법무법인(유한) 율촌 | Yulchon LLC

Yulchon represented bank H in a litigation seeking revocation of refusal of request for reductive rectification of corporate tax by obtaining decision that even if the tax affairs relating to the fund for non-performing loans (the “Fund”) are flawed, it would be allowed to include such tax affairs in deductible expenses during the reasonable taxable year, and that the relevant taxpayer has not violated the good faith principle, and successfully obtained a revocation decision of refusal of such request.

The tax authorities argued that had the bank already included the contribution for the Fund in deductible expenses once, it should not be allowed to include such amount in deductible expenses again even though the reasonable taxable year arrives as such act of double inclusion violates the good faith principle. Yulchon then meticulously reviewed and presented legal principles and comparative laws regarding the good faith principle from the legal precedents. Further, Yulchon argued and proved that given that the corporate tax law imposes on a taxpayer the reporting and payment obligations regarding tax base and amount, any violation of the good faith principle shall be determined based on the tax base and amount; however, in this case, even after citing the request for rectification made by the bank, it has no impact on the tax base and amount whatsoever. As a result, the court accepted Yulchon’s argument and cancelled the refusal assessment made by the tax authorities.

This case is meaningful in that (i) it clarified that the good faith principle cannot be arbitrarily applied to taxpayers based on meticulous legal review, and (ii) it rectified the wrongful assessment of the tax authorities who admitted that its authoritative interpretation was flawed. This case will likely have a positive influence on the case involving bank K contesting over the same issue.