Revocation of rejection of corporate tax application

The Plaintiff’s request for the correction of corporate tax for the business year 201 and 2012 using the Act on Calculation of Reduction and Exemption of Capital Increase, and the Defendant’s citing this request, the income from the investment in the sixth extension of this case cannot be deemed as duplicate support where a certain amount of the investment in the sixth extension of this case is deducted from the income tax unless foreign investment is reduced or exempted.

Article 26 of the Restriction of Special Taxation Act

Gwangju District Court 2014Guhap1267

AA Stock Company

Head of the tax office

1. The Defendant’s disposition rejecting correction of KRW 206,203,199 and corporate tax of KRW 435,069,027 for the business year 2011 against the Plaintiff on December 23, 2013 is revoked.

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

Cheong-gu Office

The same shall apply to the order.

1. Basic facts

A. The plaintiff's status

The plaintiff is a parent corporation located in the German country in 1988 (hereinafter referred to as the "MosiA") that has invested 100% of shares in 100, and is a foreign-capital invested company whose business purpose is the manufacturing business of chemical products, pharmaceutical products and other products.

(b) The plaintiff**** facility investment

원고는 1992년 ◈◈◈에 생산능력 40,000톤 규모의 *** 생산공장을 설립하여운영하면서, 1995년부터 2012년까지 아래와 같이 6차례에 걸쳐 *** 생산설비를 증설투자하여 *** 생산능력을 증가시켜 왔다(이하 각 증설 투자를 '이 사건 1차 증설 투자'와 같이 표시한다).

C. Plaintiff’s report of corporate tax for each business year

1) Reporting corporate tax to the business year 2008

In filing a corporate tax with the Defendant by the business year 2008, the Plaintiff calculated the tax amount to be reduced or exempted as a foreign investment with respect to the instant 4 and 5 increase investments in accordance with Articles 121-4(1) and 121-2(1) of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010; hereinafter referred to as the “former Special Act on Taxation Restrictions”) by applying the weighted average rate of reduction or exemption and the rate of increase or exemption as follows (hereinafter referred to as “general method of calculating reduction or exemption”).

2) Plaintiff’s claim for rectification of corporate tax for the business year 2008

As the form of calculation of deductible tax reduction and exemption under subparagraph 8 of the Enforcement Rule of the Corporate Tax Act, which must be prepared and submitted when reporting the amount of corporate tax to be reduced and exempted by foreign investment, was revised (No. 10 of the Ministry of Strategy and Finance of March 31, 2008), and there was a legal basis for calculating the amount of tax to be reduced and exempted by each expansion investment, the Plaintiff calculated the tax base by each expansion investment in proportion to the ratio of the amount of tax to be reduced and exempted by each expansion investment in the total production capacity *****

② Based on the tax base of each of the above increased investments, the court calculated the tax amount to be reduced or exempted for foreign investment by applying the reduction or exemption rate for each of the increased investments (hereinafter referred to as "calculated method of calculating the reduced or exempted tax amount for foreign investment") and filed a claim for correction of corporate tax for the business year 2008."

3) Plaintiff’s report of corporate tax for 2009 business year and imposition of Defendant’s corporate tax

In filing a corporate tax for the business year 2009, the Plaintiff calculated the tax amount to be reduced or exempted for foreign investment according to the method of calculating the reduced or exempted amount of capital increase, as set forth in the above 2.

On October 1, 2010, in order to calculate the reduced or exempted tax amount based on the calculation method of the reduced or exempted tax amount of capital increase, the defendant can keep separate accounting and can calculate the separate tax base of the increased or exempted tax amount. The investment in the 4 and 5th increase in the above case is an extension investment in the existing business rather than a separate facility, and it does not constitute separate accounting. The defendant applied the general calculation method of the reduced or exempted tax amount to the plaintiff for the imposition of corporate tax for the business year 2008 and 2009.

