TAX PRACTICE - Yulchon

TAX PRACTICE

1Observers Speak With One Voice In Proclaiming ItOne Of The Most Respected And Reliable Practices In Korea.– Chambers Global: The World’s Leading Lawyers for BusinessC O N T E N T SCOMMITMENT. INNOVATION. EXCELLENCE 2TAX PRACTICE 4PROFESSIONALS 12

3CommitmentInnovationExcellenceYulchon is a full-service international law firm headquartered inSeoul, Korea. We employ over 200 professionals, including morethan 50 licensed in jurisdictions outside of Korea. Our perspective isinternational and our reach is global. We represent clients from sixcontinents, and we have helped Korean companies expand aroundthe globe. We strive to provide the most innovative solutions to themyriad legal challenges confronting our clients.Yulchon has become an acknowledged market leader in the developmentand practice of law. We are known for our high standardsof excellence, our culture of collaborative problem solving,and our strong relationships with government agencies and otherinternational law firms. We are frequently retained to negotiatemulti-billion dollar transactions, to help draft new legislation andregulations, and to represent clients in high-stakes adversarial proceedings.In particular, Yulchon’s tax group is widely regarded as the best taxpractice group in Korea. The tax group advises clients on all aspectsof domestic and international taxation, including some of the mostsophisticated tax planning, compliance, and dispute resolution matters.Our tax attorneys and tax advisors have extensive expertiseand experience in tax litigation and have obtained many favorabletax rulings for our clients in administrative and court proceedings,resulting in the satisfactory settlement of tax controversies and theprocurement of special credits, deductions, and tax holidays for clients’inbound investments. In addition, our tax group works closelywith the Ministry of Strategy and Finance and the National Tax Serviceand has been at the forefront of the development of tax lawin Korea with respect to transfer pricing, sourcing rules, and withholdingtaxes.

9Transfer pricing seems to be a particularly troublesome area for many of our clients.Some of the more significant transfer pricing work that we have done includeadvising a major Korean car manufacturer in negotiating and entering intoa bilateral advance pricing arrangement with the U.S. and Korean governments,negotiating the management fees payable to headquarters for a multinationalmarketing company with the Korean tax authorities, and winning the first transferpricing case involving royalties for film distribution in Korea for one of the topglobal film distributors.4. Financial Products and ServicesOur tax group has extensive experience with the tax aspects of financial productsand derivatives transactions. Working with issuers, underwriters, and investors,we advise clients on numerous types of securities offerings, including issuancesof high-yield debt, structured notes, common stock, preferred stock, and assetbackedsecurities. We focus on the examination of tax issues for such offeringsand the creation of tax-efficient structures.Some of the more innovative tax work that we have done in this area was in connectionwith Korean Air Lines issuance of ¥27 billion in Japanese Secured VariableRate Bonds securitized by future airline ticket receivables - to our knowledge thefirst cross-border securitization of future receivables effected in Korea. This transactioninvolved a multi-tier structure and the use of swap transactions to minimizetaxes. We also advised on the tax structuring of SK Corporation’s issuance ofUS$1.25 billion in guaranteed exchangeable bonds that involved many unchartedtax issues in Korea. This deal won the IFLR Debt and Equity Linked Deal of the YearAward. Also, we have advised a major investment bank in establishing the firstmulti-series, multi-currency commercial paper conduit in Korea. This project tookover a year to complete due to various tax and other legal hurdles, and to ourknowledge it has not been duplicated by any other party in Korea.In addition, Yulchon has been a pioneer in the issuances of asset backed securitiesand the application of the tax benefits under Korea’s Asset Backed SecuritizationAct, and our firm has unsurpassed experience in this area. For example, one of thelargest deals that we have worked on involved a major investment bank’s structuringand entering into a program for the sale and management of non-performingloans with an outstanding principal balance of 10 trillion won (approximatelyUS$8 billion at the time) under a multi-tier ABS structure. This transaction is oneof the largest and most sophisticated non-performing loan transactions in Koreanhistory.5. Wealth Management PracticeThis practice requires a wide range of tax law knowledge and a skillful approachto planning for income tax, inheritance tax, gift tax, and acquisition tax.Our tax professionals are exceptional in this area and share their experienceand expertise through speaking at private seminars, as well as governmentsponsoredconferences for Koreans residing overseas.Closely-held businesses and high net-worth individuals often have to deal withextremely complex tax issues, particularly those materially affected by the everchangingtax regimes of numerous jurisdictions. The tax group advises theseclients on general tax planning, utilization of trusts, insurance, and the use ofindependent appraisals, and helps them develop an overall estate plan thatallows a tax-efficient transfer of assets. The group also counsels non-residentindividuals and corporations in connection with their worldwide investmentsand the structuring of the ownership and control of entities.6. Legislative and Administrative PracticeOur tax lawyers are effective advocates for our clients’ positions on tax issues.Several members of our firm have held senior government positions and haveadvised the Ministry of Strategy and Finance and the National Tax Service. Withthis first-hand knowledge of the government, our lawyers can work effectivelyon a variety of matters involving tax planning and resolving controversies. Ourgroup’s long-standing relationship with government agencies helps facilitateproductive discussions with officials of the Ministry of Strategy and Finance orNational Tax Service on new and unusual issues encountered in domestic andinternational transactions. One of our ongoing efforts in this arena includesworking with the Ministry of Strategy and Finance to comprehensively reformthe transfer pricing tax regime in Korea, whereby we conduct in-depth studiesand comparative analyses on transfer pricing regimes of other developed countries,as well as OECD Transfer Pricing Guidelines, and propose the draft provisionsfor tax law amendments. In addition, our group has advised the Ministryof Strategy and Finance in connection with ongoing tax treaty negotiationswith the US. Furthermore, we successfully spearheaded the tax legislative supportproject which led to amendment of the Korean tax laws and regulationsto allow deduction for cost of equity stock compensation such as stock optionsand stock awards (via stock of the parent company or head office) provided toemployees of the Korean subsidiary or branch.

