Daejeon District Court-2014-Gu Partnership-104642 (No. 13, 2016)

The instant disposition, which excluded the reduction or exemption of the headquarters from relocation to the local area, is against the principle of no taxation without law, as there is no basis statute.

No grounds for exclusion from the application of corporate tax reduction or exemption can be found for the income generated from the business that is transferred by the actual business acquisition, and the reduction or exemption provisions in the Restriction of Special Taxation Act must be strictly cut off, and the taxpayer cannot be interpreted to be disadvantageously.

Daejeon High Court 2016Nu1034 Revocation of Disposition of Corporate Tax Imposition

Co., Ltd. 00

00. Head of tax office

Daejeon District Court Decision 2014Guhap104642 Decided 13, 2016

2016.21

oly 12, 2016

1.In accordance with changes in claims in the trial, the judgment of the first instance shall be changed as follows:

The Defendant’s imposition disposition of KRW 000 of corporate tax for the business year 2010 against the Plaintiff on January 2, 2013 in excess of KRW 000 and the imposition disposition of KRW 000 of corporate tax for the business year 2011 in excess of KRW 00 shall be revoked.

2. All costs of the lawsuit shall be borne by the defendant.

The judgment of the first instance is revoked. The same as the written judgment of the first instance (the plaintiff changed the purport of the claim in the trial).

1. Details of the disposition;

A. Current status of the establishment of the Plaintiff Company and the special relationship corporation

1) On March 7, 1991, the Plaintiff Company was a corporation mainly established for the wholesale business of pharmaceutical products, and on February 10, 2010, the name of the Plaintiff Company transferred from "Seoul 00-Gu 00-Gu 0000 (00 dong, 000 dong, 1st floor) to "00-Gu 000 195 (00 dong, 00 welfare center 1st floor) in 'UNFCCC drugs of 'U.S. Co., Ltd.' to 'ASO drugs'.

2) The current status of drug wholesale and retail corporations in a special relationship with the Plaintiff Company is as follows.

- - Table omission -

(b) Relocation of the headquarters of UNP and reduction or exemption of the amount of tax;

1) On January 3, 2004, UNP Co., Ltd. (hereinafter referred to as "UNFCCC") moved its head office from "Seoul 00-Dong 00-dong 50-3" to "Seoul 00-dong 00 Dong 1322".

2) At the time of the relocation of the headquarters, the business partners of pharmacies, etc. located in the Seoul metropolitan area shall transfer to the Plaintiff Company the headquarters of which was located in the Seoul metropolitan area. Under Article 63-2 of the former Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004, and amended by Act No. 7322 of Dec. 1, 2005, the corporate tax of KRW 00,000 due to the relocation of the headquarters was reduced or exempted pursuant to Article 63-2 of the former Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004).

3) On March 2010, UNP entered into an agreement with the International Institute of Justice of the Educational Foundation located in Busan and the International Institute of Justice of the International Institute of Justice of the International Institute of Justice of the International Institute of Justice of the International Institute of Justice of Busan. However, the said agreement was reversed, and the seat of the headquarters of UNP is 0,000, Daejeon, Daejeon 00,000,000.

C. Relocation of the headquarters of the Plaintiff Company, acquisition of the controversial business partners from UNP and tax reduction

1) 원고 회사는 2009. 5. 21. 주식회사 JOY네트웍스에 매출의 대부분을 차지하는 약국 영업 부문(2009. 5. 31. 기준 원고 회사의 약국 영업에 관련된 매출채권, 거래처와의 계약관계 및 근로관계)을 000억 여 원에 매각하였고, 2010. 2. 10. 본점을 서울 00구에서 천안시로 이전하면서 수도권 소재 약국 등의 거래처 일부는 주식회사 SUUNO약품(이하 'SUUNO약품'이라 한다)에 인계하였으며, UNOP으로부터 쟁점거래처를 인수하였다. 위와 같은 거래처 인수과정에서 원고 회사, SUUNO약품, UNOP 사이에 대가가 지급된 적은 없다.

2) As a result of the relocation of the headquarters of the Plaintiff Company, 21 employees of the Plaintiff Company were removed from each Plaintiff Company on January 2010 and around February 2010, 2010, and 5 employees were re-exploited into each of the Plaintiff Company, a special relationship corporation, and 7 employees working for UNFCCC were re-exploited into the Plaintiff Company after withdrawal of UNFCCC.

3) The Plaintiff Company reported and paid corporate tax for each business year by making a tax reduction or exemption amount of KRW 000 in the business year 2010 and KRW 0000 in the business year 201 under the following table pursuant to the tax reduction or exemption provisions for the headquarters relocation to the local area under Article 63-2 of the former Restriction of Special Taxation Act (amended by Act No. 10406, Dec. 27, 2010; hereinafter “former Restriction of Special Taxation Act”).