On December 28, 2010, the Plaintiff dissatisfied with the above disposition and filed a request for a trial with the Tax Tribunal on December 28, 2010, and it is possible for the Tax Tribunal to keep separate accounts by dividing the amount of production capacity on May 28, 2013. Thus, it is reasonable to calculate the amount of tax to be reduced or exempted by foreign investment according to the method of calculating the reduced or exempted amount of capital increase, the Plaintiff accepted the above claim and revoked

4) Plaintiff’s declaration of corporate tax for the business year 2011 and 2012

Before the determination of the tax appeal under Paragraph (3) above, the Plaintiff reported to the Defendant the tax base and amount of corporate tax for the business year 201 and 2012, and calculated the tax amount to be reduced or exempted for foreign investment in accordance with the method of calculating the general tax reduction or exemption regarding the investment in the 4 and 5th increase.

With respect to the investment amount in 2011 among the 6th increase investments, the amount of temporary investment credit amount to be deducted under Article 14(1) and (2) of the Addenda of the Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010) and Article 26 of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010; hereinafter referred to as the "former Restriction of Special Taxation Act") shall be calculated, and the amount of tax credit for job creation investment to be deducted under Article 26 of the former Restriction of Special Taxation Act shall be calculated after the amendment for the 2012 investment amount. The amount calculated as above by multiplying each of the 2011 and 2012 business years multiplied by the ratio of national investment under Article 127(3) of the Restriction of Special Taxation Act.

D. Plaintiff’s request for correction and Defendant’s rejection disposition

C. (3) On October 25, 2013, after the decision of tax appeal under paragraph (3) above, the Plaintiff: (1) on October 25, 2013, the Defendant

(2) With respect to the investment in the sixth extension of the Special Taxation, an amount calculated pursuant to Article 26 of the former Restriction of Special Taxation Act and Article 26 of the former Restriction of Special Taxation Act after the amendment (201 business year: 45,864,193; 1,34,248,778: 1,392; 662,067,392; 1,769,317,805 won; 2012; 1,769,317,805 won for the business year of 2011: 206,203,99; 6267,64,197; 305 won; 206,475,475,476,475,207; 2015,75,746,75,767,475,75,205) of the Restriction of Special Taxation Act before the amendment.

On December 23, 2013, the defendant cited the amount of tax to be reduced or exempted for foreign investment among the plaintiff's claim for correction, and made a disposition to dismiss the amount of tax to be deducted for temporary investment and job creation investment in the same taxable year, as the plaintiff applied foreign investment reduction or exemption in the same taxable year, in accordance with Article 127 (3) of the Restriction of Special Taxation Act, on the ground that the proportion of the national can be deducted according to the provision on the exclusion from duplicate support (hereinafter referred to as "the rejection

(e) Procedures of the previous trial;

On March 24, 2014, the Plaintiff filed a tax appeal with the Tax Tribunal against the instant rejection disposition, but the Tax Tribunal dismissed the Plaintiff’s above claim on May 20, 2014.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 3, purport of the whole pleadings

2. The parties' assertion and relevant Acts and subordinate statutes

A. The parties' assertion

1) The plaintiff's assertion

The plaintiff asserts that the rejection disposition of this case is illegal for the following reasons.

A) It is possible to keep separate accounting

Since the ratio of sales of businesses with facilities added to the 6th expansion investment of this case (hereinafter referred to as the "facilities of this case") and the ratio of sales of businesses due to facilities prior to such investment (hereinafter referred to as the "previous facilities") is the same as the ratio of each facility in total production capacity to the total production capacity, it is possible to keep separate accounting by means of distributing common deductible expenses and common gross income in proportion to sales.

Therefore, the tax base based on the instant facilities and the tax base based on the previous facilities and the amount of reduction or exemption or deduction can be calculated separately.

B) It does not constitute duplicate support under the Restriction of Special Taxation Act

If it is possible to keep separate accounting as above, foreign investment tax reduction or exemption may be granted for the previous facilities, and temporary tax credit for investment and employment-generating tax credit for the facilities of this case, and even if so, it does not give tax benefits in overlap with one investment. Thus, it does not violate Article 127(3) of the Restriction of Special Taxation Act.

2) The defendant's assertion

The defendant asserts that the rejection disposition of this case is lawful for the following reasons.

