropriation of the national tax refund is similar to offset under the Civil Act in that the State's obligation and the tax claim ceases to exist on an equal amount, rather than a disposition that specifically and directly affects the existence, scope, or extinction of the right to claim repayment held by the taxpayer. In the event there is no tax claim extinguished or the claim becomes null and void or cancelled on an inevitable basis, the taxpayer may claim the return of the national tax refund already determined by filing a civil lawsuit at any time (see Supreme Court Decision 2003Da64435, Mar. 25, 2004). Meanwhile, in the event that a final and conclusive judgment is rendered in favor of only the tax amount additionally notified in a lawsuit seeking revocation of the tax disposition, the revocation by the final and conclusive judgment in favor of the taxpayer does not take effect with respect to the tax amount already deducted from the amount initially imposed (see Supreme Court Decision 2005Da34698, Feb. 22, 2007).

In addition, the purport of Article 9(1) of the National Tax Collection Act stipulating that the head of a tax office shall issue a tax payment notice stating the taxable year, tax item, amount of tax, basis of calculation, deadline for payment of tax amount, place of payment, etc. to a taxpayer when he intends to collect a national tax is intended to protect the rights and interests of taxpayers by providing the taxpayer with detailed notification of the details of taxation to the taxpayer in detail and convenience in filing an objection. As such, it is reasonable to deem that a tax payment notice has been issued in a way that the taxpayer’s exercise of rights would not be construed or applied so that the taxpayer’s exercise of rights is disadvantaged. In addition, even if the corporate tax and income tax are imposed for the same period of time without separately notifying the tax payment notice, a legitimate assessment notice was issued if the notice clearly states the year to which the tax base and amount of tax for each taxable period belong, and the basis for calculation of the amount of tax (see Supreme Court Decision 96Nu19352, Apr. 11, 1997; 201.

(2) According to the facts acknowledged above, while imposing the income tax on this case, the defendant did not explicitly send the tax notice to the plaintiffs other than the plaintiff Lone Star U.S. and Lone Star Community. However, prior to receiving a request for transfer of national tax refund from the above plaintiffs or receiving a request for appropriation for national tax refund, the above plaintiffs notified the tax year of income tax or corporate tax, the tax amount, and the basis for calculation of the tax amount, etc., which are the basis for calculating the refund amount. Thus, the above plaintiffs' taxation disposition against the above plaintiffs exists. Further, the above plaintiffs can seek the return of the national tax refund already determined because the imposition disposition of corporate tax becomes null and void on the premise of legitimate imposition of tax, and thus there is a legal interest in dispute as to the validity of the disposition of this case. The defendant's main defense to

3. Judgment on the merits

A. The plaintiffs' assertion

(1) The instant income belongs to a holding company of Belgium or its shareholders, not the Plaintiffs, and thus, it can be imposed only on Belgium pursuant to Articles 10 and 13 of the Korea-Belgium Tax Treaty. Even if the instant income is deemed to belong to the Plaintiffs, the Plaintiffs are merely joint investors of capital as traditional collective investment schemes, and individual investors of the Plaintiffs are subject to taxation as final holders of income.

(2) The Plaintiffs were not domestic business activities but investment activities, and did not have the authority to dispose of or use the business place in Korea. Since they did not perform essential and important business activities in Korea, the instant disposition based on the premise that the Plaintiffs had a permanent establishment in Korea is unlawful.

(3) Even if it is recognized that the plaintiffs have a permanent establishment in Korea, the entire dividend income of the instant case is deemed to be unlawful in calculating the income attributable to the principles of an independent enterprise, and to view that 21% of the transfer income of the instant case simply added up the profit distribution rate of the non-party 2, the non-party 3, and the non-party 4's lsP has a source in the domestic permanent establishment.

(4) Of the instant income, imposing an additional tax on the amount of tax that was normally withheld and paid during the statutory due date goes against the purpose of legislation of additional tax.

(b) Relevant statutes and treaties;

Attached Form 3 is as shown in the "relevant Acts and subordinate statutes and treaties".

