[Plaintiff-Appellant-Appellant-Appellant] Themort Inc. (Law Firm continental, Attorney Noh Jeong-cheon et al., Counsel for plaintiff-appellant-appellant-appellant)

The head of Jongno-gu Seoul Metropolitan Government (Law Firm Seocho, Attorney Park Sang-chul, Counsel for the plaintiff-appellant)

August 11, 2004

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The Defendant’s imposition of the registration tax of KRW 3,614,400,000 against the Plaintiff on June 9, 2003 and the local education tax of KRW 662,640,00 shall be revoked.

1. Details of the imposition;

A. On March 2, 2001, the Plaintiff was a foreign corporation whose head office is located in Hong Kong, established for the purpose of real estate investment, etc., and on March 2, 2001, the Korea Development Bank purchased a building of 10-2 large 1,877.4 square meters and above 31 square meters of the above ground (hereinafter the above land and buildings collectively referred to as “the instant real estate,” and where the above building is referred to as “the instant building,” it shall be referred to as “the instant building”) at 50.2 billion won. On August 7, 2001, the Plaintiff completed the registration of ownership transfer in the Plaintiff’s future, and around that time paid the Defendant the registration tax of 1.5 billion won and the local education tax of 31.2 billion won.

B. On June 9, 2003, the Defendant: (a) deemed the Samil Development Co., Ltd., which was entrusted with the management services of the instant real estate acquired by the Plaintiff as the Plaintiff’s branch; and (b) issued the instant disposition imposing local education tax (including additional tax) upon the registration of transfer of ownership on the instant real estate as KRW 4.518 billion on the ground that the Plaintiff acquired the instant real estate to establish a branch of the Seoul Metropolitan Area; (c) adjusted the amount of registration tax (including additional tax) as KRW 9.3.6 billion; and (d) imposed and notified the Plaintiff of the disposition of imposition of the instant tax by deducting the tax already paid from the said tax amount to KRW 3.614 billion; and (e) imposing and notifying the local education tax to additionally pay KRW 662,64 million.

(c) Procedures of the previous trial;

Plaintiff, July 19, 2003

Board of Audit and Inspection, January 20, 2004 (Dismissal of Request for Review)

[Ground of recognition] Facts without dispute, entry of Gap 3's evidence 1, 2, and Eul 3's evidence, the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The plaintiff asserts that the disposition of this case is unlawful for the following reasons.

(1) The three-party development is merely entrusted by the Plaintiff with the management services of the instant real estate and did not perform the functions of the Plaintiff’s branch as the rental business operator.

(2) When three-day development is employed, the Plaintiff’s prior approval is not required, and the Plaintiff’s branch office is not separately established in the office of three-day development, and the price for the management service belongs to three-day development. In light of the fact that three-day development belongs to three-day development, three-day development is an independent corporation not under the Plaintiff’s direction and supervision.

(3) Even if third party development is substantially the Plaintiff’s branch, it is not relevant to the establishment of the Plaintiff’s Republic of Korea and the registration of the instant real estate.

(b) Related statutes;

It is as shown in the attached Form.

(c) Fact of recognition;

(1) On August 29, 2001, the Plaintiff completed business registration with the head of Jongno-gu Tax Office on August 29, 2001, the Plaintiff’s Korean branch office, the representative of Nonparty 1, the location of the establishment, the date of opening the business on August 7, 2001, and the type of business as real estate leasing business. The Plaintiff did not engage in any business other than rental business for the instant real estate in Korea.

(2) On March 15, 2001, Samil Development is the comprehensive real estate management business, real estate leasing business, etc. The head office is a company established under the Commercial Act with the location of the real estate in this case, and on September 4, 2002, the opening date was registered to the head of Sejong District Tax Office on March 28, 2001, and there is no business other than the management of the real estate in this case. Three-party shareholders are only 21 shareholders.

(3) On December 31, 2001, the Plaintiff entered into a comprehensive building management consignment agreement with the Samil Development.

(1) The real estate of this case and buildings subject to entrusted management shall be the buildings of the size of 14th and upper floors above 7-3 ground, real estate of this case and Jongno-gu, real estate of this case, and the term of the contract shall be from August 7, 2001 to July 31, 2003

(2) Three days development shall be entrusted by the plaintiff to provide building management services, such as lease of a building, rent and management expenses and collection management of a building, cleaning and management of a building, operation and maintenance of facilities and equipment of a building, sanitation management and sanitary control and quarantine control, expenses for safety management, etc.

(3) For the maintenance of this contract and the management of buildings, tri-day development may employ and supplement necessary human resources after obtaining prior approval from the plaintiff, and the development of tri-day shall assume responsibility for them as an employer.