117. Tax ControversyOur tax group has substantial experience in the resolution of tax controversieswith the Korean tax authorities. We assist clients with their tax audits and representclients in tax controversies before the National Tax Service and in civil andcriminal tax trials and appeals in the Korean courts, including the ConstitutionalCourt. We also advise corporations and their tax and legal advisers on proceduralissues and disputes with the National Tax Service.Recently, we successfully represented a client in a landmark constitutional casechallenging the constitutionality of the legislation on land profit tax and secondaryliability for majority shareholders, obtaining a ruling that the legislation wasunconstitutional. We also successfully represented the Hyundai Group in a caseinvolving the transfer of stock prior to the listing of the stock, thereby saving ourclient over KRW 100 billion in taxes. More recently, we successfully represented amajor life insurance company before the Tax Tribunal in a case involving revaluationof property held by the company, where the tax amount in dispute was approximatelyUS$220 billion. We received a ruling of the Tax Tribunal in our client’sfavor for the abatement of penalty taxes in the amount of approximately US$114million.In August 2008, Yulchon successfully represented a major U.S.-based financialinstitution at the Supreme Court of Korea in its appeal of the Securities TransactionTax (STT) imposed on its purchase of depository receipts for shares issued bya Korean financial institution. The relevant issue was whether the term “stock” inthe Securities Transaction Tax Act implicitly includes the concept of depository receipts.At the district court level, the Seoul Administrative Court held that the STTassessment should be cancelled on the ground that stock and depository receiptsare clearly distinguishable for STT purposes and the relevant tax provision must beinterpreted strictly according to the literal meaning of the terms used. Upon losingat the Seoul Administrative Court, the National Tax Service of Korea appealedto the Seoul High Court; in May 2008, the Seoul High Court also found for thetaxpayer. On August 21, 2008, the Supreme Court rendered a decision in favor ofthe taxpayer, accepting the rationale employed by the lower courts.8. Real EstateYulchon has a dominant and cutting-edge real estate practice. This has beendue in part to the tax group’s close collaboration with the firm’s real estategroup in coming up with innovative real estate acquisition and financing structuresto minimize taxes. Our firm was an early pioneer in the structuring ofloans in the form of ABS bond issuances to finance real estate acquisitions toobtain tax benefits provided under Korea’s Asset Backed Securitization Act andthe use of trusts to acquire and sell real estate. We used this structure to assista foreign client in the acquisition of the Star Tower building valued at overUS$500 million, the largest international real estate transaction in Korea.9. CustomsYulchon assists its clients in navigating the intricacies of Korean customs proceduresand helps clients resolve customs duty audits and controversies. Ourfirm also helps clients in the use and establishment of customs bonded areas.The firm’s close relationship with the Korean Customs Service and a variety ofcustoms brokerage firms ensures our ability to work through the customs bureaucracyto quickly resolve problems and also allows our firm to keep up withthe latest news and developments in the customs arena.Recently, we successfully represented several major international software andtechnology companies with their customs audit and valuation of softwareproducts. We also represented P&G Korea in the first-ever Advance CustomsValuation Arrangement (ACVA) with the Korea Customs Service since the introductionof the ACVA system in 2007.Our tax controversy services are not confined to domestic dispute resolutions;we represent multinational enterprises in Mutual Agreement Procedures (MAP)as well. Recently, our tax group successfully represented a multinational semiconductormanufacturer in a MAP between the Hungarian and Korean competentauthorities under the Hungary-Korea tax treaty.

