Hyundai Heavy Industries Co., Ltd. (Attorney Yoon Jae-in, Counsel for the defendant-appellant)

Ulsan Metropolitan City Head of the Nam-gu (Law Firm International Law, Attorney Lee Dong-young, Counsel for defendant-appellant)

Ulsan District Court Decision 201Guhap2099 Decided April 4, 2012

September 7, 2012

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s imposition of acquisition tax of KRW 38,113,890 and registration tax of KRW 38,113,890 against the Plaintiff on April 30, 2010 shall be revoked.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Details of the disposition;

A. 1) On September 22, 2005, the Plaintiff Company was exempted from acquisition tax and registration tax on each of the above lands on the ground that: (a) the land acquired by the Plaintiff constituted “real estate acquired to newly construct or expand industrial buildings, etc. in an industrial complex” under the main sentence of Article 276(1) of the former Local Tax Act (amended by Act No. 7834, Dec. 31, 2005; hereinafter “former Local Tax Act”) with two lots, including 127,446.0 square meters of land in Ulsan-dong, Ulsan-gu, Ulsan-gu, Seoul Metropolitan City, which was acquired by the Plaintiff, constituted “real estate acquired to newly construct or expand industrial buildings

2) On December 1, 2005, the Plaintiff Company leased 9,000 square meters (hereinafter “the instant land portion”) out of the remaining 12,871 square meters (hereinafter “instant land”) remaining after each land is divided into 12,871.9 square meters (hereinafter “instant land”) to Hyundai Professional Co., Ltd., a company established by the Nonparty, etc., who was an employee of the Plaintiff Company, in accordance with the Plaintiff Company’s in-house start-up business system, on December 1, 2005, 127,46.0 square meters of a factory site (number 1 omitted) or 112,871.9 square meters (number 2 omitted). Hyundai Professional Co., Ltd., a corporation, one of the vessel manufacturing processes of the Plaintiff Company, was newly constructed and operated on November 9, 2006.

3) On April 25, 2008, the Plaintiff Company invested in kind the instant land in the power plant Co., Ltd., and purchased the said land again from the said company on June 7, 2011.

B. On April 30, 2010, the Defendant issued a disposition to collect acquisition tax of KRW 38,113,890 and registration tax of KRW 38,113,890 on the ground that the Plaintiff leased the instant land portion to Hyundai Professionals (hereinafter the instant disposition).

[Ground for recognition] Unsatisfy

2. Whether the instant disposition is lawful

A. The parties' assertion

1) Plaintiff

According to the main sentence of Article 276 (1) of the former Local Tax Act, the real estate acquired by the “person who wishes to lease the real estate for factories to small and medium enterprises” is also subject to the reduction of acquisition tax and registration tax, and the “real estate for factories” includes the land in the site state where industrial buildings, etc. are not constructed. Thus, even if the Plaintiff wishes to lease the land portion in the site without constructing industrial buildings, etc. to the modern professional agent, it constitutes the reduction of acquisition tax and

In addition, since modern professional agent who leased the part of the instant land from the Plaintiff newly constructed industrial buildings, etc. and used them for its purpose within the prescribed period, it does not constitute “where it is not used directly for the use of industrial buildings, etc. within three years from the date of its acquisition without justifiable grounds, or where it is sold or used for other purposes without using directly for the use of industrial buildings, etc. for more than two years from the date of its use” (Article 276(1) proviso of the Local Tax Act is interpreted as such insofar as the Plaintiff directly constructs industrial buildings, etc. and does not use them for that purpose, modern professional agent constitutes a part of the Plaintiff company by the Nonparty, etc. who was an employee of the Plaintiff, and thus, constitutes a part of the Plaintiff company by constructing industrial buildings, etc., it can be deemed that the Plaintiff directly uses them for that purpose).

2) Defendant

"A person who intends to lease real estate for factories to small and medium entrepreneurs" included in the main sentence of Article 276 (1) of the former Local Tax Act shall be deemed to be a person who intends to newly build and expand industrial buildings, etc. and lease them to small and medium entrepreneurs along with the land annexed thereto. However, the Plaintiff’s lease of the land portion in this case to

In addition, after the Plaintiff acquired the instant land, it leased the instant land to Hyundai Professionals without constructing industrial buildings, etc. on the instant land. This constitutes “where it is used for other purposes without using it directly for the purpose of industrial buildings, etc., other than for other purposes,” which is exempted from the proviso of Article 276(1) of the former Local Tax Act, and thus, the instant disposition is lawful.

(b) Related statutes;

Article 276 (Reduction or Exemption for Industrial Complexes, etc.) (1) Any real estate acquired by a person (including a person who intends to lease real estate for factories to a small or medium enterprise owner) who intends to newly construct or extend a building for industrial use, research facility, or experimental production prescribed by Presidential Decree (hereafter referred to as "industrial complex, etc." in this Article) within an industrial complex designated under the Industrial Sites and Development Act, and an industrial complex created under the Act on Special Cases concerning Promotion of Industrial Cluster Development and Factory Establishment and Industrial Technology Support, and an industrial complex constructed under the Act on Special Cases concerning Support of Technoparks, shall be exempted from the acquisition and registration taxes, and the property tax on such real estate shall be reduced by 50/100 for five years from the date on which the tax liability becomes first established (in cases of an industrial complex located in an area outside the Seoul Metropolitan area under subparagraph 1 of Article 2 of the Seoul Metropolitan Area Readjustment Planning Act, the acquisition tax or the exempted property tax shall be collected additionally for two or more years from the date of its acquisition without justifiable reasons.

