Supreme Court Victory for Hydis Technology Co., Ltd. in the Litigation for Cancellation of Corporate Income Tax Assessment
2013.06.14.
Yulchon's tax group earned a Supreme Court victory for Hydis Technology Co., Ltd. in its appeal of a KRW 43.2 billion corporate income tax assessment.
Previously known as Hyundai Electronics Co., Ltd., Hydis is currently a foreign corporation with Yuen Yu Group of Taiwan as the controlling shareholder. Based on the Special Tax Treatment Control Act (STTCA), as a foreign-invested corporation, Hydis initially received corporate income tax exemptions for tax years 2003 and 2004. Subsequently, when Hydis entered into reorganization proceedings, 100% of the interests of its foreign investor at that time (BOE Technology Group) were retired without consideration, and Hydis' registration as a foreign-invested corporation was cancelled by the official authority. Following such events, the tax authorities assessed KRW 43.2 billion as corporate income tax for taxable year 2008 to claw back the tax incentives given to Hydis (along with accrued interest) based on Article 121-5(1) of the STTCA.
The dispute in the case mainly focused on whether cancellation of foreign-invested corporation status by the official authority fell under causes for clawback as prescribed by Article 121-5(1)(1) and (2) of the STTCA. Through thorough analysis of the requirements related to each cause for clawback provided in the STTCA, Yulchon persuaded the Supreme Court that the requirements for clawback of the tax incentives had not been satisfied in this case and, after two and a half years of litigation, obtained a favorable ruling for its client.
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