13ProfessionalsChang Rok Woo_ Managing PartnerChang Rok Woo (Managing Partner) is a member of the Tax PolicyReview Council, Ministry of Strategy and Finance, the InternationalFiscal Association, Tax Law Association, and InternationalBar Association. He worked at Kim & Chang for thirteen years asan associate and partner, and is the founder of Yulchon. He hastaught at the Judicial Research and Training Institute and at theSeoul National University Law School. He is the author of severalpublications, including “A Brief Survey of Korean CorporateLiquidation and Bankruptcy Law” (1980); “A Study on Streamliningand Improving the Tax Law System” (1982); “A Study onTax Treatment of Interest Received by Foreign Banks – with Emphasison Characterization of such Interest” (1992); “A Study onthe Concept of Market Price in Tax Law” (1994); “The Standardsto Determine Non-Business Real Property” (1995); “Residency asthe Base for Tax Jurisdiction” (1996); “Deductibility of Illegal Expenses”(1997); and “Tax Issues Related to Mergers & Acquisitions(1997). His primary practice areas include corporate, taxation, realestate, and government relations.T _ 82-2-528-5201E _ crwoo@yulchon.comSai Ree Yun_ PartnerSai Ree Yun (Partner) is a Technical Advisor to the Tax Policy ReviewCouncil at the Ministry of Strategy and Finance and a member ofthe Competition Policy Advisory Board at the Fair Trade Commission.He served as member of the Local Tax Appeals Board for fouryears and as Outside Legal Advisor to the Korea Fair Trade Commission.Mr. Yun currently serves as Vice Chairman of InternationalFiscal Association Korea. He was selected as a World’s Leading TaxAdvisor by Legal Media Group in 2009. He has taught at the JudicialResearch and Training Institute and at the Seoul National UniversityLaw School. He is the author of several articles and publications,including: “Cost-Sharing and Transfer Pricing,” Taxation andInbound Investment in Pacific Rim Countries, International Bureauof Fiscal Documentation (1991); “Transfer Pricing in South Korea,”CCH International Transfer Pricing Laws (Text and Commentary)(1994); and “Tax Aspects of Derivative Financial Instruments,” 49thCongress of the International Fiscal Association (1995). His primarypractice areas are corporate, antitrust, taxation, and governmentrelations.T _ 82-2-528-5202E _ sryun@yulchon.com

