Mod. 39 (Tax Special Cases for Debt Assumption/Repayment)

Where a shareholder or investor of a domestic corporation (limited to cases where it is a corporation; hereinafter referred to as "shareholder, etc." in this Article) assumes or repays the debt of the corporation, and meets the requirements of any of the following subparagraphs, the amount of the corporation's debt that is assumed or repaid by the shareholder, etc. shall be deductible in calculating the income amount of the shareholder, etc. for the relevant year, within the limits of the amount prescribed by Presidential Decree. <Amended on Dec. 24, 2018, Dec. 28, 2021, Dec. 31, 2023> 1. To transfer all of the ownership shares or investment equity of the controlling shareholder, investor, and their special-relationship persons (hereinafter referred to as "controlling shareholder, etc." in this Article) of the domestic corporation to a person other than a special-relationship person prescribed by Presidential Decree, by December 31, 2026, in accordance with a financial restructuring plan prescribed by Presidential Decree (limited to those approved by a person prescribed by Presidential Decree; hereinafter referred to as "financial restructuring plan" in this Article). 2. To submit a corporate liquidation plan to the head of the tax office having jurisdiction over the place of tax payment of the domestic corporation, as prescribed by Presidential Decree, and to conclude the liquidation of the domestic corporation by December 31, 2027.

When applying paragraphs ① and ②, if a corporation subject to transfer, etc. that has received the application of paragraph ② falls under any of the following subparagraphs, the amount not included in gross income as prescribed by Presidential Decree shall be included in gross income when calculating the income amount of the corporation subject to transfer, etc. for the tax year in which the reason occurred. In this case, the corporate tax reduced for shareholders, etc. under paragraph ① and the amount of interest equivalent calculated as prescribed by Presidential Decree shall be additionally paid as corporate tax, and such tax shall be deemed as the tax payable under Article 64 of the Corporate Tax Act. 1. Where the debt-to-equity ratio of the corporation subject to transfer, etc. increases beyond the standard debt-to-equity ratio within three years after the debt assumption or repayment (limited to corporations subject to transfer, etc. falling under subparagraph 1 of paragraph ①). 2. Where the business is discontinued or liquidated within three years from the date of debt assumption or repayment, and the business is not succeeded by a merged corporation, a newly established corporation due to division, or a corporation that is a party to a division merger (limited to corporations subject to transfer, etc. falling under subparagraph 1 of paragraph ①). However, in cases of unavoidable reasons prescribed by Presidential Decree, such as bankruptcy, the corporate tax reduced for shareholders, etc. under paragraph ① and the amount of interest equivalent calculated as prescribed by Presidential Decree shall not be added. 3. Where the requirements of subparagraph 1 or 2 of paragraph ① are not met.

The benefits obtained by other shareholders, etc. of a corporation due to the assumption or repayment of the corporation's debt under paragraph ① shall not be considered as a gift under the Inheritance and Gift Tax Act. However, this shall not apply to special-relationship persons of the shareholder, etc. who assumed or repaid the debt, as prescribed by Presidential Decree.

When applying the provisions of paragraphs ① through ⑥, the scope of debt, the contents and approval criteria of the financial restructuring plan, the scope of controlling shareholders, etc., the requirements and reporting methods for asset deficiency, the submission of documentation on corporate transfer and acquisition, the submission of the corporate liquidation plan, the application for tax reduction, and other necessary matters shall be prescribed by Presidential Decree.