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| TITLE | Supreme Court Decision 2016Du841 Decided June 27, 2019 【Revocation of Disposition Imposing Corporate Tax】 [full Text] |
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| Summary | |
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[1] Whether the principle of imposing tax liability on a person to whom it substantially belongs, as prescribed under Article 14(1) of the Framework Act on National Taxes, uniformly applies to the interpretation and application of a tax treaty (held: affirmative in principle) Whether Article 27(2) of the Agreement Between the Republic of Korea and the federal Republic of Germany for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital constitutes a special provision excluding the principle of substantial taxation in the interpretation and application of the foregoing Treaty (negative), and standard of determining whether to apply the restriction prescribed in Articles 10(2), 11(2), 12(2), and 21 of the said Treaty [2] In the case where: (a) Germany-based Company A established Company B and Company C, both of which are German companies, and had them acquire all of the issued stocks of Limited Company D, 50% each; (b) thereafter, Company D paid out dividends to Company B and Company C; (c) Company A applied a limited tax rate of 5% pursuant to Article 10(2) Item (a) of the Agreement Between the Republic of Korea and the federal Republic of Germany for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital, withheld corporate tax based thereon, and paid the tax amount; and (d) the tax office excluded the application of the foregoing Treaty, applied a tax rate of 25% pursuant to the former Corporate Tax Act, and issued the corrected amount of the withheld corporate tax for the relevant tax year to Company D, the case holding that tax office may not exclude the application of a 15% tax rate to Company A by citing Article 27(2) of the foregoing Treaty |
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