A) It is impossible to keep separate accounting

The separate accounting means that each tax base can be calculated with respect to the instant facilities and the previous facilities. For this purpose, the sales cost should be deducted from the sales cost of each facility and the cost of each facility should be deducted. However, since the instant facilities and the previous facilities cannot be calculated with a single continuous process facility that is not separated, it is impossible to separate the instant facilities and the previous facilities from each other.

B) the overlapping assistance prescribed by the Restriction of Special Taxation Act

The purpose of the Restriction of Special Taxation Act is to exclude duplicate support on the basis of ‘nationals or residents', and the plaintiff is a national based on the plaintiff as a national **** because foreign investment has been reduced or exempted in the business year 2011 and 2012.

(b) Related statutes;

It is as shown in the attached Table related statutes.

3. Whether the rejection disposition of this case is legitimate

(a) Whether it is possible to keep separate accounting;

1) Facts of recognition

In addition to the purport of the oral argument in the above evidence, ①*** the fact that, through piping pipes, inputs are made in a series of continuous processes that combines the inputs inside the facility, ② the Plaintiff has installed separate production facilities while investing in each expansion.

In addition, the production capacity has increased by means of replacing some of the existing facilities with the high capacity, and ③ the Plaintiff may recognize the fact that the Plaintiff reported corporate tax for the business year 201 and 2012, along with the income classification statement by means of distributing sales, common deductible expenses, and common gross income according to the production capacity, depending on the instant facilities and the previous facilities.

(ii) the relevant provisions;

Article 143(1) of the Restriction of Special Taxation Act and Article 136(1) of the Enforcement Decree of the Restriction of Special Taxation Act provide that if a person runs a business subject to tax reduction or exemption and any other business, a separate accounting shall be made by applying mutatis mutandis Article

Article 113(1) of the Corporate Tax Act, Article 156(1) of the Enforcement Decree of the Corporate Tax Act, Article 75(2) of the Enforcement Rule of the Corporate Tax Act, and Article 76(6) of the Enforcement Rule of the Corporate Tax Act provides that a corporation concurrently operates any business for which corporate tax is reduced or exempted shall keep separate accounts by applying mutatis mutandis Article 76(6) of the Enforcement Rule of the Corporate Tax Act. Article 76(6) of the Corporate Tax Act provides that "Common profit of profit-making business and other business shall be calculated in proportion to revenue or sales of profit-making

3) Determination

In light of the above relevant provisions, as long as the above facts of recognition are produced through the continuous process, ***** as increased production capacity due to the facilities of this case and the ratio of production capacity due to the previous facilities ***** in proportion to production, as a result, *** in proportion to production.

It is reasonable to view that it can be divided according to the ratio of one production capacity, so it is reasonable to view that the separate accounting is made by the method of calculating common gross income and common deductible expenses of the instant facilities according to the ratio of the production capacity, it shall be deemed that the separate accounting is made by the method of calculating in proportion

Therefore, it constitutes separate accounting under Article 143(1) of the Restriction of Special Taxation Act for the Plaintiff to keep separate accounting by dividing the business from the instant facilities and the business from the previous facilities according to the ratio of production capacity. Therefore, this part of the Plaintiff’s assertion is with merit.

(b) Whether it constitutes duplicate support prescribed by the Restriction of Special Taxation Act;

Comprehensively taking into account the above facts, the language and text of the relevant Acts and subordinate statutes, and the legislative intent as a whole, it is not overlapping support as prescribed by the Restriction of Special Taxation Act for the Plaintiff to obtain tax credits for temporary investment or job creation investment in the business due to the facilities of this case, and to obtain tax reduction or exemption due to foreign investment in the business due

Therefore, since the plaintiff's assertion on this part is well-grounded, the rejection disposition of this case based on the premise that it is duplicate support is illegal.

