2015년도 법인세 및 소득세 판례회고

This paper covers 7 Supreme Court decisions rendered in 2015 concerning corporate tax and personal income tax, all of which have important implications. This paper also provides an overview of the relevant facts, main issues and substance of each ruling, followed by an analysis of the judicial significance of each decision. I selected for review 4 cases that dealt with the Corporate Tax Law. In Supreme Court Decision 2012Du7608 (January 15, 2015), the Supreme Court held that rebate expenses in the pharmaceutical industry should not be deductible, even though they were paid before the restriction and punishment clauses under the Pharmaceutical Affairs Act were passed into law. Additionally, Supreme Court Decision 2013Du7711 (March 26, 2015) held that a tax treaty should apply with reference to the members of a pass-through entity as is the case with the Korea-Germany tax treaty (which lacks a special tax residence clause like one of the Korea-US tax treaty). Overall, these Supreme Court decisions relied on prior Supreme Court precedent and attempted to draw appropriate conclusions with a purposeful approach. Finally, I introduced Supreme Court Decision 2012Du4111 (January 15, 2015) in which the court allowed a merging (surviving) corporation, who succeeded to a merged company’s liabilities at book value, to apply bad debt allowances on such liabilities. This decision attracted public attention because it respected the taxpayer’s right to make its own decisions pursuant to the tax law notwithstanding violations of other administrative laws which are unrelated to tax law. With respect to cases concerning the Personal Income Tax Law, I introduced 2 cases, one of which was Supreme Court Decision 2013Du12652 (August 27, 2015). In this case, the court held that transfer taxes still apply to repurchase contracts because, unlike in a rescission of contract, an additional purchase takes place. I expect this decision to have a meaningful impact on the current transactional practice in Korea.