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| TITLE | Supreme Court Decision 2017Du48482 Decided April 23, 2019【Revocation of Disposition Withholding Corporate Tax, etc.】 [full Text] |
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| Summary | |
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[1] Purport of Article 93 Subparag. 11(b) of the former Corporate Tax Act or Article 93 Subparag. 10(b) of the former Corporate Tax Act and Article 132(10) of the former Enforcement Decree thereof If cash payments, which a foreign entity received as penalty or compensation in the Republic of Korea upon a contractual breach or termination, fall within the scope of compensation for actual losses that in turn caused a decline in net assets relating to the contract in question, whether the same constitutes “money paid in excess of compensation for payment under the original contract” as prescribed by the foregoing provisions (negative) [2] In the case where: (a) domestic shipbuilders, such as Company A, and foreign vessel owners, such as Company B, concluded a shipbuilding agreement; (b) the Export-Import Bank of Korea (“EXIM Bank”) concluded an agreement guaranteeing the refund of shipbuilding payments that Company A, etc. received upfront from Company B, etc. based on the aforementioned agreement and, thereafter, EXIM Bank paid Company B, etc. the advances received and interest upon the rescission of the shipbuilding agreement; and (c) the competent tax authority issued a disposition of collecting withholding corporate taxes, etc. against EXIM Bank for the relevant business year on the grounds that EXIM Bank did not withhold taxes, despite the interest on payments received upfront, as other income, having constituted a foreign entity’s domestic source income pursuant to the former Corporate Tax Act, the case holding that in light of overall circumstances, the interest on advanced payments was compensatory damages for recovering the realized decline in net assets, rather than compensatory damages for the amount surpassing the actual accrued losses by Company B, etc. |
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