The case holding that Article 27-3 of the Incheon Metropolitan City Ordinance on Partial Revision of the Tax Reduction and Exemption is unlawful since the matters concerning the exemption from taxation that can reduce the amount of reduction and exemption from the registration tax and acquisition tax without obtaining permission from the Minister of Public Administration and Security, which goes beyond the scope prescribed by the Act and goes beyond the scope prescribed by the Act and violates the higher Acts and subordinate statutes such as Article 9 of the Local Tax Act.

Article 9 of the Local Tax Act, Article 15(1) of the Act on Designation and Management of Free Economic Zones, Articles 3 and 22 of the Local Autonomy Act

Incheon Metropolitan City Mayor (Law Firm Shin, Attorneys Choi Young-sik, Counsel for the plaintiff-appellant)

The Incheon Metropolitan Council (Attorney Park Jae-won, Counsel for the plaintiff-appellant)

October 29, 2009

The re-resolution of the Incheon Metropolitan City Ordinance on Partial Amendment of the Incheon Metropolitan City Tax Reduction and Exemption, which was made by the defendant on November 1, 2007, shall not be effective. Litigation costs shall be borne by the defendant.

The same shall apply to the order.

1. Re-resolution of the Municipal Ordinance;

The following facts may be acknowledged in light of the whole purport of the pleadings in the descriptions of Gap evidence 1-1, 2, Gap evidence 2, 3, Gap evidence 4, 5-1, and 2.

A. The Defendant passed a resolution on September 18, 2007 and transferred the Ordinance to the Plaintiff. The Plaintiff demanded re-resolution on the ground that some of the contents of the Ordinance were in violation of the statute, but the Defendant, on November 1, 2007, re-resolutioned and finalized the Ordinance as the original bill.

B. Article 27-2 of the Ordinance provides for the qualification standards for foreign-capital invested companies eligible for special cases such as tax reduction and exemption, land sale, loan, etc., and Article 27-3 provides for the special cases of reduction and exemption of acquisition tax and registration tax for development project implementers of free economic zones.

2. Whether the provisions governing dispute over the bill violate Acts and subordinate statutes; and

A. Part concerning the special case of sale, lease, etc. of land under Article 27-2(4)

Article 27-2 (4) of the Ordinance of this case provides that a foreign-invested enterprise which is the executor of a development project implemented within a free economic zone shall meet the same standards for tax reduction and exemption as those prescribed by the Ordinance of the Restriction of Special Taxation Act required for the foreign-invested enterprise to obtain special cases

Article 16(5) of the Free Economic Zone Act provides that "The State and local governments may use, profit from, lend or sell state-owned or public property owned by the State or local governments to development project implementers or relocating foreign-capital invested companies through a free contract, notwithstanding the provisions of the State Property Act, public property and Commodity Management Act and other Acts," thereby granting local governments the right to lease or sell public property through a free contract, but the development project implementers do not provide for specific standards that can be granted such special provisions.

In full view of the legislative intent of Article 16(5) of the Free Economic Zone Act and the fact that the management of public property is the autonomous affairs of a local government, the Free Economic Zone Act does not purport to exclude the determination of the qualification standards, etc. for foreign-invested enterprises eligible for special cases concerning the sale, etc. of public property in compliance with the actual circumstances of the local government. Thus, it is difficult to deem that Article 27-2(4) of the Ordinance of this case violates higher statutes or infringes on the essential part of the authority to execute the head of the local government (Article 27-2(4) of the Ordinance of this case does not include state property in the subject of regulation

Therefore, the plaintiff's assertion that the above provision is illegal by deviating from the limit of the legislative authority is without merit.

(b) Municipal Ordinance Article 27-3;

Article 27-3 of the Ordinance of this case provides that "The amount shall be calculated by multiplying the reduced or exempted area of acquisition tax and registration tax on real estate acquired by a development project operator of a free economic zone who is a foreign-invested enterprise in accordance with the implementation plan by the ratio of the area to be transferred or leased to foreigners among the area to be transferred or retained to the total area

However, Article 121-2 (4) of the Restriction of Special Taxation Act provides that the amount of tax to be reduced or exempted shall be determined by multiplying the ratio of foreign investment by the amount of tax to the property acquired and held by the development project operator of a free economic zone who is a foreign-invested enterprise in order to carry on the business subject to reduction or exemption, and the tax amount equivalent to 50/100 of the amount of tax subject to reduction or exemption

Article 27-3 of the Ordinance stipulates the requirements for reduction and exemption not prescribed in Article 121-2 (4) of the Restriction of Special Taxation Act by allowing only the ratio of the area to be transferred or leased to a foreigner among the property acquired and held by a foreign-invested enterprise to be included in the area subject to reduction and exemption of acquisition tax and registration tax. This is to provide for the requirements for reduction and exemption not prescribed in this Article.

Article 9 of the Local Tax Act provides that when a municipal ordinance prescribes matters concerning exemption from taxation, etc., permission from the Minister of Public Administration and Security shall be obtained, Article 15(1) of the Free Economic Zone Act provides that a development project operator may be granted tax reduction or exemption, such as acquisition tax and registration tax, as prescribed by the Restriction of Special Taxation Act and the Local Tax Act. Article 22 of the Local Autonomy Act provides that a local government may enact municipal ordinances concerning its affairs within the scope of statutes, and Article 3 of the Local Autonomy Act provides that matters necessary for the imposition and collection of local taxes shall be prescribed by municipal ordinances within the scope prescribed by

The Ordinance of this case without the permission of the Minister of Public Administration and Security newly provides for the exemption from taxation, which may reduce the tax amount subject to reduction of registration tax and acquisition tax, beyond the scope prescribed by the Act. Thus, Article 9 of the Local Tax Act and Article 22 of the Local Autonomy Act are unlawful.

3. Conclusion

As seen above, as long as some provisions of the Ordinance of this case violate the law, the re-resolution of the Ordinance of this case shall be denied in its entirety. Thus, the plaintiff's claim of this case is justified, and the costs of lawsuit are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Cha Han-sung (Presiding Justice)