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| TITLE | Supreme Court Decision 2018Du38376 Decided November 29, 2018【Revocation of Disposition Imposing Corporate Tax】 [full Text] |
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| Summary | |
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[1] Meaning of and standard for determining what constitutes “beneficial owner” as prescribed by Article 10(2)(a) of the Convention between the Government of the Republic of Korea and the Government of the Hungarian People’s Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income Whether a tax treaty may be deemed inapplicable in the event that treaty abuse is acknowledged according to the principle of substantial taxation under the Framework Act on National Taxes even if constituting a beneficial owner of dividend income (affirmative) [2] In a case where: (a) Company A, in paying dividends on six occasions to Hungary-based Company B that owns 50% of its shares, paid the withheld corporate tax based on the limited tax rate of 5% as prescribed by Article 10(2)(a) of the Convention between the Government of the Republic of Korea and the Government of the Hungarian People’s Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income; and (b) the competent taxing authority deemed the U.S.-based Company C, the ultimate parent company of the multinational business group to which Company B is affiliated with, to be the beneficial owner of dividend income and, subsequently, issued a notice of correction to the amount of corporate tax withheld against Company A by applying a limited tax rate of 15% pursuant to Article 12(2)(a) of the Convention between the Government of the Republic of Korea and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, the Court holding that the application of the Convention between the Government of the Republic of Korea and the Government of the Hungarian People’s Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income cannot be denied with respect to dividend income even if based on the principle of substantial taxation under Article 14(1) of the Framework Act on National Taxes |
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