(c) Fact of recognition;

(1) An overview of Lone Star Fund IV (Loneone Loneone Financial Fund IV)

(A) Lone Star Fund is a partnership-type private equity fund that mainly raises funds through private placement and mainly creates profits through a financial institution or a general company’s acquisition and merger, purchase of non-performing loans, and real estate investment in the 1990s. However, upon the completion of each investment, Lone Star Fund I through Lone Star Fund V was formed in the middle of the 1990s, in the form of constituting a new fund (hereinafter “Lone Star Fund I through Lone Star Fund V”), and among them, a specific fund is referred to as “Lone Star Fund”.

(B) Lone Star Fund IV consists of investors (hereinafter “LP”) who are limited partners, such as GP, Plaintiff Lone Star U.S., Lone Star Community, and other Plaintiffs (hereinafter “LP”). While the Plaintiff asserts that Lone Star Fund refers only to LP, and Lone Star Fund is divided into LP, which is the managing body of Lone Star Fund, it is reasonable to define LP as Lone Star Fund in addition to LP and Lone Star Fund in light of the composition and operating method of Lone Star Fund, etc. However, LP determines whether to invest after delegation of the right of operation from LP and determines whether to sell assets, the timing and management method of sale of assets, etc., and LP merely distributes profits according to the management performance of LP, and it is not possible to control or participate in the operation of LP. LP consists of LP and 25 LP, which is a LP and 25 LP, which is comprised of Nonparty 1, Nonparty 2, Nonparty 3, and Nonparty 14.

(C) Lone Star Fund has Lone Star global quiisd (hereinafter “LGA”) established under the Slone Global Scisd for the discovery and valuation of its investment targets as affiliated companies. The interests of Lone Star Fund are all owned by Nonparty 1. For the management of the assets invested in each country, Hudd Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Rod Ro (hereinafter “HL”), and the remainder0.1% of its shares are owned by Nonparty 1, a corporation owned by Nonparty 1, who concluded a contract with the Lone Star Fund to discover and manage its assets and services, and each of its respective investment and service fees are paid to the State.

(D) Lone Star Fund IV established a special purpose corporation of the nature of holding company in Belgium for the purpose of acquiring the stocks of the target company, and managed the rate of return on August 21, 2003, which was established in Belgium for the purpose of acquiring and managing the stocks of foreign exchange banks on August 21, 2003, and belongs to KH, HH, and LSH established for the purpose of acquiring and managing the stocks of Lone Star Fund IV. Nonparty 3 stated that Lone Star Fund IV used Lone Star Fund IV’s separate special purpose corporation established by investing the total amount of Lone Star Fund IV as the legal entity of investment, and the only purpose of the investment is to legally own the assets to be acquired in question as the owner of the investment.

(E) Of the investment profits in Lone Star Fund IV, 20% of the investment profits is to Lone Star Fund IV, the remaining 80% is to LP, which is to be distributed to LP, and the internal allocation rate for the income received by LSP is Nonparty 129.9%, Nonparty 530%, Nonparty 27%, Nonparty 36%, and Nonparty 41%.

(2) Domestic structure of Lone Star Fund IV-related corporations

(A) The domestic subsidiary of LSG is comprised of Lone Star Round Korea (Loneone Round Korea, hereinafter “SAK”) established on February 10, 199 and composed of investment finance experts, certified public accountants, etc., and when the head office is decided to engage in the business of buying assets subject to investment, such as non-performing loans, and accepting the intent of investment and concluding a contract for acquisition of assets. The domestic subsidiary of HAL consists of certified public appraisers and real estate development experts as Mudson Korea (hereinafter “HAK”) established on the same day. LSAK and HAK concluded an entrustment contract with LSG, HAK on December 12, 201, and received the prescribed fees in return for the transaction and management of assets.

(B) In the case of the acquisition of non-performing loans, LSAK decided to make an investment in the Investment Committee of the head office if it reported to the head office via Nonparty 2. However, the sale of non-performing loans was made only by the decision-making of the HAK Asset Management Team. In the case of the sale of real estate, LSAK decided to make an investment in the Investment Committee of the head office if it is requested by the head office via Nonparty 3 and Nonparty 2, and the corporate merger was also decided by the Investment Committee of the head office if it is requested by Nonparty 2 to the head office via Nonparty 2

(C) The Plaintiff Hudco Partners lent the investment funds to the employees of LSAK or HAK at a lower rate of up to 75% of Lone Star Fund’s investments.