D. Determination of the defendant's exemption from local areas

1) On November 2012, 2012, a regional tax office conducted an integrated investigation of corporate tax on the Plaintiff Company, and determined that the Plaintiff Company’s transfer of its business partners and employees from the UNP to a specially related corporation constitutes a business takeover. Accordingly, the income accrued in the part of the business that succeeded or taken over where the headquarters succeeds to or acquires an existing business through a merger or a transfer of business after the relocation to a provincial area does not apply, but the number of persons and benefits succeeded to a merger or a transfer of business should be excluded even at the time of calculating the ratio of reduction or exemption.” Based on the following table, 00 won among the abated or exempted tax amounts to 2010 won (i.e., the initially reduced or exempted tax amount - the changed or exempted tax amount - 000 won), among the abated or exempted tax amounts to 200 won (i.e., the initially reduced or exempted tax amount - the changed or exempted tax amount - 000 won) from

1. The sales status of the Plaintiff Company - The list omitted -

2. The monthly employees and salaries of the Plaintiff Company from January 2010 to December 201, 201, and at the relocated head office - omitted.

3. Re-assessment of tax base - omitted-

4. Reduction and exemption rate - Table omitted -

5. Reduction and exemption income calculation - Table omission -

6. Calculation of the tax amount reduced or exempted to provinces - omitted -

2) The Defendant, reflecting the decision of 00 regional tax office to exclude the abated or exempted tax amount to local areas, corrected and notified the Plaintiff Company of KRW 000 of corporate tax for the business year 2010 (including additional tax of KRW 000), and KRW 000 of corporate tax for the business year 2011 (including additional tax of KRW 000).

3) In relation to the business year 201, when the Defendant recognized 000 won of the value of the stock confirmed as the title trust shares of the Plaintiff Company’s MI drug business as the loss incurred from the dissolution and liquidation of the Plaintiff Company, the Defendant, ex officio, determined the amount of tax calculated by adding the amount to deductible expenses and re-calculated the amount of tax reduced or exempted for the business year 201 to 000 won, and accordingly, re- corrected and notified the amount of corporate tax 000 won (additional tax 00 won) for the business year 2011 (hereinafter “instant disposition”).

(e) Procedures of the previous trial;

On April 1, 2013, the Plaintiff Company filed a petition with the Tax Tribunal for an adjudication seeking the revocation of the instant disposition, but the Tax Tribunal dismissed it on August 18, 2014.

Facts without any dispute arising in recognition, Gap's 1, 2, 4, 6 through 8, 13, Eul's 1 through 3, and 11 through 13 (including branch numbers, if any; hereinafter the same shall apply), and the purport of the whole pleadings.

2. Whether the instant disposition is lawful

A. Summary of the plaintiff company's assertion

1) The exclusion of the tax amount reduced or exempted to local areas can be limited to cases falling under any of the subparagraphs of Article 63-2(7) of the former Restriction of Special Taxation Act. The former Enforcement Decree of the Restriction of Special Taxation Act and the former Enforcement Decree of the Restriction of Special Taxation Act (amended by Presidential Decree No. 22583, Dec. 30, 2010; hereinafter referred to as the "former Enforcement Decree of the Restriction of Special Taxation Act") does not stipulate "business acquisition" as the grounds for exclusion from the tax amount. Therefore, the Defendant issued the disposition in this case on the ground that "business acquisition" cannot be excluded by arbitrary interpretation of Article 63-2 of the former Restriction of Special Taxation Act without any legal basis, even though there is no provision that excludes the salary and number of workers who have retired from employment in another corporation at the time of calculating the reduction or exemption under the above-mentioned statutes, the Defendant calculated the reduction or exemption ratio by excluding the salary and number of the number of workers who retired from employment in the company.

2) The business transferee is also a comprehensive transfer of all rights and obligations to a business transferee. It cannot be said that the business transferee transfers a part of the rights and obligations to a business to a business transferee. The Plaintiff Company did not take over sales claims, etc. held by UNOP against the key transaction partner, and the UNOP did not transfer its position to the Plaintiff Company comprehensively with regard to the key transaction partner because it does not engage in the wholesale business of drugs. Therefore, the Plaintiff Company cannot be deemed to have comprehensively taken over all rights to the transaction partner from UNOP. Thus, the instant disposition was unlawful on the premise that the Plaintiff Company’s taking over the issues from UNOP constitutes the business transferee.

3) Even if a business partner’s acquisition of the issues from UNP constitutes business acquisition and the exclusion of the tax amount to be reduced or exempted for that reason, the Defendant calculated the number of employees of the Plaintiff Company in January and February 2010 by mistakenly calculating the number of employees during the reduction or exemption ratio. Therefore, the instant disposition is unlawful since there are errors in the rate of reduction or exemption applied to the instant disposition.

B. Relevant statutes

Attachment 'Related Acts and subordinate statutes' shall be as shown.

C. Determination

1) Determination on the first argument

A) Relevant legal principles and relevant laws

(1) Under the principle of no taxation without law, the interpretation of tax laws and regulations shall be interpreted as the legal text, barring any special circumstances, and shall not be extensively interpreted or analogically interpreted without reasonable grounds. In particular, it accords with the principle of fair taxation with the principle of fair taxation (see, e.g., Supreme Court Decision 2008Du11372, Aug. 20, 2009). Since a taxpayer may choose one of the several legal relations with the same economic purpose while carrying out economic activities, even if it is an act to avoid heavy tax burden, it shall be deemed as valid unless there are special circumstances to deem that it constitutes the most unfair act, and if a taxpayer’s transaction by the principle of substantial taxation is deemed as a tax evasion act and thus it is possible to deny its validity (see, e.g., Supreme Court Decision 2008Du11372, May 13, 2011).

