Lot shopping Co., Ltd. (Bae, Kim & Lee LLC, Attorneys Kim Ho-ho et al., Counsel for the plaintiff-appellant)

The head of Mapo-gu Seoul Metropolitan Government

July 3, 2013

Seoul Administrative Court Decision 2012Guhap19397 decided November 23, 2012

1. The part of the judgment of the first instance against the Plaintiff, which orders the revocation below, shall be revoked. The part of the disposition imposing registration tax of KRW 456,078,450, which exceeds KRW 6,272,124, which the Defendant imposed on the Plaintiff on April 12, 2011, and the local education tax exceeding KRW 1,254,425, out of the disposition imposing registration tax of KRW 91,215,690, shall be revoked

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

1. Purport of claim

The Defendant’s disposition imposing local education tax amounting to KRW 456,078,450, and the registration tax amounting to KRW 253,48,40, and the additional tax amounting to KRW 91,215,69, and the additional tax amounting to KRW 41,576,10, which was imposed by the Plaintiff on April 12, 2011, shall be revoked.

2. 1) Purport of appeal

As set forth in Paragraph 1 of the Disposition (The plaintiff partially reduced the purport of appeal in this Court).

1. Details of disposition;

A. On July 2, 1970, the Plaintiff is a corporation established with the “Seoul Jung-gu ( Address 1 omitted)’ as its principal office located. On December 11, 2007, the Plaintiff registered the business with the “place of business; the name; the Seoul Mapo-gu ( Address 2 omitted); the Plaintiff’s red entry district, items; the film screen business; the film screen business, the daily miscellaneous, and the lease.” On December 31, 2007, the Plaintiff registered the Defendant from 8 to 11th of the building on eight lots other than Mapo-gu Seoul ( Address 2 omitted) as a movie theater.

B. On January 3, 2008, the Plaintiff purchased from 7 to 11,401,961,366 won among the above buildings (hereinafter “instant real estate”). On January 10, 208, the Plaintiff reported and paid the registration tax of KRW 228,039,220, and the local education tax of KRW 45,607,840, calculated by applying the registered tax rate of KRW 20/1,000, and completed the registration of ownership transfer on the instant real estate on January 10, 208. The Plaintiff used the instant real estate as indicated below (hereinafter “the instant real estate registration”). The Plaintiff is using the instant real estate as indicated below (hereinafter “the instant real estate registration”).

The area of use of the ticket contained in the main sentence shall be leased from 8 to 4,673.0 square meters to 60.2 square meters and movie theaters, part of 11 stories to 4,673.0 square meters to 8,66.0 square meters, part of 10 stories, and used as resting restaurants.

C. On April 12, 2011, the Defendant imposed and notified the Plaintiff of KRW 456,078,450, and the local education tax, added thereto, KRW 91,215,690, imposed on the Plaintiff on the ground that “the instant real estate was registered within five years after the establishment of a branch, etc. in a large city, and thus, it is subject to heavy registration tax,” and the registration tax and the imposition of local education tax for the instant real estate, which are subject to the disposition of imposition of the registration tax and the local education tax (hereinafter “instant disposition”).

D. The Plaintiff filed an appeal on July 7, 201, but was dismissed by the Tax Tribunal on April 12, 2012.

【Ground for Recognition: Facts without dispute, Gap evidence Nos. 1, 2, 3, Eul evidence Nos. 1, 2, and 3, the purport of the whole pleadings】

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

1) Article 138(1) proviso and (3) of the former Local Tax Act (amended by Act No. 8864, Feb. 29, 2008; hereinafter “former Local Tax Act”); Article 101(1)3 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 20708, Feb. 29, 2008; hereinafter “former Enforcement Decree”), Article 2 subparag. 2 of the Act on Public-Private Partnerships in Infrastructure (amended by Act No. 9282, Dec. 31, 2008; hereinafter “former Public-Private Partnerships Act”); Article 2(1)3 and (2) of the Culture and Arts Promotion Act (amended by Act No. 11313, Feb. 17, 2012; hereinafter “former Enforcement Decree of the Culture and Arts Promotion Act”); Article 101(1)3 of the former Enforcement Decree of the same Act (amended by Presidential Decree No. 20708, Feb. 21, 2008).

2) According to the proviso of Article 138(1) and (3) of the former Local Tax Act, Article 101(1)16 of the Enforcement Decree of the same Act, Article 2(1)3 and (2) of the former Culture and Arts Promotion Act, and subparagraph 1(b) of the Enforcement Decree of the same Act, the registration of real estate acquired to use for the operation of cultural and arts facilities, such as performance halls, is excluded from the subject of heavy registration tax. Since movie theaters are cultural facilities, the instant real estate registration is not subject to heavy registration tax. The instant disposition based on a different premise is unlawful.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination as to whether Article 101(1)3 of the former Enforcement Decree of the Local Tax Act falls under Article 101(1)3

1) Article 138(1)3 of the former Local Tax Act and Article 102(2) of the Enforcement Decree of the same Act provide for heavy taxation on the registration of real estate acquired by a juristic person within five years after its establishment in a large city: Provided, That the proviso to Article 138(1) of the former Local Tax Act and Article 101(1)3 of the former Enforcement Decree of the Local Tax Act excludes real estate from subject to heavy taxation on the registration of real estate to be used for “infrastructure facilities under Article 2 subparag. 2 of the former Public-Private Partnerships Act” and Article 2 subparag. 2 of the former Enforcement Decree of the Public-Private Partnerships Act provides that “infrastructure facilities” mean facilities related to the construction, extension, improvement, or operation of infrastructure facilities, which serve as the basis of various production activities, facilities, or enhance the convenience of the users and convenience in the lives of the people. Article 2 subparag. 1 of the former Enforcement Decree of the Public-Private Partnerships Act provides for any of the following facilities among movie theaters under Article 2(1)3 of the Culture and Arts Promotion Act:

