(1) The income of each consolidated corporation for each consolidated business year shall be the aggregate of income or losses calculated in the following order: <Amended on Dec. 31, 2011; Dec. 24, 2018; Dec. 13, 2022>
1. Calculation of income for each business year by consolidated corporation: Calculation of income or losses for each business year of each consolidated corporation pursuant to Article 14;
2. Exclusion of consolidation adjustment items by any of the following consolidated corporations:(a) Adjustment of non-inclusion of received dividends in gross income: An amount equivalent to the dividend income of each consolidated corporation that has been excluded from gross income pursuant to Article 18-2 shall be included in gross income;(b) Adjustment of non-inclusion of donations and business promotion expenses in deductible expenses: An amount equivalent to the donations and business promotion expenses that have been excluded from deductible expenses pursuant to Articles 24 and 25 shall be included in deductible expenses;
3. Adjustment of profits and losses from transactions between any of the following consolidated corporations:(a) Adjustment of received dividends in gross income: An amount equivalent to the dividend amount received from another consolidated corporation shall not be included in gross income;(b) Adjustment of business promotion expenses: An amount equivalent to business promotion expenses paid to another consolidated corporation shall not be included in deductible expenses;(c) Adjustment of appropriation for bad debts: An amount equivalent to appropriation for bad debts pursuant to Article 34 established in relation to claims to another consolidated corporation shall not be included in deductible expenses;(d) Adjustment of transfer marginal profits or losses of assets: Profits or losses from the transfer of assets prescribed by Presidential Decree, such as tangible or intangible assets, shall be excluded from gross income or deductible expenses, as prescribed by Presidential Decree;
4. Allocation of consolidation adjustment items to each consolidated corporation: An amount excluded from gross income or deductible expenses shall be first calculated by applying mutatis mutandisArticles 18-2, 24, and 25, deeming a consolidated group to be one domestic corporation and the amount calculated, as prescribed by Presidential Decree, among the calculated amount shall be excluded from gross income or deductible expenses by consolidated corporation.
(2) Any of the following losses on the disposal of assets shall be included in deductible expenses up to the amounts in the relevant subparagraphs when the amount of income of the relevant consolidated business year is calculated. In such cases, losses on disposal excluded from deductible expenses, exceeding the limit, shall be construed as losses referred to in Article 76-13 (1) 1 and shall be deducted from the tax base for the following consolidated business year up to the amounts in the relevant subparagraphs: <Amended on Dec. 31, 2011; Dec. 15, 2015; Dec. 24, 2018; Dec. 31, 2022>
1. Where the consolidated tax return system is applied to a domestic corporation after it has become a wholly controlled subsidiary of another domestic corporation (excluding where it became a wholly controlled subsidiary on the registration date of establishment), the loss from the disposal of the assets (limited to assets acquired before the consolidated tax return system is applied) accrued during the period between the business year in which the consolidated tax return system is applied and the consolidated business year that ends within four years from the start date of the business year following the business year in which the consolidated tax return system is applied: The amount specified in either of the following items (referring to the individually reverted amount prior to the deduction of the relevant loss from disposal, but the foregoing shall not apply to the cases to which the latter part of paragraph (2) applies):(a) The individually reverted amount of consolidated income of the consolidated parent corporation, in cases of the loss of the consolidated parent corporation from the disposal of assets;(b) The individually reverted amount of consolidated income of the consolidated subsidiary, in cases of the loss of the consolidated subsidiary from the disposal of assets;
2. Where a consolidated parent corporation qualifiedly merges (including a qualified division and merger of a consolidated parent corporation as a counterpart corporation to the division and merger) with another domestic corporation (limited to a corporation, other than a consolidated corporation as at the registration date of the merger), losses (limited to the difference only where the market value of the relevant assets as of the registration date of the merger is lower than book value) incurred in the consolidated business year that ends within five years from the registration date of the merger from the disposal of the assets owned by the consolidated parent corporation, the consolidated subsidiary (hereafter in this paragraph, referred to as "existing consolidated corporation"), and the merged corporation (including the divided corporation; hereafter in this Article, the same shall apply) before the merger: The amount specified in either of the following items (referring to the amount of income prior to the deduction of the relevant loss on disposal, but the foregoing shall not apply to cases to which the latter part of paragraph (2) applies):(a) The amount of income of the existing consolidated corporation, in cases of the loss of the existing consolidated corporation from the disposal of assets (referring to the amount of income accrued from the business of the consolidated parent corporation and the individually reverted amount of consolidated income of the consolidated subsidiary before the merger among the individually reverted amount of consolidated income of a consolidated parent corporation);(b) The amount of income accrued from business transferred by the merged corporation, among the individually reverted amount of consolidated income of the consolidated parent corporation, in cases of the loss incurred from the disposal of assets owned by the merged corporation before the merger.
(3) Matters necessary for calculating the amount allocated to each consolidated corporation among losses for each consolidated business year pursuant to paragraph (1), the amount excluded from gross income or deductible expenses by applying mutatis mutandisArticles 18-2 and 25, deeming a consolidated group to be one domestic corporation, and for including losses on disposal in deductible expenses under paragraph (2) shall be prescribed by Presidential Decree. <Amended on Dec. 24, 2018>[This Article Wholly Amended on Dec. 30, 2010]