(2) Article 63-2 of the former Restriction of Special Taxation Act provides for the tax amount equivalent to the amount calculated by multiplying the amount calculated by multiplying the amount for each taxable year by the smaller rate among item (a) or (c) (i) the taxable year to which belongs the date of relocation of the factory facilities or the principal office (hereinafter referred to as the "principal office or the principal office") for three consecutive years or more, (limited to the case of relocation of the main office, other than the factory facilities, to any subsequent year) by December 31, 201, as prescribed by Presidential Decree, where a corporation relocates its main office to an area outside the Seoul Metropolitan area and starts its business or where it starts its business after constructing its head office on or before December 31, 2014 (hereinafter referred to as "transfer corporation to a local area"; hereinafter referred to as "the same corporation") for the taxable year to which the date of relocation belongs, and for the following taxable year to which the corporation tax belongs within 20 years and 4 years (in cases of relocation to an area outside the Seoul Metropolitan area as prescribed by Presidential Decree within 30 years).

(a) An amount obtained by subtracting gains on transfer of rights to acquire land, buildings and real estate from the tax base for the pertinent taxable year;

(b) The ratio occupied by the total amount of wages received after relocation by the employees working at the relocated head office for the relevant taxable year to the total annual wages received by all corporations;

(c) Ratio occupied by the employees of the relocated head office in the relevant taxable year to the entire employees of the corporation;

3. Where the number of executives prescribed by Presidential Decree (hereinafter referred to as "executive officers") working at the relocated head office falls short of 50/100 among the total number of executive officers working at the relocated head office within the Seoul Metropolitan area and at the relocated head office (paragraph 4 (2) 2), the corporate tax shall not be reduced or exempted pursuant to paragraph (2) from the relevant taxable year (excluding paragraph 4). In addition, where a relocated corporation whose corporate tax is reduced or exempted discontinues its business or is dissolved within 3 years from the date of commencing its business (i.e., 1., relocation of its factory or head office within 3 years from the date of commencing its business, as prescribed by Presidential Decree: Provided, That the same shall not apply to cases where it fails to start its business after relocating its head office or head office outside the Seoul Metropolitan area; 5. Where it establishes a factory producing the same products at the relocated head office within the Seoul Metropolitan area under paragraph (1) 1, and where it falls under any of paragraph (4) 2, 60 or more of the former Enforcement Decree of the Restriction of Special Taxation Act:

B) We examine the instant case in light of the foregoing legal doctrine and the text, structure, and form of the relevant laws and regulations.

In full view of the facts and evidence as seen earlier, Gap evidence No. 31, Eul evidence No. 6, and Eul evidence No. 8 together with the whole purport of the pleadings, it is reasonable to view that the defendant's calculation of the tax base based on the issue in calculating the tax base based on the provision of Article 63-2 (2) 2 (b) and (c) of the former Restriction of Special Taxation Act is against the principle of no taxation without law because there is no basis law to exclude the number of workers and the salary of the workers succeeded from UNP in the process of the disposition in this case, and the defendant's calculation of the tax base based on Article 63-2 (2) 2 (a) of the former Restriction of Special Taxation Act is against the principle of no taxation without law, and it is reasonable to view that the defendant's calculation of the tax base based on the premise that the "tax base based on the pertinent taxable year" is limited to the "tax base based on the business income generated by the actual transfer corporation to a local area" or the "tax base obtained by the business transfer of the company."

(1) Examining the contents, structure, form, etc. of the former Restriction of Special Taxation Act and Article 60-2 of the former Enforcement Decree of the Restriction of Special Taxation Act, Article 63-2 of the former Restriction of Special Taxation Act provides for the basic requirements for the application of corporate tax reduction and exemption of corporations relocating to provinces, and Article 60-2(1) through (4) of the former Enforcement Decree of the Restriction of Special Taxation Act provides for the additional requirements that shall be met along with such basic requirements. However, if such relocation corporations fall under the instant provision, such as Article 63-2(4) and (7) of the former Enforcement Decree of the Restriction of Special Taxation Act, a provision system is formed in the form of exclusion from such benefits. However, even if examining the text of the relevant Act such as Article 63-2 of the former Restriction of Special Taxation Act, it is difficult to find the grounds for excluding the application of corporate tax reduction

(2) The defendant asserts to the purport that "an acquisition by transfer of a corporation which contributed to the revitalization of local economy while running a business in an area other than the Seoul Metropolitan area only changes only to a business entity, and has the nature of the existing income creation structure and human resources. Therefore, the defendant's acquisition by transfer of a corporation which contributed to the revitalization of local economy in the area other than the Seoul Metropolitan area is merely moving its head office to a provincial area, and it is not possible to resolve side effects due to overconcentration in the Seoul Metropolitan area and to create new employment or make new investments in the area outside the Seoul Metropolitan area, so it is impossible to give benefits of reduction or exemption under the above provision and it is also consistent with the objective interpretation of the above provision." However, the same is also applicable to the interpretation of the provision of the exclusion requirement of reduction or exemption requirement to the effect that it can not be interpreted to be disadvantageous to taxpayers beyond the possible scope of the language and text of the tax law. Accordingly, in the case of Article 63-2 of the former Restriction of Special Taxation Act, if it intends to deprive a corporation beyond the possible scope of corporate tax law, it should be resolved.