1) Article 127 of the Restriction of Special Taxation Act provides for "the elimination of overlapping assistance", and Article 2 of the Restriction of Special Taxation Act

In applying tax credits for invested assets in the same taxable year at the same time, only one of them shall be selected. In applying tax credits for the same taxable year to a national under paragraph (3), the amount calculated by multiplying the total stocks or equity shares of the relevant company by the ratio of stocks owned by a national investor to the total stocks or equity shares of the relevant company shall be deducted. Paragraph (5) of this Article requires a national to select only one of them where two or more provisions of tax reduction or exemption can be applied to the same place of business in the same taxable year. Paragraph (6) of this Article requires a national to select only one of them where two or more provisions of tax reduction or exemption may be applicable to the same place of business in the same taxable year. Paragraph (7) of this Article requires a national to select one of them where the provisions of tax reduction or exemption for acquisition tax and property tax reduction or exemption for the same taxable year are applied to the same place of business by a resident, but if the provisions of two or more transfer of land, etc. are applied at the same time

As can be seen, Article 127 of the Restriction of Special Taxation Act does not determine whether a tax benefit is duplicate support by a national or a resident unit, but rather determines whether a tax benefit overlaps based on investment assets, foreign investment shares, places of business, real estate in a place of business, and real estate subject to reduction or exemption. In other words, Article 127 of the Restriction of Special Taxation Act provides that only one benefit may be provided if a single investment act or a real estate acquisition act satisfies the requirements for multiple tax benefits at the same time, and does not purport to provide only one benefit on the ground that an act of investment or a real estate acquisition satisfies the requirements for tax benefits separately (see Supreme Court Decision 2014Du47662, May 14, 2015).

In particular, Article 127(3) of the Restriction of Special Taxation Act provides that an amount calculated by multiplying the deductible tax amount by the percentage of the shares of national investors shall be deducted if the tax credit for a national and foreign investment reduction overlap since the establishment of a new provision. However, as seen earlier, foreign investment reduction is based on the method of calculating the general amount of tax reduction or exemption prior to the

When calculating tax exemption amount, the foreign investment reduction or exemption should be applied to the tax base due to domestic investment by applying the foreign investment reduction or exemption ratio calculated in a certain way to the total tax base, not the tax base for the business of reduction or exemption. Therefore, if the foreign investment is deducted from the national investment, it is deemed a legislative device to eliminate the result of applying the foreign investment reduction or exemption to the same investment at the same time

Therefore, in this respect, the purport of the above provision does not purport to support only one benefit on the ground that it is the same national or resident, or for the same reason that the said provision does not duplicate tax reduction or exemption and tax credit for one investment.

2) The amount eligible for the tax credit with the investment in the sixth extension of the instant case is the amount of the relevant investment.

The amount calculated by the rearrangement rate, and the tax reduction or exemption due to foreign investment is calculated by the calculation method of the tax reduction or exemption, not based on the total income of the taxpayer, but only on the income generated by the increase of foreign-invested enterprises (i.e., the income generated by the investment of the fourth and fifth increase). In such cases, whether to provide double support for the reduction or exemption of tax reduction or exemption shall be determined based on each income generated by the investment of the fourth and fifth increase and the sixth increase as provided in each of the above provisions, rather than the entire income of the national.

However, the Plaintiff’s claim for correction of corporate tax for the business year 201 and 2012 using the Act on Calculation of Tax Reduction and Exemption for Capital Increase, and the Defendant’s cites it to the income from the investment in the instant six expansion, unless foreign investment is reduced or exempted, it cannot be deemed as a welfare center out of the amount of deduction of a certain amount out of the amount of investment in the instant six expansion.

3) In the case of separate accounting by business under Article 127(10) of the Restriction of Special Taxation Act newly established on January 1, 2013

In order to clarify that it does not fall under the welfare center, Article 143 of the Restriction of Special Taxation Act on the purpose of legislation and separate accounting has continued to exist in relation to tax reduction and exemption, the above provision cannot be deemed to be a creative provision, and only it is nothing more than confirming the existing interpretation content.

4) The defendant has a result of a carried-over of the tax credit amount due to the investment in the sixth extension of this case.

Thus, this case’s 4 and 5 expansion investment can be deducted from income, and thus, this case’s 4 and 5 expansion investment can eventually become duplicate support. However, even after the establishment of Article 127(10) of the Restriction of Special Taxation Act on January 1, 2013, the carried-over deduction may equally occur, and only for such reasons, the tax credit and tax reduction for different investments cannot be said to be duplicate support.

4. Conclusion

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