15Soon Moo Soh_ PartnerSoon Moo Soh (Partner) is a Technical Advisor to the Tax PolicyReview Council at the Ministry of Strategy and Finance and hasserved as a non-standing judge of the Tax Tribunal. Dr. Soh receivedhis LL.B. and LL.M. degrees from Seoul National University,was a visiting scholar at Bonn University in 1990 and received hisPh.D. degree from Kyung Hee University in 1999. Having servedas a judge for twenty years, including a term as Chief ResearchJudge of the Supreme Court of Korea, he joined Yulchon in 2000as a partner. He has taught at the Judicial Research and TrainingInstitute, and also lectures at the Seoul National UniversityLaw School. His publications include: “Tax and Constitutional Litigation”(1998); “Study on the Tax Refund Right & Its LitigationStructure” (1999); “Tax Litigation” (2008).T _ 82-2-528-5302E _ smsoh@yulchon.comSeok Hoon Kang _ PartnerSeok Hoon Kang (Partner) served as a judge at various courts for17 years, including the Seoul District Court, the Seoul High Court,and the Supreme Court of Korea. During his tenure at the SupremeCourt, Mr. Kang served as the leader of a team of research judgesdedicated to tax cases. He was also a lecturer in tax law at theJudicial Research and Training Institute for two years. Mr. Kang iscurrently acting as the National Tax Examiner at the National TaxService, the Tax Regulation Commissioner at the Ministry of Strategyand Finance, as an advisor to the Ministry of Legislation, andas the vice chairman of the Korean Local Tax Association. Mr. Kangreceived his LL.B. degree from Seoul National University and LL.M.sfrom both Seoul National University and the Georgetown UniversityLaw Center. He has authored many publications, including "Applicationof Denial of Unfair Transaction Rules to Unfair Merger AfterStock Transfer: Judgment on Other Types of Granting Benefits"(2005) and "Review of 2005 Corporate Income Tax Law Cases"(2006).T _ 82-2-528-5669E _ shkang@yulchon.comDong Soo Kim_ PartnerDong Soo Kim (Partner) is an Advisor to the Jungbu Regional TaxOffice and a member of the Advisory Board at the National TaxService Call Center, the Tax Quality Innovation Committee and theInternational Tax Law Reform Act Committee at the National TaxService. Mr. Kim was selected as a “Leading Tax Attorney” for twoconsecutive years by AsiaLaw, the leading legal journal for theAsia-Pacific region. Mr. Kim received his LL.B. degree from SeoulNational University and his LL.M. from the University of Florida,Gainesville in International Tax Studies. He was also a memberof the Taxation Review Committee of the Samseong District TaxOffice, the International Fiscal Association, Tax Law Association,and the International Bar Association. Mr. Kim has lectured at theSeoul National University Law School as an adjunct professor. Hispublications include “Lease and Tax Avoidance” (1988), “Earnings-strippingRule” (1998), “Can the Earnings-stripping RuleWithstand the Crossfire of the Treaty Nondiscrimination Rule?”(1998).T _ 82-2-528-5219E _ dskim@yulchon.comKyung Geun Lee_ Senior Tax AttorneyKyung Geun Lee (Senior Tax Attorney) is a former Director of theInternational Tax Division and the Corporate Income Tax Divisionat the Korean Ministry of Strategy and Finance. Since he joinedYulchon in December 2007, he has led the international tax team.During his service in the Ministry, he played a leading role in formulatingpolicies and reform measures in Korean income tax law aswell as the Law for Coordination of International Tax Affairs. He alsonegotiated tax treaties with the competent authorities of Australia,Canada, China, India, Ireland, Malaysia, Switzerland and Thailandand initial drafts of treaties (or protocols) with Australia, China,Canada, and Thailand during 2005-2006. During 1999-2003, heworked for the OECD Center for Tax Policy and Administration as aPrincipal Administrator. Also, during 2005-2009, he played a leadingrole as Vice Chair of the UN Tax Expert Committee. Currently, heparticipated in the Transfer Pricing Subcommittee of that committeeas a member from the private sector.T _ 82-2-528-5238E _ kygelee@yulchon.com