(3) The legislative intent of Article 63-2 of the former Restriction of Special Taxation Act is a factory of a corporation located in the Seoul Metropolitan Area.

In addition, it is difficult to conclude that the purpose of the above provision is to induce the relocation of the head office to a local area to eliminate side effects caused by overpopulated in the Seoul Metropolitan area and to promote balanced regional development through decentralization of the functions of the Seoul Metropolitan area. It is also difficult to conclude that new job creation or new investment, etc. should be achieved through the relocation of the head office to the local area. If the legislative intent of the above provision is limited, it can be carried out in the legislative intent to induce the companies located in the Seoul Metropolitan area to relocate to the local area to the local area, rather than harming the motive or incentive for the companies to relocate to the local area to the local area, thereby promoting the decentralization of the companies. Furthermore, it is difficult to disregard the proper function of the companies relocating to merge the local enterprises located in the limited situation or to systematically operate the existing business by transferring the companies to the local area, and it is also difficult to see that the relocation corporation newly expands its business through the merger or acquisition of the business after the relocation

(4) However, in light of the above, there may be a side effect that it may be difficult to regulate the tax avoidance act abusing the provisions of Article 63-2 of the former Restriction of Special Taxation through a related corporation, etc., as if the Defendant concerns in the instant case. However, in order to deny the validity of a taxpayer’s transaction in light of the principle of substantial taxation, the principle of no taxation without law should be established individually and specifically under the principle of no taxation without law if the taxpayer’s transaction is an act of tax avoidance notwithstanding its form. However, if the taxpayer had selected one of the various legal relations in order to achieve the same economic purpose in the course of conducting economic activity without any reasonable provision, the tax authority should respect the legal relationship chosen by the taxpayer, unless there are special circumstances, such as that the transaction constitutes a disguised act.

However, in this case, the facts that the Plaintiff Company and UNP are in a special relationship corporation under the Corporate Tax Act, or that the Plaintiff Company received tax benefits by taking over the business of UNP as argued by the Defendant, or that the Plaintiff Company received tax benefits by the Defendant’s respective statements (No. 6 is a data analyzing the expected sales and the effect of corporate tax reduction and exemption in cases where transaction partners are separated, and No. 7 is a data to examine the issues that may arise in cases where the Plaintiff Company that had already moved its headquarters to Daejeon Metropolitan City after September 201. The evidence No. 8 appears to have been prepared in the purport of supplementing the Plaintiff Company’s commuting’s commuting records, identifying the status of the Plaintiff Company’s employees, and supplementing the vehicle operation log.) alone, it is difficult to readily conclude that the Plaintiff Company’s receipt of the issues of UNP’s business partners and employing some of the UNP employees as the employee of the UNP constitutes the disguised act for the purpose of tax avoidance.

(5) The Defendant does not have a separate statute on the basis of “in relation to the exclusion of the number of workers who succeeded from UNP from calculating the rate of reduction or exemption of wages for workers,” but, in the event that the head office of a corporation succeeds to or takes over the existing business through a merger or a transfer of business after relocation to a provincial area, the income accrued from the succeeded or taken over business division does not have to be subject to the provisions of Article 63-2 of the Restriction of Special Taxation Act, and therefore, separate accounting should be conducted in accordance with Article 143 of the same Act,” i.e., 46019-42 ( March 7, 2001);

제도 46012-12105(2001. 7. 13.) �, "피합병법인이 사업부문에서 발생한 소득은 동 조항의 감면소득에 해당하지 아니하므로, 조세특례제한법 제63조의2 제2항 제2호에 따른 감면소득 계산 시에도 합병으로 승계한 인원 및 급여를 제외하여 계산하는 것"(법인세과-76, 2010. 1. 27.) 등에 기하여 그와 같이 제외하였다.'는 취지로 주장한다. 그러나 그와 같은 국세청의 유권해석・질의회신 등은 행정청 내부의 사무처리 기준에 불과할 뿐 법원이나 국민을 기속하는 대외적인 효력이 없다.

(6) The Defendant asserts to the effect that “the requirements under the Restriction of Special Taxation Act shall be determined by substance rather than by form.” The Defendant’s assertion to the effect that the Plaintiff Company transferred 21 business partners and 21 employees in the Seoul metropolitan area, which was currently in operation, to the specially related corporation, and the acquisition of business partners and employees from the specially related corporation, which was already in operation in the local area, shall not be deemed to be a relocation of the headquarters.” However, according to Article 63-2(1) of the former Restriction of Special Taxation Act, if a corporation which has continuously been in operation in the Seoul metropolitan area for three years or more relocates its head office to the outside of the Seoul metropolitan area and starts business until December 31, 2011, it constitutes a relocation corporation under Article 63-2 of the former Restriction of Special Taxation Act. As seen earlier, the Plaintiff Company satisfies all such requirements. According to the Plaintiff Company’s argument to the effect that according to this part of the Defendant’s argument, the remainder of the relocation corporation constitutes one of the entire tax base reduction and exemption.

