외국단체에 대한 조세조약의 적용 ― 해석을 넘어 입법으로 ―

Under inbound investment structures, in cases where foreign investors earn income from Korean investments through foreign transparent entities, the issue is that they can enjoy the tax benefits of existing tax treaties between the resident countries of foreign investors and Korea because of the limits these countries impose on Korea’s tax rights as a source country on the Korean-sourced income. The basic position of the Korean Supreme Court on this issue has been against these tax benefits because the Court has found the Korean-sourced income is attributable to the foreign transparent entities not their investors, pursuant to Korean Corporate income tax law. Therefore, based on the Court’s ruling it is reasonable to conclude that there should be no change in interpreting tax treaties when it comes to the attribution of income, which means foreign investors can not pursue the tax benefits of tax treaties. Even though this interpretation is not in the line with the OECD’s recommendations, we need to admit that it is in Korea’s interest to eliminate or lessen tax inefficiency and the risks of losses of tax revenue by denying the application of these tax treaties in cases where tax transparent entities are set up in tax havens which do not guarantee transparency in regards to tax information. Meanwhile, the Korean Supreme Court has produced another doctrine that allows foreign transparent entities to apply tax treaties in limited situations where all or parts of foreign investors set up these entities in their resident countries. One thing that needs attention is the range of tax benefits is not applied to the total share ratio of a foreign transparent entity, but it is applied to the holding ratio of the foreign investors in the same resident country as the nation where the foreign transparent entity was established. However, one strong criticism of this is that there explicitly exists irrational discrimination of indirect investment made by multiple foreign investors who reside in different countries that all have tax treaties with Korea. The recently enacted special provision for withholding procedures assumes Korean-sourced investment income is attributable to foreign investors in applying tax treaties, but this contradicts the above interpretations of the Korean Supreme Court. The two track approach for addressing the problems generated by this interpretation is as follows. First, this paper suggests, at a minimum, policy solutions to solve the irrational discrimination derived from the second doctrine that has been adopted by the Korean Supreme Court. Second, changing the basic position by the Korean Supreme Court into the OECD’s recommendations deserves close scrutiny. This paper’s proposal concerning this matter is to adopt these recommendations by renegotiating tax treaties with counterparts on a country-by-country basis.