[1] The meaning of "branch or sub-branch" in the case of acquiring real estate in a large city as a result of establishing a branch or sub-branch in a large city" subject to heavy taxation of acquisition tax under Article 13 (2) 1 of the former Local Tax Act

[2] In a case where Company A purchased a golf course site, building, etc. in a large city from Company B and completed the registration of ownership transfer, and the tax authority deemed Company A to have acquired a golf course as a result of establishing a branch office in a large city and imposed acquisition tax, the case affirming the judgment below holding that the above disposition was unlawful

[1] According to Article 13(2)1 and (8) of the former Local Tax Act (amended by Act No. 11690, Mar. 23, 2013); Article 27(3) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 24425, Mar. 23, 2013) and Article 6 of the former Enforcement Rule of the Local Tax Act (amended by Ordinance of the Ministry of Security and Public Administration, Mar. 23, 2013), a “cases of acquiring real estate in a large city following the establishment of a branch or branch office of a corporation in a large city” subject to heavy acquisition tax, the branch or branch office refers to a place of business registered under the Corporate Tax Act, the Value-Added Tax Act, or the Income Tax Act where business or business is continually performed with human resources and physical facilities. The term “personal facilities” refers to at least the number of persons under direct control and supervision of the relevant corporation, not to take the form of employment.

[2] In a case where Company A purchased a golf course site, building, etc. in a large city from Company B and completed the registration of ownership transfer, and the tax authority imposed an excessive imposition of acquisition tax, etc. on Company A on the ground that Company A acquired a golf course as a branch office in a large city, the case affirming the judgment below which held that the above heavy imposition of acquisition tax, etc. on the acquisition of a golf course site and building was unlawful on the ground that Company A cannot be deemed as using the golf course as a branch to handle its business or business through Company C, on the grounds that the above operation and management entrustment agreement provides that Company A wholly takes responsibility for Company C’s entire rights and duties as to the operation and management of the golf course and that it is stipulated that Company B should operate and manage the golf course.

[1] Article 13(2)1 and (8) of the former Local Tax Act (Amended by Act No. 11690, Mar. 23, 2013); Article 27(3) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 24425, Mar. 23, 2013); Article 6 of the former Enforcement Rule of the Local Tax Act (Amended by Ordinance of the Ministry of Security and Public Administration No. 1, Mar. 23, 2013) / [2] Article 13(2)1 and (8) of the former Local Tax Act (Amended by Act No. 11690, Mar. 23, 2013); Article 27(3) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 24425, Mar. 23, 2013); Article 6 of the former Enforcement Rule of the Local Tax Act (Amended by Ordinance of the Ministry of Security and Public Administration)

[1] Supreme Court Decision 2008Du18496 Decided June 10, 201 (Gong2011Ha, 1406)

Dong-gun Co., Ltd. (Attorneys Lee Jae-de et al., Counsel for the defendant-appellant)

The head of Seo-gu Incheon Metropolitan City (Law Firm Law Firm, Attorney Choi Jong-tae, Counsel for defendant-appellant)

Seoul High Court Decision 2013Nu18454 decided January 15, 2014

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

A. According to Article 13(2)1 and (8) of the former Local Tax Act (amended by Act No. 11690, Mar. 23, 2013; hereinafter the same), Article 27(3) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 24425, Mar. 23, 2013; hereinafter the same shall apply), and Article 6 of the former Enforcement Rule of the Local Tax Act (amended by Ordinance No. 1 of the Ministry of Security and Public Administration, Mar. 23, 2013), a branch or branch office is subject to heavy acquisition tax (hereinafter “acquisition of real estate in a large city following the establishment of a branch or branch office in a large city” and “place where business or business is conducted continuously with human and physical facilities registered under the Corporate Tax Act, the Value-Added Tax Act, or the Income Tax Act. The term “personal facilities” refers to a place where the pertinent corporation is not directly bound by the type of employment, but is directed and supervised at least the number of the pertinent corporation.