2) Calculation of the amount of legitimate tax;

A) In relation to the reduction or exemption (related to Article 63-2 (2) 2 (b) and (c) of the former Restriction of Special Taxation Act) where a person is included in UNP transfer, the Plaintiff Company claims that the number of employees of the Plaintiff Company should be calculated based on January 21, 2010 and February 5, 2010, among the employees of the Plaintiff Company, on the basis of the reduction or exemption ratio (Article 63-2 (2) 2 (b) and (c) of the said Act (Article 63-2 (2) of the former Restriction of Special Taxation Act), and that the number of employees of the Plaintiff Company was calculated based on the number of employees of the Plaintiff Company, i.e., January 9, 2010 (Article 30 – 21), and February 7, 2010 (Article 12 – 5).

In addition to the contents of evidence Nos. 9 and 10, the whole arguments are to be taken. ① The total number of employees in January 2010 of the Plaintiff Company is 51, and the middle-aged retirement is 21, so the actual number of employees in January 201 of the Plaintiff Company is 30, excluding this, ② the total number of employees in February 2010 of the Plaintiff Company is 17, and the middle-aged retirement is 5, so the actual number of employees in February 200 of the Plaintiff Company is 12. Accordingly, it is reasonable that the Defendant calculated the total number of employees in the Plaintiff Company as of January 30, 2010 and February 12, 2010. Accordingly, this part of the argument of the Plaintiff Company on a different premise is without merit (other than the illegality of the disposition of this case and the fair tax amount of the Plaintiff Company, and the remaining argument of the Plaintiff Company does not require any special judgment.)

If so, in calculating the rate of reduction or exemption for cases involving UNP transferrs, the total number of juristic persons shall be as of January 30, 2010 and February 12, 2010, and shall be calculated according to the rate of reduction or exemption as follows:

(B)total tax bases and tax credits eligible;

각 해당연도의 총과세표준과 감면대상과세표준(쟁점거래처 과세표준을 포함한 것임)은 다음과 같고 그 내역 및 금액과 관련해서는 당사자 사이에 다툼이 없다. 한편, 아래표 중 2011 사업연도의 감면대상 과세표준은 00000원에서 00000원 �아래 '다)항'에서 보는 바와 같이 2011 사업연도의 과세표준 00000원이 00000원으로 재경정되었고, 재경정된 과세표준(00000원)에서 부당과소신고 소득금액 000원을 공제하고 남은 금액임 으로 변경되었다.

C)Re-revision of corporate tax for the business year 2011;

As seen earlier, the computation formula of the corporate tax for the business year 201 and the re-revision of the related year is as follows:

D) Corporate tax settlement (including additional tax) for each business year 2010, 2011

If the corporate tax (including additional tax) for each corresponding year is determined by applying the tax base that includes the small amount of reduction or exemption of each corresponding year of each corresponding year and the tax base of the key transaction partner in the above sub-paragraph (b).

- Calculation omitted -

E) Sub-decision

Therefore, on January 2, 2013, the Defendant’s imposition disposition of corporate tax of KRW 000 for the business year 2010 against the Plaintiff Company should be revoked in excess of KRW 000 (including additional tax) and KRW 00 (including additional tax) of corporate tax of KRW 000 for the business year 201.

3. Conclusion

If so, the part exceeding the above legitimate tax amount should be revoked in an unlawful manner, and the claim of this case that the plaintiff company has changed in the trial court is justified, and it shall be accepted in all, and the judgment of the court of first instance shall be modified in accordance with the changed claim in the trial court.

Related Acts and subordinate statutes

▣ 구 조세특례제한법(2004. 12. 31. 법률 제7322호로 개정되어 2005. 1. 1. 시행되기 전의 것)

Article 63-2 (Temporary Special Tax Abatement or Exemption for Relocation of Corporation's Factory and Head Office Outside Seoul Metropolitan Area)

(1) Any corporation that meets the requirements falling under each of the following subparagraphs (hereafter in this Article, referred to as a "corporation relocated to an area other than the Seoul Metropolitan area") may be subject to corporate tax reduction or exemption pursuant to paragraphs (2) through (4): Provided, That the same shall not apply to any corporation that runs real estate business

1. It shall be a corporation that has operated a business with factory facilities for at least three consecutive years in an overconcentration control region in the Seoul Metropolitan area or has its head office or principal office (hereafter in this Article, referred to as the "head office") for

2. It is required that it should, under the conditions as prescribed by the Presidential Decree, relocate its entire factory and facilities or its head office to an area outside the Seoul Metropolitan area and start business therein not later than December 31, 2005 (in case of the relocation of factory and facilities to a Metropolitan City, limited to an industrial complex under the Industrial Sites and Development Act; hereafter the same shall apply in this Article) or that it should build a new factory or head office in an area outside the Seoul Metropolitan area and start business on or before December 31, 2008 (limited to the case where it acquires a site for factory or head office on or before December 31, 2005, and submits a relocation plan at

(2) The whole amount of corporate tax for the taxable year whereto belongs the date of transfer and the taxable year that ends within four years from the commencing date of the following taxable year, and the tax amount equivalent to 50/100 of corporate tax for the taxable year that ends within two years thereafter shall be reduced or exempted for the following income:

1. Income accruing from a factory, in case where the factory is relocated;

2. In cases of relocated head office, income equivalent to the amount computed by multiplying the amount under item (a) by the ratio under items (b) and (c).