(D) The domestic manager of Lone Star Fund IV was Nonparty 2, who actually controlled the affairs of HAK and LSAK, and participated in the meetings of the advisory committee at the head office as a regional manager. By July 22, 2003, Nonparty 2 served as the representative director of LSAK until July 22, 2003. When Lone Star Fund IV was investigated into Lone Star Fund IV, Nonparty 2 left the Republic of Korea on April 27, 2005 and did not return to the United States.

(E) From October 200 to December of the same year, Nonparty 3 worked as the former office of HAK, and became the representative director from January 2001 to December of the same year. From July 23, 2003 to June 30, 2009, Nonparty 3 was actually involved in the duties of HAK while working as the representative director of LSAK.

(F) Nonparty 4 entered HAK around August 199 and served as the former director in charge of finance, and became the representative director around March 2002.

(3) Acquisition and sale of shares in Lone Star Fund IV

(A) The acquisition of Lone Star Fund IV’s shares in Lone Star Fund IV was made on Nonparty 2’s proposal. Nonparty 2 strongly recommended LSG and LSP to purchase a domestic bank as a representative of LSK, and around October 2002, Nonparty 3 visited Nonparty 6, a president of Lone Star Fund, at the time of foreign exchange, and officially expressed the intent of Lone Star Fund’s investment. On February 10, 2003, Nonparty 3, as the representative of LSK, began to acquire a foreign exchange bank work on an official basis, such as submitting a preliminary proposal for acquisition of the foreign exchange bank. Nonparty 2, along with Nonparty 2, participated in negotiations for acquisition of the foreign exchange bank with LSK’s representative qualification.

(B) On April 3, 2003, Nonparty 2, as the representative director of LSAK, concluded negotiations with the foreign exchange bank on the acquisition of new shares equivalent to KRW 600 million. On June 8, 2004, Nonparty 2 attended a meeting jointly held by Lone Star and Lone Star Community, and explained the conditions, possibility, and condition of the foreign exchange bank’s investment to the participants, such as LP of Lone Star U.S. and Lone Star Community.

(C) On August 27, 2003, Nonparty 3 participated in an underwriting agreement conference of the foreign exchange bank on behalf of lsK and took charge of the acquisition team of the foreign exchange bank.

(D) On October 31, 2003, Lone Star U.S.: (a) held 51% of the shares of the foreign exchange bank; and (b) appointed Nonparty 1, Nonparty 5, Nonparty 2, Nonparty 3, and Nonparty 7 as outside directors of the foreign exchange bank. Nonparty 3, around November 2003, with Nonparty 5, Nonparty 7, and Nonparty 2, etc., considered the reduction of the appraisal price of the foreign exchange card to decrease the appraisal price against the opposing shareholders of the foreign exchange card against the merger between the foreign exchange bank and the foreign exchange card company (hereinafter “foreign exchange card”).

(E) The sale of the shares of a foreign exchange bank was conducted through a cphids scam under the initiative of Nonparty 5, Nonparty 7, and Nonparty 1.

(4) extreme construction, acquisition and sale of Lone Star Fund IV’s shares

(A) At the time of the tender for the Kudong Construction, Nonparty 3 reported the result of evaluating LSK and HAK companies to Nonparty 2, and Nonparty 2 again reported it to Nonparty 1 and Nonparty 5, and obtained approval for participation in the tender and bid price for the Kudong Construction. Thereafter, Nonparty 3, along with Lone Star Overseas, obtained the power of representation in relation to the investment for the Kudong Construction, signed an investment agreement with the Kudong Construction as his agent on November 8, 2002, and signed a memorandum of understanding for the acceptance of Kudong Construction as his agent on April 11, 2003.

