2012년 국제조세 판례회고

Introduced here are Supreme Court decisions rendered in 2012 which are meaningful as precedents heavily relied on in the recent direction of the Supreme Court decisions and a Seoul High Court decision on the relation between transfer pricing under the International Tax Coordination Law and transaction value under the Customs Duties Law. 1. Supreme Court Decision 2010Du5950 dated January 27, 2012For the first time, the Supreme Court suggested a criterion to determine whether a foreign entity can be viewed as a corporate taxpayer under the Corporate Income Tax Law (“CITL”). In general, whether or not a foreign entity falls under a corporation under the CITL can be determined not only from a private law perspective but also from a tax law perspective, but the Supreme Court, from a private law perspective, held that such determination should be made based on whether or not the concerned foreign entity has its own rights and obligations independent and separate from its members in light of its nature (substance) and the relevant statutory provisions in the country of residence. This Supreme Court ruling is different from the OECD’s position that whether or not an entity can be considered as a corporation should be determined based on how it is treated under the tax law of the country in which it was formed, but is consistent with the legislative position of many countries. However, the above criteria from a private law perspective inevitably raise confusion in the interpretation and application of a tax treaty. 2. Supreme Court Decision 2010Du11498 dated April 26, 2012The Supreme Court determined the applicability of the substance over form principle under domestic tax law in the application of a tax treaty and rendered a ruling on the non-discrimination principle under tax treaty. For the first time, the Supreme Court expressly held that the substance over form principle under the National Tax Basic Law is applicable also in the application of a tax treaty. In addition, with regard to the issue of unequal treatment of a foreign SPC and a domestic SPC in the application of a tax treaty, the Supreme Court ruled that whether the two SPC are in the same circumstance should be determined based on whether the foreign SPC was established for tax avoidance purposes. The two rulings above reflect the Supreme Court’s intention to protect the taxation right of Korea from treaty shopping committed for tax avoidance purposes. 3. Supreme Court Decision 2011Du6127 dated December 26, 2012The Supreme Court held that the tax authority has the burden to prove that it has reasonably determined an arm’s length price based on information/documents obtained from a taxpayer pursuant to relevant statutory provisions. In the transfer pricing taxation regime, determining an arm’s length price is unquestionably the most important factor, but it is impossible to determine one that is perfectly undisputable. As such, dispute between the tax authority and taxpayers over the determination of an arm’s length never ceases. In this Supreme Court decision, the Supreme Court primarily imposed the burden of proof on the tax authority but eased the degree to a certain extent. 4. Seoul High Court Decision 2012Nu1961 dated November 30, 2012This high court decision relates to the relationship between transfer price adjustment and customs duty. In this high court case, a multinational company made a year-end import price adjustment in accordance with its transfer pricing policy but the Seoul High Court did not recognize the adjusted import price as a customs value. The OECD and the WCO have long made efforts to pursue harmony between tax and customs administrations and the US also changed its long-last position recently and is pursuing the same. Considering that an importer/taxpayer struggles with confusion and potential double taxation due to the different positions of the National Tax Service and the Korea Customs Service over the appropriate import price, harmonization between the two administrations is desired.