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TITLE Supreme Court Decision 2016Du35212 Decided December 24, 2019 【Revocation of Disposition Imposing Corporate Tax】 [full Text]
Summary
[1] Meaning of “beneficial owner” stated in 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,” and the standard for determining whether one qualifies as the beneficial owner
[2] In the case where: (i) the Germany-based limited company (“Company A”) acquired 100% of the issued shares of the Republic of Korea-based company (“Company C”) that engages in a real estate rental business using the investment fund set up by Fund Company (“Fund B”), a public offering investment fund, which was created pursuant to the German Investment Act; (ii) Company C paid as dividends the profit derived from the rental of building, etc. to Company A, and paid to the competent tax office a corporate tax withheld at a limited tax rate of 5% pursuant to Article 10(2) Item (c) 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”; (iii) Company C subsequently transferred the remainder of the profit to the bank account Company A opened for Fund B; (iv) the competent tax office issued a tax collection notice of the withheld corporate tax for the competent business year to Company C by applying a limited tax rate of 15% under Article 10(2) Item (b) of the said Agreement, under the premise that the beneficial owner of the dividend income was Fund B, designated Company A as the secondary tax obligor of Company C, and issued a notice of payment of the said corporate tax against Company A, the case holding that, in light of the entire circumstances, the dividend income paid to Company A is considered to have been paid to Company C, a German corporation that is the beneficial owner directly holding Company C’s shares and, therefore, a limited tax rate of 5% under Article 10(2) Item (a) of the said Agreement should be applied
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