1. Before the former Restriction of Special Taxation Act was amended by Act No. 11614, Jan. 1, 2013

c. Article 2(1) of the former Special Provision Act

Article 31(1) of the Enforcement Decree of the Restriction of Special Taxation Act provides that, where a small or medium enterprise to be extinguished by a consolidation between small and medium enterprises operating a type of business prescribed by Presidential Decree transfers its fixed assets for business prescribed by Presidential Decree to a corporation established by consolidation or a corporation surviving the consolidation (hereinafter “integrated corporation”), the said fixed assets for business may be subject to the carryover taxation. Article 28(3) of the Enforcement Decree of the Restriction of Special Taxation Act provides that a person who intends to be subject to the carryover taxation of transfer income tax shall submit an application for carryover taxation prescribed by Ordinance of the Ministry of Strategy and Finance to the head of the district tax office having jurisdiction over the place of tax payment along with the consolidated corporation at the time of filing a tax base return (including a preliminary return) for the taxable year in which the date of consolidation falls. Meanwhile, Article 2(1)6 of the former Special Taxation Act provides that, where a person transfers the fixed assets for business, etc. used for the relevant business (hereinafter “previous fixed assets, etc. for business”).

It is defined as "where the corporation which acquired the fixed assets for business instead of taxation transfers the fixed assets for business to the corporation, the amount of capital gains tax calculated under Article 104 of the same Act shall be paid as corporate tax, which is calculated on the basis that there is no other asset transferred to the corporation in the taxable period to which the date of transfer

The purpose of the carried-over taxation of capital gains tax for consolidation between small and medium enterprises under Article 31 (1) of the former Act is to make a business for the integration between small and medium enterprises.