17Soo-Jeong Ahn_ Senior Foreign CounselSoo-Jeong Ahn (Senior Foreign Counsel) joined Yulchon in 2008.She has vast experience in representing and advising foreign anddomestic clients in tax and corporate aspects of their cross-bordertransactions and litigation and participated in a number of significantreal property and M&A transactions in Korea as lead transactionlawyer. She has published various articles and publications onthe taxation of cross-border transactions and is a frequent speakeron international tax issues. She was admitted to the New York Barin 1996 and has since practiced law in the New York offices ofMorgan, Lewis & Bockius and Shearman & Sterling, and with Kim& Chang Law Offices in Korea, specializing in tax, financial regulations,cross-border real property and M&A transactions. Immediatelyprior to joining Yulchon, she served as in-house counsel forCitibank. Ms. Ahn is a graduate of University of California, Berkeley(B.A. with magna cum laude in Economics); she obtained J.D.and tax LL.M. degrees from New York University School of Law.T _ 82-2-528-5552E _ sjahn@yulchon.comJae Hoon Lee_ Senior Tax AttorneyJae Hoon Lee (Senior Tax Attorney) was an NTS official for over 30years, specializing in the corporate income taxation and tax auditsof various domestic and foreign-invested corporations. Over theyears, he held various positions within the NTS, including Directorof the Investigation Division of the Seoul Regional Tax Office,Superintendent of the Yeosu District Tax Office, and Director ofthe Income Tax Division of the Daejeon District Tax Office, just toname a few. He received the prize for Best Performance Withinthe National Tax Service in 1985, a Service Merit Medal for hisoutstanding service to the government in 1997, and the Order ofService Merit-Red Stripe in 2005.T _ 82-2-528-5357E _ leejh@yulchon.comUn Sang Jung _ Senior Customs AttorneyUn Sang Jung (Senior Customs Attorney) is an expert in customsand international trade for domestic and foreign-investment corporations.He has worked as a customs specialist at customhousesin Seoul, Busan, and Incheon and also at the Customs Bureau ofthe Tax Tribunal. He received his B.A. and M.A. degrees from SungkyunkwanUniversity.T _ 82-2-528-5653Jong Bong Kim_ Tax AttorneyE _ usjung@yulchon.comJong Bong Kim (Tax Attorney) is a former NTS official with over 20years of service under his belt. While serving at the NTS in variousposts, including the Jungbu Regional Tax Office, the NTS InvestigationBureau, and the Seoul Regional Tax Office, Mr. Kim focused ontax issue affecting corporations, including foreign-invested enterprises,and gained expertise in corporate income tax. He received hisB.S. degree from the National Tax College and M.A. in Policy Studiesfrom Korea University Graduate School.T _ 82-2-528-5864E _ jbkim@yulchon.comSang Woo Song _ Certified Public AccountantSang Woo Song (Certified Public Accountant) is a senior CPA whosemain practice area is transactional tax. Mr. Song represented andadvised clients on wide-ranging tax issues for domestic and crossbordertransactions, including investments involving domestic andforeign investment funds. He also served as an advisor for the NationalTax Service and Ministry of Strategy and Finance in connectionwith the reform of various international tax regimes. Beforejoining Yulchon, Mr. Song was a senior manager at Samil AccountingCorporation (PricewaterhouseCoopers). Mr. Song is a memberof New York Bar and received his LL.M. in Taxation from NorthwesternUniversity School of Law.T _ 82-2-528-5408E _ sangsong@yulchon.com

