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| TITLE | Supreme Court Decision 2015Du2451 Decided July 14, 2016【Revocation of Imposition of Corporate Tax, etc.】 [full Text] |
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| Summary | |
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[1] Person liable for taxation on the income on property in cases where: (a) the person to whom property nominally accrues lacks the capacity to control and manage the property; (b) another person substantially controls and manages the property by means of governance, etc., of the nominal owner; and (c) the discrepancy between name and substance arose out of the intent to avoid tax (= the person who substantially controls and manages the property); and in cases where there is no discrepancy between name and substance, whether the income shall be deemed attributable to the person to whom the income nominally accrues (affirmative) Whether such principle applies likewise to the interpretation and application of tax treaties (affirmative in principle) [2] In the case where: (a) as a corporation established under English law, Company “A” is an intermediate holding company doing business within “C” Group, whose ultimate parent company is Company “B” that is established under French law, and holds 50% shares in Company “D,” a Korean corporation; (b) in paying out dividends to Company A, Company D withheld and paid corporate tax by applying the 5% limited tax rate under Article 10(2)(a) of the Convention between the Government of the Republic of Korea and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital; but (c) the tax authority imposed a different amount of corporate tax on Company D by deeming Company B to be the beneficial owner, and thus, applying a different tax rate, the case holding that there is sufficient room for deeming Company A, as an intermediate holding company doing pertinent business within C Group with an independent substance and business purpose, to constitute a person to whom dividend income substantially accrues, with the capacity to control and manage it, or a beneficial owner for that purpose under Article 10(2) of the said Convention |
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