(a) Amount obtained by subtracting the transfer margin of land and buildings from the tax base for the relevant taxable year;

(b) The ratio occupied by the total amount of salaries received after relocation by the relocated head office for the relevant taxable year to the total annual salaries received by all corporations.

(c) The ratio occupied by the employees working at the relocated head office in the Seoul Metropolitan area and at the relocated head office (if the ratio is less than 50/100, it shall be deemed zero).

3. Where a factory and head office are moved together, the income equivalent to the amount computed by adding up the incomes under subparagraphs 1 and 2: Provided, That it shall be limited to the income amount in the relevant taxable year.

▣ 구 조세특례제한법(2010. 12. 27. 법률 제10406호로 개정되어 2011. 1. 1. 시행되기 전의 것)제63조의2(법인의 공장 및 본사를 수도권 밖으로 이전하는 경우 법인세 등 감면)

(1) A corporation meeting the following requirements (hereafter in this Article, referred to as "corporation relocated to a local area") may be subject to the reduction of or exemption from corporate tax under paragraphs (2) through (4): Provided, That the same shall not apply to a corporation that runs consumptive service business, real estate business or construction business prescribed

1. It shall be a corporation that has operated its business with factory facilities in the overconcentration control zone of the Seoul Metropolitan Area for at least three consecutive years or has its head office or principal office (hereafter in this Article, referred to as the "head office") for at least

2. It shall relocate its entire factory facilities or head office to an area outside the Seoul Metropolitan area and start business therein no later than December 31, 201, as prescribed by Presidential Decree (in cases of the relocation of such factory facilities to another Metropolitan City, limited to an industrial complex under the Industrial Sites and Development Act; hereafter the same shall apply in this Article) or build a new factory or head office in an area outside the Seoul Metropolitan area and start business no later than December 31, 2014 (limited to cases where it acquires a site for its factory or head office no later than December 31, 201, and submits a relocation plan when filing a tax base return for the taxable year whereto belongs December 31, 2011).

(2) A corporation relocating to a local area shall reduce or exempt the full amount of corporate tax for the taxable year to which the date of transfer belongs and for the taxable year ending within six years (four years in cases of relocation to a Metropolitan City located in an area other than the Seoul Metropolitan area and to an area prescribed by Presidential Decree) from the commencing date of the following taxable year, and for the taxable year ending within three years (two years in cases of relocation to a Metropolitan City located in an area other than the Seoul Metropolitan area and to an area prescribed by Presidential Decree) thereafter,

1. Income generated from a factory, in case where the factory is relocated;

2. In cases of relocated head office, income equivalent to the amount computed by multiplying the amount under item (a) by the smaller ratio among item (b) or (c) for each

(a) An amount obtained by subtracting gains on transfer of rights to acquire land, buildings and real estate from the tax base for the relevant taxable year;

(b) The ratio occupied by the total amount of wages paid to the employees working for the relocated head office after relocation to the total annual wages paid to the entire employees of the corporation;

(c) Ratio occupied by the employees of the relocated head office in the relevant taxable year to the entire employees of the corporation;

3. Where a factory and head office are moved together, the income equivalent to the amount computed by adding up the income under subparagraphs 1 and 2: Provided, That it shall be limited to the income amount in the relevant taxable year.

(3) In applying paragraph (2) 2, the term "persons working at the relocated head office" means the persons calculated by subtracting the annual average number of full-time employees working at the relocated head office from the annual average number of full-time employees working at the head office (referring to the number of full-time employees as of the end of each month and divided by the number of relevant months; excluding the number of full-time employees working at the head office relocated to the relocated head office in an area other than the Seoul Metropolitan area after the taxable year to which the second anniversary retroactively from the date of relocation belongs) to the annual average number of full-time employees working at the head office at the relocated head office in the taxable year to which the third anniversary retroactively from the date of relocation belongs

(4) In applying paragraph (2) 2, where it falls under any of the following subparagraphs in the reduction or exemption period of corporate tax, the corporate tax shall not be reduced or exempted pursuant to paragraph (2) from the relevant taxable

1. and 1. Deleted;

2. Where the percentage occupied by the number of executives prescribed by Presidential Decree (hereafter referred to as "executive officers" in this Article) working at the relocated head office among the total number of executives working at the head office within the Seoul Metropolitan area and at the relocated head office falls short of 50/100.

(5) Article 60 (2), (4) and (6) or Article 61 (3), (5) and (6) shall apply mutatis mutandis to corporate tax on gains from the transfer of a factory or head office located in the overconcentration control zone of the Seoul Metropolitan area.

