Beneficial Ownership 개념과 실질과세원칙의 관계

The fact that the specific level of tax rate applicable to a taxpayer is varied from taxpayer to taxpayer makes it important to determine to whom an economic activity is substantially attributable for taxation purpose. In this regard the substantial attribution doctrine should be considered at first for the purpose of the application of domestic tax laws in Korea. Along with the above doctrine the beneficial ownership concept has to be applied to a non-resident taxpayer from a country with which a tax treaty is concluded. A routine tax treaty has provisions that the preferential tax rates in them may be applied to a non-resident from the counter-party country only if he is a beneficial owner of the pertinent income. Such restriction is put on interest income, dividend income and royalty income. The concept of beneficial ownership is not defined in any official laws or regulations of sovereign countries or international organizations though parti- cles of its meaning may be found in sporadic tax court decisions or tax authorities' opinions. The difficulties originating from such uncertainty are aggravated by the intertwining between the beneficial ownership concept and the substantial attribution doctrine. Especially when the judicial precedents do not show consistency as to which of the legal substance or the economic substance is to be respected, which would be the right picture of Korea's situation, such uncertainty is strengthened. In this article the author analyzed such problems from various aspects and reached a conclusion that they are not to be resolved without radical changes to the current tax law system. As one of such radical changes we may think of a taxation system under which foreign-source capital income is not taxed and domestic-source capital income is taxed at a single tax rate by withholding. But a rather more realistic way to lessen the uncertainty in the application of the beneficial ownership concept and the substantial attribution doctrine will be to improve the current prior approval of the application of a tax treaty in the Corporate Tax Law and the advance ruling which is issued by the Commissioner of the National Tax Service.