(B) The acceptance of Kudong Construction took overall charge of the practice of Nonparty 3 and the final person responsible for it was Nonparty 2. After all, Nonparty 3 was appointed as a director of Kudong Construction and participated in the board of directors and was reported from the persons related to Kudong Construction at any time on the results of human resource adjustment, the appointment of the representative director, etc.

(C) The officers and employees of LSAK and HAK, including Nonparty 8, Nonparty 9, etc., were appointed as directors of Lone Star Lease, attended the general meeting of shareholders, and received from Lone Star Management reports on the current status of business performance, etc. from time to time.

(D) The sale of shares of Kudong Construction and Lone Star Lease was in charge of EBN ABN AMF securities, and Nonparty 7 finally decided the sale terms.

(5) Other

Lone Star U.S.’s written application for participation in the tender submitted by Korea Development Lease Co., Ltd. on May 19, 2003, when Lone Star U.S. wishes to acquire Korea Development Lease Co., Ltd., is written as “direct management.”

[Reasons for Recognition] Unsatisfy, the evidence adopted earlier, Gap evidence Nos. 7, 8, 9, 32, 33, Eul evidence Nos. 5, 7, 10 through 13, 15 through 19, 22, 23, 25, 26, 28, 29, 33, 36, 40, 41, 47 through 52, 61, 61, 69, 69, 70, 75 through 78, 80, 81, 87, 89, 90, 104, and 106, respectively, the purport of the whole pleadings

C. As to the assertion on the application of the Korea-Belgium Tax Treaty

(1) A taxation treaty does not create a taxation right for the avoidance of double taxation and the prevention of Fiscal Evasion by adjusting the issue of taxation between the Contracting States, but rather functions to allocate or restrict the already established taxation right under the tax laws of one Contracting State. Therefore, in order to apply a tax treaty, the person to whom the income accrues should be identified as a resident of the Contracting State, and the determination of the person to whom the income accrues should be based on the interpretation of the tax laws of the country to which

However, the principle of substantial taxation under Article 14(1) of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007) refers to the person to whom the income, profit, property, transaction, etc. belongs, if there is a separate person to whom the actual income, etc. belongs, unlike the nominal person, should be the person to whom the income, profit, property, and transaction belongs. Thus, the nominal person is not the nominal person to whom the property belongs, but the nominal person is not the nominal person, and there is another person who actually controls and manages the property through the control, etc. over the nominal person, and if the disparity between the nominal person and the real person arises from the purpose of tax evasion, the income on the property shall be deemed to have been reverted to the person who actually controls and manages the property, and such principle shall be the person to whom the income from the property belongs (see Supreme Court en banc Decision 2008Du84999, Jan. 19, 2012). This principle applies to the interpretation and application of tax treaties effective under the Act (see, 2016Du.

(2) Comprehensively taking account of the following circumstances revealed in light of the overall purport of the arguments as to this case’s health class and the aforementioned facts, since the Plaintiff’s nationality holding companies, such as LK, KH I, II, H and LSH, are merely a company established for the purpose of tax avoidance and cannot be deemed to have controlled and managed the instant income, it cannot be deemed that the instant income actually belongs to the entity. Furthermore, insofar as the Plaintiffs are subject to corporate tax under the Corporate Tax Act as a foreign corporation under the Corporate Tax Act, it cannot affect the imposition of corporate tax against the Plaintiffs, which ultimately belongs to the individual investors. Accordingly, the Korea-Belgium Tax Treaty cannot be applied to the instant income, and the Plaintiffs’ assertion contrary thereto is without merit.

(A) Lone Star Fund IV did not participate in the process of purchasing and transferring stocks of foreign exchange banks, etc. in determining terms and conditions or amount of the contract. LSAK and HAK participated in the purchase and management of stocks, and LSP finally decided.

(B) Lone Star Fund IV established the said holding company by investing the total amount immediately before acquiring the shares of the foreign exchange bank (In addition, it seems that the liquidation procedures of the holding company have been completed after transferring the shares).

(C) Nonparty 3 revealed that the establishment purpose of the above holding company is only the legal owner of the investment assets.