(6) Land annexed to a building for a factory before a corporation relocated to a local area (limited to cases where the ownership of the building is transferred due to merger, division, or merger after division) owns (including cases where the ownership is transferred) and subject to Article 106 (1) 3 (a) of the Local Tax Act as of the date of the relocation of the factory shall be deemed land subject to Article 106 (1) 3 (a) of the Local Tax Act for five years from the date of the relocation of the factory: Provided, That this shall not apply after the business is closed

(7) Where a corporation relocated to a local area whose corporate tax is reduced or exempted under paragraph (2) falls under any of the following subparagraphs, the amount of tax calculated, as prescribed by Presidential Decree, when filing a tax base return for the taxable year in

1. Where the business is closed or a corporation is dissolved within three years from the date on which the business commences after relocating the factory or head office: Provided, That the same shall not apply to cases of merger, division, or merger after division;

2. Where he/she fails to commence business after relocating his/her factory or head office outside the Seoul Metropolitan area, as prescribed by Presidential Decree.

3. Where the corporation sets up in the Seoul Metropolitan area its head office or a factory producing the same products as those produced at the factory relocated under paragraph (1);

4. Deleted;

5. Where the relocated head office has an office in the Seoul Metropolitan Area above the criteria prescribed by Presidential Decree.

6. Where the relocated head office falls under paragraph (4) 2.

(8) Where the amount of corporate tax reduced or exempted under paragraph (2) is paid under paragraph (7), the provisions concerning the additional amount equivalent to the interest under Article 33-2 (4) shall apply mutatis mutandis.

(9) Where a local government-invested corporation to which Article 106 (1) 3 (a) of the Local Tax Act applies to the land annexed to a building for factory before relocation for five years from the date of relocation under paragraph (6) falls under any of the provisions of paragraph (7) 1 through 3, the amount of property tax, comprehensive real estate holding tax and the amount equivalent to interest shall be collected as a penalty

(10) In applying paragraphs (1) through (5) and (7), the method of calculating a period, scope of salaries, applications for tax reduction or exemption, and other necessary matters shall be prescribed by Presidential Decree.

Article 143 (Separate Accounting)

(1) Where a national concurrently operates a business subject to tax reduction or exemption under this Act (where at least two reduction rates exist, referring to each business; hereafter in this Article, referred to as "business subject to tax reduction or exemption") and other business, he/she shall keep separate accounts, as prescribed by Presidential Decree

(2) A national who conducts consumptive service business and other business together shall keep a separate account of assets, liabilities, profits and losses for each business, as prescribed by Presidential Decree.

(3) In calculating the income amount of the business subject to reduction or exemption, where any deficit occurs among the business classified and accounted pursuant to paragraphs (1) and (2), it shall be the total amount of the relevant deficit minus the amount calculated in proportion to the income amount of the business accrued.

▣ 구 조세특례제한법 시행령(2010. 12. 30. 대통령령 제22583호로 개정되어 2011. 1. 1. 시행되기 전의 것) 제60조의2(법인의 공장 및 본사를 수도권 밖으로 이전하는 경우 법인세 등 감면)

(1) Real estate business and construction business prescribed by Presidential Decree in the proviso to Article 63-2 (1) of the Act means any of the following projects: Provided, That the foregoing shall not apply to relocating public agencies defined in subparagraph 2 of Article 2 of the Special Act on the Construction and Support of Innovation Cities Following Relocation of Public Agencies:

1. Real estate rental business;

2. Real estate brokerage business;

3. Real estate trading business under Article 122 (1) of the Enforcement Decree of the Income Tax Act;

4. and 4. Deleted;

5. Construction business (including the business of developing and supplying residential buildings under Article 150-2 (3) of the Enforcement Decree of the Income Tax Act);

(2) In applying Article 63-2 (1) 1 of the Act, the period shall be calculated in accordance with any of the following subparagraphs:

1. Where a factory is relocated, the operation (the period during which operation is suspended by an order to improve, relocate, or suspend operation under the Clean Air Conservation Act, the Water Quality and Aquatic Ecosystem Conservation Act, or the Noise and Vibration Control Act shall be deemed to have been operated) continuously in an overconcentration control region in the Seoul Metropolitan area for not less than three years retroactively from the date of suspending operation in order to relocate the factory facilities to an area outside the Seoul Metropolitan area under Article 2 (1) 9 of the Act (hereinafter referred to as "Seoul Metropolitan area");

2. Where the head office or principal office (hereafter in this Article, referred to as the "head office") is relocated, it shall have been able to carry on business with the head office in the overconcentration control region in the Seoul Metropolitan area continuously for three or more years retroactively

(3) and (3) Deleted.

