YOON&YANG

When making payments on acquisition of shares in a Belgian corporation in 2005, Haitai Confectionery & Foods Co., Ltd. did not withhold taxes relying on the Korea-Belgium Tax Treaty. However, the Korean tax authority imposed additional corporate tax that amounted to KRW 8.9 billion (approximately USD 7.6 million) for the fiscal year 2005 on the basis that the beneficial owner of the capital gain from the shares acquisition should be the investors to a Belgian corporation, not a Belgian corporation itself, and accordingly, Haitai Confectionery & Foods Co., Ltd. had a duty to withhold corporate tax from the purchases of shares from the investors, which is not a Belgian company.
 
Yoon & Yang represented Haitai Confectionery & Foods Co., Ltd. in litigation where the client seeks to invalidate the additional corporate tax imposed by the tax authority. During the litigation, Yoon & Yang argued the distinction standard and application scope of the exclusion period and extinctive prescription.
 
The court’s decision was to revoke the tax authority’s previous imposition of the corporate tax. As a result, the client received an economic benefit from a tax refund of KRW 8.9 billion (approximately USD 7.6 million).
 
This case is meaningful, which clarified that an exclusion period system is applied for tax imposition cases while an extinctive prescription system is applied for tax collection cases. The predictability regarding tax imposition and collection is provided to taxpayers, and therefore, the business uncertainty is removed from the tax perspective.