④ As a fee for this contract, the Plaintiff shall pay 110% (excluding value-added tax 10%) of the amount corresponding to the general management expenses, such as personnel expenses incurred in managing and maintaining the buildings, which are monthly for third party development, to third party development, and all necessary expenses for the maintenance and management of the buildings may be paid directly by the Plaintiff upon receiving the products of third

(5) Three days development shall execute expenses with a prior approval after presenting an estimate of expenses incurred in performing entrusted duties to the plaintiff: Provided, That the expenses incurred in relation to the disbursement and payment of public charges, such as electricity charges, water supply and drainage charges, public charges, national taxes, local taxes, etc., such as water supply and drainage charges, national taxes, and local taxes, may be executed without a prior approval of

(6) The third day development shall prepare a statement of accounts and financial statements related to entrusted duties and report them to the plaintiff within the 15th day of the following month, and the plaintiff may, if necessary, request the third day development to report whether entrusted duties are performed or to present relevant documents.

(4) On July 31, 2002, the Plaintiff entered into a contract for the management of facilities and equipment by setting the contract amount as KRW 396,423,746 per year with respect to the building subject to the above entrusted management between Samil Development and Samil Development, setting the contract amount as KRW 334,097,095 per year, and setting the contract amount as KRW 102,184,658 per year and the contract amount as KRW 102,658 per year. From March 3, 2003 to June 2003, the Plaintiff paid KRW 69,667,125 per month to Samil Development as the fee for the entrusted management service.

(5) Samil Development used approximately 35 square meters of the 27th floor of the instant building as an office. Among them, some of the spaces where large volume books, facsimile for office work, telephone, etc. are installed in addition to the response sets were used while Nonparty 1, the head of the Plaintiff’s Korean branch, was staying in Korea. The period during which Nonparty 1 stayed in Korea was 159 days from 201, 93 days from 2002, and 12 days from 203 days from 203.

(6) The lessee of the instant building paid rent by means of remitting it to the Plaintiff’s deposit account at the closing point of the Industrial Bank, which is located in the instant building, while keeping the Plaintiff’s official seal at the branch of the instant building, he prepared a tax invoice under the Plaintiff’s name on the rent and management fee paid by the lessee of the instant building, and delivered it to the lessee.

(7) When keeping the Plaintiff’s deposit passbook and seal impression, three-day development had withdrawn the fees for entrusted management services to be received from the Plaintiff in the said passbook with Nonparty 1’s consent, and the taxes and public charges, such as the value-added tax, to be paid by the Plaintiff.

(8) On March 11, 2002, Samil Development concluded a lease contract on the first floor of the instant building on behalf of the Plaintiff with Nonparty 3.

[Evidence] Facts without dispute, Gap's evidence, Gap's evidence 1 to 3, Gap's evidence 10, 16, 17, Eul's evidence 4-2 through 6, Eul's evidence 5, 8, non-party 4's testimony, non-party 5's testimony, non-party 5's whole testimony (excluding the part rejected later), and the purport of the whole argument

[Evidence Evidence] A. 11-1, and witness non-party 5's testimony

D. Determination

(1) In the real estate registration of the establishment of a branch or a sub-branch which is a requirement for heavy registration tax under Article 138 (1) 3 of the Local Tax Act, the term "branch or sub-branch" means a place of business registered under the provisions of the Corporate Tax Act, the Value-Added Tax Act, or the Income Tax Act, where a person or a sub-branch continues to be equipped with human and physical facilities and where the business or business of the pertinent juristic person is conducted, regardless of its name, and the term "personal facilities" here means that a person is stationed under the direction and supervision of the pertinent juristic person, and the form of employment does not require that the person take the form of employment directly belonging to the pertinent juristic person (Supreme Court Decision 98Du

(2) Considering the various circumstances revealed in the above facts, i.e., third development is a company established only for the management of the real estate of this case. Since August 7, 2001, the building comprehensive management consignment agreement was concluded on December 31, 2001, Nonparty 1, the head of Korea branch of the plaintiff, used part of the office of third party development while staying in Korea, issued a tax invoice for the rental fee and management fee in the name of the plaintiff, and delivered it to the tenant. The third party 1 collected and used the money with the consent of the plaintiff 1, the third party 1 concluded a lease agreement on behalf of the plaintiff 3, and the contents of other building comprehensive management consignment agreement and the subsequent detailed service agreement was concluded. Although the third party takes the form of independent corporation, the third party is under the direction and supervision of the plaintiff's real estate business, other than general management services such as building, facility management, cleaning and safety management services.

(3) Therefore, the instant disposition imposing the registration tax on the instant real estate, which imposed the heavy registration tax, deeming that the ownership transfer registration under the Plaintiff’s name on the instant real estate constitutes the real estate registration following the establishment of a branch in a large city as the Plaintiff’s branch.

3. Conclusion

Therefore, the plaintiff's claim of this case seeking the revocation of the disposition of this case is dismissed as it is without merit. It is so decided as per Disposition.

Judge Han-gu (Presiding Judge)