2016년 국제조세 판례회고

This paper discusses three of the decisions issued by the Supreme Court between January and December of 2016 that have precedent value in connection with key issues in international taxation. Overall, the Supreme Court’s decisions in 2016 do not appear to exhibit a certain trend; rather, the Supreme Court appears to have decided on each issue independently. First, the Magilink decision is the first decision where the Supreme Court clarified the standard for interpreting the “place of effective management” stipulated in Article 1(1) of the Corporate Income Tax Act. The decision is notable for its consideration of reality that decision making can take place both on- and offshore. However, although the concept of place of effective management is an uncertain concept, the decision did not clarify its scope of application or how this concept is related to the formal standard of place of registration. Second, in the Dephi decision, the Supreme Court’s interpretation seems faithful to the language of Korean domestic tax law with respect to the scope of foreign corporation’s taxable gains from assets contributed. However, the decision seems to indicate that corporate income tax can be imposed by re-characterizing gains from assets contributed as capital gains on the ground that the gains from assets contributed were not taxed. There is a question as to whether the decision is in violation of the Korea-Luxembourg Tax Treaty (which restricts the source country’s right to tax gains from assets contributed) and Article 28 of the Law for Coordination of International Tax Affairs (which stipulates that a tax treaty should prevail over Article 93 of the Corporate Income Tax Act with respect to classification of Korean-source income). The first-level court’s decision may have reached a more reasonable conclusion that is consistent with the overall interpretation and purpose of the tax treaty. Third, the AMEC decision, which addresses the standard for determining “offshore services,” is the first decision where the tax status of a domestic EPC business performed by a foreign entity was at issue. The decision denied the substance of offshore services in EPC business, which take place on- and offshore due to the nature of the business, and re-characterized the entire transaction as a single onshore service. However, it is questionable whether this is consistent with the substance of the legal arrangement and realities of the transaction. In particular, the decision re-characterized multiple personal services performed both on- and offshore as a single onshore service on the ground that the plaintiff in the decision had a branch in Korea, yet the decision failed to clarify which single onshore service was provided in Korea. Moreover, the decision appears to have determined the place of transaction in reference to the recipient of service rather than the supplier of service, which is contrary to the series of the Supreme Court decisions on the place of supply of services for VAT purposes.