(4) A corporation that relocates all of the factory facilities or its head office under Article 63-2 (1) 2 of the Act shall meet the requirements falling under any of the following subparagraphs. In such cases, in the application of Article 63-2 (5) of the Act, it shall be limited to the transfer of factory facilities or head office

1. Operation by the relevant factory facilities shall be impossible due to the transfer of a factory in the overconcentration control zone in the Seoul Metropolitan area or the removal or closure of the entire factory facilities located in the overconcentration control zone in the Seoul Metropolitan area within 2 years from the date of commencing a business by relocating

2. The site shall be acquired (including cases of retaining the site) not later than December 31, 201 and the business shall be commenced not later than December 31, 2014, in cases where the business is commenced or relocated to a newly-built factory outside the Seoul Metropolitan area from the date of transfer or closure of the factory in the overconcentration control region in the Seoul Metropolitan area (where one is equipped with his/her own factory facilities by leasing a site and building of the factory, referring to the date of suspending operation in order to relocate the factory) to December 31, 2011;

3. It shall be transferred its head office in the overconcentration control region in the Seoul Metropolitan area or converted into uses other than its head office (including cases where it is used for any office falling short of the standards prescribed in paragraph (11); hereafter the same shall apply in this Article) within 2 years from the date of commencing the

4. The site shall be acquired (including cases of retaining the site) not later than December 31, 201 and the business shall be commenced not later than December 31, 2014, in cases where the business is commenced or relocated to a new factory outside the Seoul Metropolitan area from the date of transfer of the head office in the overconcentration control region in the Seoul Metropolitan area or conversion to other usage than the head office to December 31, 2011.

(5) "Areas prescribed by Presidential Decree" in the part other than the subparagraphs of Article 63-2 (2) of the Act means areas prescribed in attached Table 9.

(6) and (6) Deleted.

(7) In applying the provisions of Article 63-2 (2) 2 of the Act, the salary means the benefits and income under Article 20 (1) 1 and 4 of the Income Tax Act.

(8) "Executives prescribed by Presidential Decree" in Article 63-2 (4) 2 of the Act means persons falling under any item of Article 20 (1) 4 of the Enforcement Decree of the Corporate Tax Act: Provided, That any executive who does not work full-time shall be excluded.

(9) Where a business fails to commence after relocating a factory or head office outside the Seoul Metropolitan area, as prescribed by Presidential Decree, as prescribed in Article 63-2 (7) 2 of the Act, the time it fails to meet the requirements under each subparagraph of paragraph (4

(10) and (10) Deleted.

(11) "At least the standards prescribed by Presidential Decree" in Article 63-2 (7) 5 of the Act means where the annual average number of regular employees engaged in the head office affairs in the Seoul Metropolitan area is at least 50 percent of the annual average number of regular employees engaged in the head office affairs.

(12) The tax amount to be paid under Article 63-2 (7) of the Act shall be calculated according to the classification in the following subparagraphs:

1. The cases falling under Article 63-2 (7) 1 of the Act: Tax amount abated or exempted within three years retroactively from the date of business discontinuance or the date of corporate dissolution;

2. The cases falling under Article 63-2 (7) 2 of the Act: Tax amount abated or exempted within five years retroactively from the date of failing to satisfy the requirements in each subparagraph of paragraph (4);

3. The cases falling under Article 63-2 (7) 3 of the Act: Tax amount abated or exempted within 5 years retroactively from the date of establishing the head office or factory. In this case, where there exist 2 or more relocated factories producing mutually different products at the same factory, it shall be limited to the portions subjected to the abatement or exemption due to the relocation of factory producing the same products as those of the factories within the Seoul Metropolitan area

4. The cases falling under Article 63-2 (7) 5 of the Act: Tax amount abated or exempted within five years retroactively from the date of establishing the office above the standard as referred to in paragraph (11); and

5. The cases falling under Article 63-2 (7) 6 of the Act: Tax amount abated or exempted within 5 years retroactively from the date of falling short of the ratio under the same subparagraph; and

(13) A corporation which intends to have corporate tax reduced or exempted under Article 63-2 (2) of the Act shall submit, together with a tax base return, an application for tax abatement or exemption and tax abatement or exemption statement to the head

(14) For the purposes of Article 106 (1) 1 or 2 of the Local Tax Act, the amount of property tax to be collected as a penalty pursuant to Article 63-2 (9) of the Act means the difference between the amount of property tax paid under Article 63-2 (6) of the Act and the amount of property tax to be paid, and the amount of comprehensive real estate tax to be collected as a penalty pursuant to Article 63-2 (9) of the Act means the amount of comprehensive real estate tax to be paid, in cases where Article 106 (1) 1 or

1. In cases falling under Article 63-2 (7) 1 of the Act: Within three years retrospectively from the date of business discontinuance or the date of corporate dissolution;

2. Where he/she falls under Article 63-2 (7) 2 of the Act: Not more than five years from the date he/she fails to meet the requirements in the subparagraphs of paragraph (4).

3. In cases falling under Article 63-2 (7) 3 of the Act: Within five years retroactively from the date on which a factory is installed.

(15) The additional amount equivalent to interest under Article 63-2 (9) of the Act shall be the amount calculated by multiplying the difference in the amount of property tax and the amount of comprehensive real estate holding tax under paragraph (14) by the period under subparagraph 1 and

1. Period from the day following the payment deadline for the taxable year to the date of notifying the amount of tax to be collected additionally pursuant to Article 63-2 (9) of the Act;

2. 3/10,000 per day.