판례평석 : 자회사(子會社)의 임직원(任職員)이 외국법인(外國法人)인 모회사(母會社)로부터 받은 주식매수선택권(株式買受選擇權)과 관련된 소득과세(所得課稅)의 방법(方法) -대법원 2007. 10. 25. 선고 2007두1941 판결- = Case Review : How to Tax a Stock Option Granted by a Foreign Parent Company -A Review on the Supreme Court Decision, 2007 Du 1941 of October 25, 2007-

다국어 초록 (Multilingual Abstract)

The Korean Supreme Court (hereinafter the Court) rendered on October 25, 2007, a landmark decision on when and how to tax a stock option granted by a foreign parent company to an employee who provides her service for a Korean subsidiary or a Korean branch of a foreign subsidiary. Firstly, the Court in this decision held that the grant of a stock option itself is not a taxable event, but the spread between the fair market value of the shares and the option price (hereinafter the Gain) should be taxed as employment income when the option is exercised, which conclusion was already reached in an unpublished 2006 decision of the Court. Secondly, the Court held that, as long as the grant of a stock option is to a certain extent connected with employment, then the Gain should be qualified as employment income regardless of whether or not the taxpayer is employee of the grantor of the stock option. Thirdly and lastly, the Court accepted the position long taken by the tax authorities that, if the stock option is granted by a foreign parent company, then the Gain falls within the category of Eul-type employment income, which means that the Korean subsidiary, who is the legal employer of the taxpayer, is not subject to any withholding requirement under the Korean tax law. I believe that the first part of the holding is correct because, under the Korean income tax law, not just any betterment of one`s economic position is recognized as income, but it is always necessary to find the most appropriate timing of taxing such betterment, and in the event of a stock option, the exercise of the option should be viewed as such appropriate taxable event. This holding is also equitable when compared with cases where employees first agree to receive certain in-kind compensation and afterwards actually do receive such compensation. I also agree with the second part of the holding in that it is not desirable to determine tax implications based on such easily manipulable decision as which of the two companies, i.e. parent company or the subsidiary, pays the income to the employee. However, I do not agree with the third part of the holding. By holding that the Gain is Eul-type when the stock option is granted by a foreign parent, the Court effectively allow, the Korean subsidiary to avoid Korean withholding tax, and the employees to reduce Korean personal income tax burden because, even when they duly file tax returns to the Korean tax authorities, they are entitled to 10% tax credit which is not allowed with respect to Kap-type employment income. Since parent-granted stock option is an economic equivalent of a mixture of the parent transferring certain benefit to its subsidiary and the subsidiary paying compensation out of this benefit, here the Gain should be qualified as Kap-type, and thus subject to Korean withholding tax just like cash or in-kind compensation received directly from the subsidiary.