2) Article 101(1)3 of the former Enforcement Decree of the Local Tax Act provides that “infrastructure facilities project under Article 2 subparag. 2 of the former Public-Private Partnerships Act” shall be deemed to mean only infrastructure facilities project implemented in accordance with the method and procedure prescribed by the former Public-Private Partnerships Act (Articles 7, 9, and 10 of the former Public-Private Partnerships Act) and the instant disposition was taken. However, Article 101(1)3 of the former Enforcement Decree of the Local Tax Act shall be construed to mean “project for the construction, extension, improvement, or operation of infrastructure facilities” under each item of Article 2 subparag. 1 of the former Enforcement Decree of the Local Tax Act. The reasons are as follows.

A) Articles 7, 9, and 10 of the former Public-Private Partnerships Act provides that the former Public-Private Partnerships Act plans to implement an infrastructure project in accordance with a private sector’s project proposal method or a private investment master plan (see, e.g., Supreme Court Decision 2006Du8969, Feb. 15, 2008). However, Article 2 subparag. 2 of the former Public-Private Partnerships Act provides that the term “infrastructure facilities project under Article 2 subparag. 2 of the former Public-Private Partnerships Act” means infrastructure facilities project under Article 2 subparag. 2 of the former Public-Private Partnerships Act, or non-taxation requirements or tax reduction or exemption requirements under the principle of no taxation without the law without the law, and it is not permitted to expand or analogically interpret the tax law without the reasonable ground (see, e.g., Supreme Court Decision 2006Du8969, Feb. 15, 208). Article 101 subparag. 3 of the former Enforcement Decree of the Local Tax Act provides that the former Public-Private Partnership Act shall be defined under Article 10 subparag. 1 of the same Act.

B) Article 101 of the Enforcement Decree of the Local Tax Act was newly established on December 31, 1976 (Presidential Decree No. 839), and Article 101 subparag. 1 of the Enforcement Decree of the Local Tax Act provides that “gas business for the purpose of producing gas and supplying it through pipes,” and “water supply business for the purpose of supplying edible water or industrial water by pipes,” which is excluded from heavy taxation. However, the above Enforcement Decree of the Local Tax Act was amended on December 31, 1996 (Presidential Decree No. 15211), and Article 101 subparag. 3 of the former Public-Private Partnership Act (amended by Presidential Decree No. 15489), which included “No. 2 subparag. 1 and 2 of the Local Tax Act” as “No. 3 of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 15489) and “No. 2 subparag. 1 and 3 of the Act,” which excludes “No. 1 and 2 subparag. 3 of the former Act” from the category of “No.

C) The proviso of Article 138(1) of the former Local Tax Act and Article 101(1) of the Enforcement Decree of the same Act provide for an exception to heavy taxation on corporations in large cities. On the other hand, whether an infrastructure project is implemented in accordance with the method and procedure prescribed by the former Public-Private Partnerships Act is not directly related to a specific type of business, and each item of Article 2 subparag. 1 of the former Public-Private Partnerships Act provides for gas supply facilities, off-road parking lots, childcare facilities, etc. as one of the infrastructure facilities, and such facilities must be installed within a large city, and it is necessary to encourage the expansion of such facilities as a policy. Meanwhile, in light of the fact that the former Public-Private Partnerships Act handles them at the same level without recognizing the difference in nature of public nature between the infrastructure facilities and commercial character, among those listed in each item of Article 2 subparag. 1 of the former Public-Private Partnerships Act, it is difficult to deem that the measures and special cases are implemented in accordance with the method and procedure prescribed by the former Public-Private Partnerships Act or exemption from taxation only for public interest.

3) The instant real estate registration is exempt from heavy registration tax pursuant to Article 101(1)3 of the former Enforcement Decree of the Local Tax Act, as the registration of the business of operating movie theaters, which are cultural facilities. The instant disposition based on a different premise is unlawful without having to examine the remainder of the claims made by the Plaintiff.

3. Conclusion

The part of the judgment of the first instance against the plaintiff regarding the disposition of this case shall be revoked. The disposition of this case shall be revoked.

[Attachment Form 5]

Judges Choi Jong-ho (Presiding Judge) Kim Tae-ho

Note 1) In the first instance trial, the claim for part of additional tax was cited, but the Defendant did not appeal.

(2) As seen below, the Plaintiff reduced the purport of the appeal to the effect that the Plaintiff only contests the imposition of the registration tax and local education tax on the portion of 4,733.2 square meters directly used by the Plaintiff, i.e., the remainder of 66 square meters, excluding the 66 square meters used as resting restaurants, among the instant real estate, under a lease of Yuwon Unemployment Co., Ltd., Ltd.

(3) A general urban gas business run by a business entity subject to Supreme Court Decision 2005Du166 Decided December 8, 2005 does not seem to be a business implemented in accordance with the methods and procedures prescribed by the former Public-Private Partnerships Act.