B. First of all, the lower court acknowledged the following facts in full view of the admitted evidence.

① On June 27, 2007, the Plaintiff is a legal entity that had its head office in the Embling Group of Gyeonggi-do ( Address 1 omitted) and has established the sports facility business as an objective business.

② On August 11, 2011, the Plaintiff entered into a sales contract with respect to the instant golf course site, buildings, etc. located in the Seo-gu, Incheon Special Metropolitan City ( Address 2 omitted), Seo-gu, Incheon Special Metropolitan City (hereinafter referred to as the “Yeung River”), and paid the sale price in full to the Yeungdong Construction on August 17, 201, and completed the registration of ownership transfer as to the instant golf course site and buildings.

③ Around that time, on August 11, 2011, the Plaintiff entered into the instant operation and management consignment agreement with the Mine Development Co., Ltd. and the instant golf course, with a deposit of KRW 3 billion as an appraisal value. The period from the Plaintiff’s acquisition date to five years. On August 26, 2011, the Plaintiff concluded the instant operation and management consignment agreement with the effect of the said lease and the entrustment of the operation and management of the instant golf course to the luminous Development.

Then, in full view of the following circumstances, the lower court determined that the instant disposition, which imposed heavy taxation on the acquisition of the land and building of the instant golf course, was unlawful on the ground that the Plaintiff could not be deemed as using the instant golf course as a branch to conduct its own business or business through the development of the forest, on the ground that the Plaintiff used the instant golf course as a branch to conduct its own business or business.

① Under the instant operation and management entrustment agreement, the Plaintiff is fully responsible for the development of the luminous area by entrusting the development of the luminous area with all rights and obligations regarding the operation of the instant golf course and the operation and management of the instant golf course.

② Under the instant operation and management entrustment agreement, the management rights of the instant golf course, such as the operation and management of the instant golf course, are entirely managed by the Plaintiff, while the Plaintiff may not participate in the instant operation and management agreement unless it was grossly negligent.

③ According to the instant operation and management consignment agreement, the Plaintiff may enter the instant golf course with the cooperation of mingical development, only when it is not allowed to enter the instant golf course at will and only when there is a special purpose for inspection of the state of preservation and witness of new lessees.

④ Under the instant operation and management entrustment agreement, there is no provision that the Plaintiff may specifically direct and supervise the operation and management of the instant golf course, or impose sanctions against luminous development if the Plaintiff fails to comply with the Plaintiff’s direction and supervision.

⑤ With respect to various proposals and approvals on personnel management reports and financial execution, etc. conducted for the operation and management of the instant golf course, the representative director of the luminous Development only has the final decision-making authority, but does not have any structure that can be involved in the Plaintiff’s approval, etc., and in fact, there is no trace of the Plaintiff’s participation therein.

C. Examining the relevant evidence on the premise of the aforementioned legal doctrine in light of the record, the lower court’s fact-finding and determination is justifiable. In so doing, contrary to what is alleged in the grounds of appeal, there were no errors by misapprehending the legal doctrine on “establishment of a branch or a branch office” or failing to exhaust all necessary deliberations, which is a requirement for heavy taxation of acquisition tax.

2. Regarding ground of appeal No. 2

In addition to the above judgment, the court below determined that ① in the process of comprehensively succeeding to the assets used by the Plaintiff for the instant golf course from minito, rather than establishing a new office, the Plaintiff acquired the instant golf course site and building in its name, and subsequently, it cannot be subject to heavy acquisition tax under Article 13(2)1 of the former Local Tax Act, etc., and ② the remainder except for the portion used as an office among the instant golf course site and building cannot be deemed as “real estate to be used directly for a corporate branch office” under the former part of Article 27(3) of the former Enforcement Decree of the Local Tax Act.

As long as the lower court’s determination on the ground of appeal No. 1 was justifiable, this part of the lower court’s additional determination cannot affect the conclusion of the judgment, and thus, the ground of appeal on this point cannot be accepted without further review.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)