2013년 국제조세 판례회고

Abstract

This article introduces Supreme Court decisions and Seoul Administrative Court decisions on international tax entered in 2013 which are believed to have precedent value. 1. Supreme Court Decision 2011Du3159 dated April 11, 2013 / The Supreme Court, in accordance with the substance over form doctrine, ruled that withholding for corporate tax is required based on the person to whom the income substantially attributes only if the person paying the domestic-source dividend income could have known that the person to whom the income substantially attributes exists. This decision is significant in that it established a limit on withholding obligation, but, in fact, there has been no precedent where the Supreme Court exempted the obligation of withholding agent. 2. Supreme Court Decision 2011Du7311 and 201Du20966 dated July 11, 2013 / The Supreme Court in its 2011Du7311 decision indicated that the tax authority’s argument for the change of the recipient of income falls under the alteration of grounds for an administrative action, as who receives income is not an essential criterion for the classification of the tax unit. In spite of the foregoing decision, the Seoul High Court in its 2013Nu23272 ruled that in the legal relationship with respect to withholdings, a change of tax items is an essential criterion for the classification of the tax unit, which in a certain aspect appears contradictory to the foregoing decision. Thus, it will be noteworthy to see how the Supreme Court will reconcile these two decisions in the future. 3. Supreme Court Decision 2011Du22747 dated October 24, 2013 / The Supreme Court ruled that a limited partnership located in the United States cannot be treated as a corporation within the meaning of the Korea-U.S. tax treaty, as a result of which, the reduced tax rate applying to corporations is inapplicable. The conclusion of this decision is acceptable in that the language of the Korea-U.S. tax treaty clearly separates between corporation and partnership. However, in general, the benefits of tax treaties are available only to the residents who are liable to tax. Thus, it is unclear on what grounds the Supreme Court viewed the limited partnership having no tax obligations in the United States as a resident within the meaning of the tax treaty. 4. Supreme Court Decision 2009Da79736 dated November 28, 2013 / The Supreme Court ruled that a transfer of issued shares in a domestic corporation held by a spun-off company as assets to a newly established company by spin-off under a spin-off of a foreign company falls under “share transfer” and is subject to corporate tax. This decision seems consistent to the basic principle of the spin-off tax scheme whereby unrealized gains are subject to tax as a result of spin-off. 5. Seoul Administrative Court Decision 2012Guhap10673 dated May 24, 2013 and 2013Guhap6343 dated September 27, 2013 / The Seoul Administrative Court in two decisions determined for the first time the meaning of and the criteria for the “place of effective management” under the Corporate Tax Act. However, the two decisions applied different standards. It is proper not to consider elements, such as the place of head office of a company and the country governing the legal status of a company, as the interpretation of the “place of effective management” needs to precede the application of the “tie-breaker rule” under the OECD Model Tax Convention.