C. Determination

1) Whether the Plaintiff constitutes “a person who wishes to lease real estate for factories to a small and medium enterprise owner” under the main text of Article 276(1) of the former Local Tax Act (hereinafter “instant main provision”).

The main text of Article 276 (1) of the former Local Tax Act provides that "any real estate acquired by a person (including a person who intends to lease real estate for factories to a small or medium enterprise owner) who intends to newly construct or extend a building for industrial use, research facilities, or pilot production in an industrial complex designated by the Industrial Sites and Development Act shall be exempted from acquisition tax and registration tax," and the main provision of this case provides that "The main provision of this case corresponds to a person who intends to newly construct or extend a building, ② since real estate includes land and a building, there is no ground to interpret "real estate for factories" as the land where a factory is constructed, and ③ the above provision of this case was newly established when the Local Tax Act was amended by Act No. 4995 on December 6, 1995. In full view of the fact that the legislative purpose of this case was to reduce local tax on the factory site in a distribution complex and industrial complex to support small and medium enterprises and reduce distribution expenses at the time, as alleged by the defendant, the main provision of this case includes land to be leased to the small and medium enterprise owner.

Therefore, this part of the plaintiff's assertion is justified.

2) Existence of grounds for collection under the proviso of Article 276(1) of the former Local Tax Act

The proviso of Article 276 (1) of the former Local Tax Act (amended by Act No. 10221, Mar. 31, 2010; the proviso of Article 276 (1) of the Local Tax Act, which was in force at the time of the disposition, is identical to the provisions of the proviso and the proviso of Article 276 (1) of the former Local Tax Act; thus, it is indicated as above for convenience; hereinafter "the proviso of this case") provides that "where an industrial building is not used directly for the purpose of industrial building, etc. within three years from the date of its acquisition without good cause" shall be collected from the Minister of Government Administration and Home Affairs (On the other hand, the proviso of the above Article provides that "where an industrial building, etc. is not used directly for two or more years from the date of its use for the purpose of industrial building, etc., and is sold or used for other purposes. In this case, the part of the land of this case, which was the date of its use, constitutes a legitimate cause for collection from the Minister of Government Administration and Home Affairs.

As seen earlier, inasmuch as the instant key provision is interpreted to include land acquired to lease land for a factory to a small and medium enterprise without constructing an industrial building, etc., a person who directly uses the instant proviso for the purpose of an industrial building, etc. does not necessarily mean that the person is limited to the purchaser of the land (the word “direct use” in the foregoing phrase is deemed to limit the purpose of use of the building, and it is difficult to view that the subject of use is limited to the building).

In addition, Article 276 (1) of the former Local Tax Act intends to newly construct or extend industrial buildings, etc. in an industrial complex, the legislative intent of exempting acquisition tax, etc. on the acquired real estate is to facilitate the occupancy of enterprises in an industrial complex by exempting acquisition tax, etc. in cases of constructing or occupying an industrial complex and constructing industrial buildings, etc., and to enhance the competitiveness of an industrial complex. In addition, the proviso to collect reduced acquisition tax, etc. is to encourage landowners to prompt factory construction and start business, to encourage landowners, and to punish cases where the market price of real estate outside of factory construction or other tax benefits are damaged and the use of real estate is changed, etc. In addition, if a small and medium entrepreneur uses industrial buildings for the purpose of industrial buildings by newly constructing or expanding industrial buildings on the leased real estate, it does not go against the legislative intent of exempting acquisition tax and registration tax.

Therefore, the phrase “cases not used directly for the purpose of industrial buildings, etc.” under the proviso of this case shall not be interpreted to mean cases where a land acquisitor directly constructed an industrial building, etc. and then directly uses it or allow the lessee to directly use it. It shall not be deemed that the case does not fall under the case where a small and medium entrepreneur who is a land lessee directly uses it for that purpose after constructing an industrial building, etc. on the land.

Therefore, the plaintiff's assertion on this part is justified.

C. Sub-committee

Ultimately, after the plaintiff acquired the land in this case, it is leased to Hyundai Professional, a small and medium enterprise owner in the state of the land part, and since Hyundai Professional, a lessee, newly constructed industrial buildings, etc. on the above part of the land and used directly for its original purpose within three years from the date of the above acquisition, the plaintiff constitutes reduction and exemption of the acquisition tax and registration tax, and there is no reason for additional collection of the acquisition tax and registration tax under the proviso of this case. Thus, the disposition in this case is unlawful.

3. Conclusion

Therefore, the plaintiff's claim is justified, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed. It is so decided as per Disposition.

Judges Choi Jae-man (Presiding Judge)