A Study on the 'Place of effective Management’ under the Corporate Tax Act : Focusing on the practice of taxation to Cryptocurrency business

Through the revision on December 31, 2005, the Corporate Tax Act added a corporation in Korea with a 'place of effective management' to the category of domestic corporations. The purpose of this amendment was to include nominal companies established overseas for tax avoidance purposes as a taxable category, but since the relevant laws and regulations did not clearly specify which cases correspond to the 'place of effective management', the reality is that it remains a rather unstable concept that is judged on an ambiguous and abstract basis and can be interpreted differently at any time depending on the judgment of facts. The court uses the criteria set out in the OECD Model Treaty commentary as it is while judging the existence of a “place of effective management” under the Corporate Tax Act, but the criteria of the OECD Model Treaty commentary are similar to those for determining residents in a single country as a concept for solving the problem of dual residents under the tax treaty, but they are clearly different concepts, which are considered inappropriate to be used as criteria for determining a “place of effective management” under the Corporate Tax Act. Furthermore, even in foreign corporations that do not have tax avoidance intentions, it is also confirmed that a 'place of effective management' exists in Korea because important decision-making or management activities are carried out in Korea. Considering the introduction of the concept of a 'place of effective management' on the premise of an overseas corporation established for tax avoidance purposes, the phrase 'place of effective management to a corporation without tax avoidance intention' is itself a contradiction of formality. If the legal text interprets that the tax avoidance intention itself cannot be viewed as a requirement because the tax avoidance intention is not set as a requirement, it is considered a behavior of judicial legislation by creating opposing requirements that are entirely contrary to the purpose of legislation through legal interpretation. As a legislative alternative to the above problems, it seems necessary to legislate specific requirements for the criteria for the judgment of the 'place of effective management' in related laws or to clearly specify corporations established for tax avoidance purposes.