19Of CounselKa Ram Chung _ Tax AttorneyKa Ram Chung (Tax Attorney), prior to joining our firm, spent 7years with the National Tax Service as a tax official conducting taxaudits on multinational enterprises involving complicated internationaltax issues. Mr. Chung was also a director of the FinanceService Tax Group at Samil (PricewaterhouseCoopers) for over 7years, advising companies on transfer pricing issues and providingaudit defense services. He received his B.S. degree (in Internal Tax)from the National Tax College.T _ 82-2-528-5679E _ krchung@yulchon.comJae Kwang LeeJae Kwang Lee is a former government official who worked formany years at the National Tax Service in various positions, includingAssistant Commissioner for Corporate Taxation, Commissionerof the Gwangju Regional Tax Office, and Assistant Commissionerfor Planning and Management. Mr. Lee received LL.B. degree fromYeungnam University in 1975 and passed the higher civil serviceexamination in 1973. He also served as a research fellow at theKorea Institute of Finance. He received the top prize for the BestPerformance Within the National Tax Service in 2003, and received aPresidential Citation in 2004 for his achievements as a governmentofficial.T _ 82-2-528-5288E _ leejk@yulchon.comJoseph Hong _ Foreign AttorneyJoseph Hong (Foreign Attorney) is a member of the New York Bar.Mr. Hong received his LL.B. degree from Korea University, and hisJ.D. degree from Georgetown University Law Center. Prior to joiningYulchon in 2006, Joseph was a consultant for Ernst & Young,New York and PricewaterhouseCoopers Korea, advising mostlymultinational firms investing in Korea on international tax matters.Since joining Yulchon, Joseph has worked on a number ofmajor tax controversy cases in Korea. Many of the cases are relatedto the Korean tax authorities’ denial of tax treaty benefits basedon anti-abuse rules. He was also part of the litigation team thatsuccessfully represented a major U.S.-based financial institution atthe Seoul Administrative Court, the Seoul High Court and the SupremeCourt in its appeal of the Securities Transaction Tax imposedon its purchase of depository receipts over shares issued by a Koreanfinancial institution. In addition to advising on tax structuringof investment into Korea, Joseph also works on tax structuring ofoutbound investment by Korean multinational companies.Professor Emeritus Tai-Ro LeeProfessor Emeritus Tai-Ro Lee is a member of the Korean CommercialLaw Association, International Fiscal Association, Korea Tax LawAssociation, Tax Policy Committee of the Ministry of Strategy andFinance, and the Tax Research Institute of the Korean Associationof Certified Tax Accounts. He has been serving as non-standingjudge at the National Tax Appeals Board of the Ministry of Strategyand Finance for over fifteen years. His publications include “TreatyShopping,” Tax Studies, Vol. 1 (1975); “A Study in the Regulationof the Use of Tax Havens” (1976); “A Review of the 1996 Tax Revision,”Human Rights and Justice, Korean Bar Association Publication(1997); “Changing Tax Law in East and Southeast Asia Towardsthe Twenty First Century,” Kluwer Law International (1997).AdvisorsT _ 82-2-528-5316E _ jhong@yulchon.comOur advisors include renowned tax scholars in academia, such asChang Hee Lee, Tax Professor at Seoul National University, ChulSong Lee, Tax and Corporate Law Professor at Hanyang University,Yoon Oh and Hun Park, Tax Professors at the University of Seoul.

CONTACT INFORMATIONSai Ree Yun, Esq. Tel : 82-2-528-5202 E-mail : sryun@yulchon.comDong Soo Kim, Esq. Tel : 82-2-528-5219 E-mail : dskim@yulchon.comKyung Geun Lee, Ph.D. Tel : 82-2-528-5238 E-mail : kygelee@yulchon.comSoo-Jeong Ahn, Esq. Tel : 82-2-528-5552 E-mail : sjahn@yulchon.com

Yulchon- Worldwide Office ContactsKoreaTextile Center 12F, 944-31 Daechi 2-dong Gangnam-gu, Seoul, KoreaTel. 82-2-528-5200 Fax. 82-2-528-5300www.yulchon.com mail@yulchon.comVietnamHo Chi Minh CityUnit 03, 4th Floor, Kumho Asiana Plaza, 39 Le Duan St., Ben Nghe Ward,Dist.1, Ho Chi Minh City, VietnamTel. 84-8-3911-0225 Fax. 84-8-3911-0230HanoiUnit M01, Atlanta Place, 49 Hang Chuoi,Hai Ba Trung District, Hanoi, VietnamTel. 84-4-3972-8123