(D) The burden of proving the non-taxation requirements and the tax exemption requirements lies on the taxpayer (see, e.g., Supreme Court Decision 98Du16095, Jul. 7, 2000; Supreme Court Decision 93Nu13162, Apr. 15, 1994). The plaintiffs have the burden of proving that the income of this case was attributed to the holding company, and there is no evidence to prove that the income of this case was attributed to the holding company.

D. As to the assertion on permanent establishment

(1) In light of the language, purport, etc. of Articles 8(1), 9(1) and (3)(a), (e), (k), and Article 94 of the Corporate Tax Act, if a permanent establishment of a foreign corporation is deemed to exist in the Republic of Korea, an employee of the foreign corporation or a person given instructions thereof shall perform “essential and important business activities,” rather than preparatory or auxiliary business activities, through the “fixed place of business,” such as domestic buildings, facilities, or equipment in which the foreign corporation has the right to dispose of or use” and should be determined by comprehensively taking into account the nature and scale of the business activities and the importance and role of the entire business activities (see Supreme Court Decision 2009Du1929, 19236, Apr. 28, 201).

(2) In light of the above legal principles, it is difficult to deem that the Plaintiffs have a permanent establishment in Korea in full view of the following circumstances revealed in the foregoing recognition by the Health Team and the above recognition.

(A) During the process of profit-making of Lone Star Fund, the principal decision was made at the head office of LSP or LSGA in the United States, where Lone Star Fund raises funds from investors, decides to invest in shares, such as foreign exchange banks, and subsequently sell assets and recover the investment amount.

(B) Since Lone Star Fund mainly takes over an insolvent company and received high-amount dividends or gains gains from transfer through corporate restructuring or financial restructuring, the act of participating in the management of the acquiring company also takes a major part of the profit-making process. However, it is true that the participation of Nonparty 2, Nonparty 3, and Nonparty 4 in the process of such process took part in considerable part of the profit-making process. Since their roles in the process of their acquisition or management are deemed to be limited to lsK and LAK’s respective representative director, qualifications, or executive officers or titles (it can be deemed that LSK and HAK is a service entrustment contract established with LSG and HAL). Even if LSP actually earned from LSP, it is difficult to evaluate that LSP directly participated in the above process on the basis of their activities. Although Lone Star Fund is in a relationship between 0 LSP and its subsidiaries and its related company (see Supreme Court Decision 90Da978, Apr. 2, 2008).

(C) Nonparty 2 and Nonparty 3, etc., were involved in the management of the foreign exchange bank, etc. and contributed to maximize Lone Star Fund’s profits by not raising the price manipulation in order to reduce the merger cost with the foreign exchange card, and were ultimately expected to be engaged in the management of the company subject to investment under Lone Star Fund’s Investment Instruments Act. However, at the time, they were in the position of directors of the foreign exchange bank, and directors of the company have the duty to endeavor to increase the company’s profits or value by the duty of loyalty under the Commercial Act. Thus, even if they contributed to the polarization of Lone Star Fund’s profits by maximizeizing the interests and value of the foreign exchange bank, as long as it is not recognized that the foreign exchange bank’s profits were expressed for the purpose of benefiting Fund’s profits only or it was against such interests, it is difficult for Nonparty 2 and Nonparty 3, etc. to intervene in the management of the foreign exchange bank’s agent or in the foreign exchange bank’s direct evaluation of the foreign exchange fund’s profits (see, e.g., 31P).

(D) In light of the purpose of the establishment or activities of LSAK and HAK, activities involving Nonparty 2 and Nonparty 3, etc. engaged in the acquisition process and management of the foreign exchange bank, etc. may be deemed ex post facto and auxiliary activities to manage lsP or LSG’s prior and preliminary activities or assets to determine whether to make an investment and to help determine the timing of such disposal.

(3) Therefore, the instant disposition on the entirely different premise should be revoked on the ground that it was unlawful without having to further examine the remainder of the Plaintiffs’ assertion.

4. Conclusion

All of the plaintiffs' claims are accepted, and the costs of lawsuit are assessed against the losing defendant.

[Attachment]

Judges 16 16 16 16