Busan High Court 2013Nu21076

The substance over form principle is applied to the interpretation of the tax treaty, and it cannot be deemed as a violation of the non-discrimination principle prescribed in the tax treaty.

The principle of substantial taxation is applied to the interpretation of a tax treaty unless there is a special provision excluding it, and it cannot be deemed as a violation of the principle of non-discrimination prescribed in the tax treaty on the ground that a corporation with the purpose of tax avoidance on the source income in the Republic of Korea through abuse of a tax treaty does not regard it as

Article 14 of the Framework Act on National Taxes

2014du39043 Revocation of revocation of revocation of corporate tax rectification

○ ○ Hybro

○ Head of ○

Busan High Court Decision 2013Nu21076 Decided March 13, 2014

oly 2015.23

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the grounds of appeal Nos. 1 and 2

A. The principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes, where there is a separate person to whom such income, profit, property, transaction, etc. belongs differently from the person to whom such income, profit, etc. belong, the person to whom the property belongs is not the person to whom such income, etc. belongs but the person to whom such income, etc. belongs, is not the person to whom such income, etc., is not the person to whom the property belongs, and there is another person who substantially controls and manages the property through the control, etc. over the nominal owner, and the disparity between the nominal owner and the substance arises from the purpose of tax evasion, the income on the property shall be deemed to have been reverted to the person to whom the property is substantially controlled and managed, and such principle shall be applied as it is, unless there is any special provision to exclude it from the interpretation of a tax treaty having the same effect as the law (see, e.g., Supreme Court Decision 201

B. The lower court: (a) held 100% shares of 10%, and held 100% of the shares in the United States of America established for the purpose of investing in the oil-related business among the countries around the world; (b) held 100% of the shares issued by the Plaintiff as the Netherlands; (c) held 75.9% of the shares issued by the Plaintiff as the Netherlands; and (d) held 24.1% of the remaining shares issued by the Plaintiff; and (e) on August 12, 2010, the Plaintiff purchased 49,016,484 shares issued by ○ Industries Co.,, Ltd. (hereinafter referred to as “○○ Industries”) from the Defendant on the ground that the Plaintiff and ○○ Industries Co., Ltd. (hereinafter referred to as “○○ Industries”) were not subject to a request for rectification of 10% of shares issued by the Government of the Republic of Korea for the purpose of transferring 20% of shares and 10% of the shares issued by ○○ Industries Co. (hereinafter referred to “the 2010%”).

Furthermore, the lower court held that the Korea-Ne Tax Treaty cannot be applied to the income from the transfer of stocks of this case on the ground that the Plaintiff merely performed the role of a transaction party in the form of a transaction party with respect to the transfer of stocks of this case, and that the disparity between the form and substance is solely attributable to the purpose of evading taxes under the Korea-Ne Tax Treaty, based on the premise that the principle of substantial taxation can be used as a standard for interpreting and applying the provisions of the tax treaty.

In light of the above provisions, legal principles, and records, the judgment of the court below is just, and

In so doing, contrary to what is alleged in the grounds of appeal, the scope of application of the substance over form principle or the standard of judgment

There is no error of misapprehending the legal principles on interpretation and application of Article 14(4) of the Korea-Ne Tax Treaty.

2. As to the third ground for appeal

Article 24(1) of the Korea-Nene Tax Treaty provides that a national of a Contracting State shall reside in that Contracting State.

The so-called principle of non-discrimination provides that no taxes or other requirements related thereto shall be imposed on the mothers borne or to be borne by the nationals of the other Contracting State under the same circumstances, regardless of whether it is self-authorization or not. Such principle of non-discrimination provides that a national of a Contracting State shall not be at a disadvantage in taxation solely on the ground that nationality differs in cases where a national of the other Contracting State is in the same situation as, or performs the same activity as, a national of the other Contracting State (see, e.g., Supreme Court Decision 2010Du15179, Apr. 26, 2012).

The lower court, like the Plaintiff, determined as tax on the source income in the Republic of Korea through abuse of a tax treaty.

The purpose of avoidance is to determine that a corporation with the same situation as a special purpose corporation, such as a domestic special purpose company, etc., which is subject to taxation without the purpose of tax avoidance is not deemed to have been placed in the same situation, and that ○○○ is not deemed to be the beneficial owner of the income accrued from the transfer of stocks of this case, and it cannot be deemed to have violated the principle of non-discrimination under the Korea-Ne Tax Treaty.

In light of the above provisions, legal principles, and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the principle of non-discrimination under tax treaties, contrary to what is alleged

3. Conclusion

The appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.