National Tax Service Finally Loses Tax Appeal Lawsuit Against Korail... Returning About 1 Trillion Won in Corporate Tax

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyung-min] The National Tax Service (NTS) has lost a tax appeal lawsuit against Korea Railroad Corporation (KORAIL) and will have to refund approximately 1 trillion won in corporate taxes.

According to the legal community on the 3rd, the Supreme Court ruled on the 30th of last month in favor of KORAIL in the lawsuit filed against the NTS seeking cancellation of the refusal to amend corporate tax assessments. This appeal case was filed in November 2016, and after two years of deliberation by the Supreme Court, a conclusion was reached this time. Following this ruling, the NTS must return about 1 trillion won, including approximately 900 billion won in national taxes, to KORAIL.

In the process of participating in the government's 'Yongsan International Business District' development project in 2005, KORAIL sold the Yongsan railroad vehicle depot site to the project operator 'Dream Hub Project' five times between 2007 and 2011 for about 8 trillion won. The Yongsan International Business District development project was a massive urban development plan worth approximately 31 trillion won, established at the time by the Ministry of Construction and Transportation. Subsequently, KORAIL paid about 900 billion won in corporate taxes to the NTS on the sale of this land.

However, in April 2013, the government canceled the Yongsan development project, and KORAIL terminated the land sales contract citing the project operator's breach of obligations. Accordingly, KORAIL filed a request for correction with the NTS to reclaim the taxes, but the NTS did not accept it. In response, KORAIL filed an administrative lawsuit seeking cancellation of the NTS's refusal to amend the corporate tax assessment.

The first and second trials ruled that KORAIL's exercise of the right to request correction was lawful and ordered the cancellation of the NTS's refusal. The Supreme Court held the same view. The court stated, "The lower courts did not err in their interpretation of the law regarding the timing of profit and loss attribution under the Corporate Tax Act, the principle of period taxation, application of corporate accounting, and subsequent grounds for correction requests."

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