Whether a “real estate for factory” under the main sentence of Article 276(1) of the former Local Tax Act is identical to an “industrial building” under the main sentence of Article 276(1) of the former Local Tax Act (affirmative), and whether a person who intends to newly construct or extend an industrial building acquires real estate for the purpose of leasing it to a third party without using it directly for the purpose of industrial building, etc. (negative in principle)

Article 276 (1) of the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same) includes "a case where a person wishes to lease real estate for factories to a small and medium enterprise owner" in the main provision of the same Article (hereinafter "the overall provision of this case") as an exception subject to exemption from acquisition tax and registration tax pursuant to the main provision of the same Article. In light of the legislative intent and amendment history, the relationship between the main provision and the proviso, etc., the "factory real estate" of this case shall not be deemed to be an "industrial building" of the main provision. Therefore, even if a person who intends to build or extend a new industrial building acquires real estate for the purpose of leasing it to a third party without using it directly for the purpose of industrial building, etc., it shall be interpreted that the lease does not fall under the object of exemption from acquisition tax and registration tax under the main provision of Article 276 (1) of the former Local Tax Act, unless it is leased to a small and medium enterprise owner.

Article 276 (1) of the former Local Tax Act (Amended by Act No. 9924, Jan. 1, 2010) (see current Article 78 of the Restriction of Special Local Taxation Act)

Eelsan Incorporated Co., Ltd. (Law Firm Sol, Attorney Park Jeong-tae, Counsel for the plaintiff-appellant)

Head of branch office of Pyeongtaek-si (Law Firm Dasan, Attorneys Kim Dong-dong et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2011Nu39839 decided June 29, 2012

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Article 276 (1) of the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same shall apply) provides that "any real estate acquired by a person (including a person who intends to lease real estate for factories to a small or medium enterprise owner) who intends to construct or extend a building for industrial use, research facilities, or pilot production, which is prescribed by Presidential Decree (hereinafter referred to as "industrial building, etc.") within an industrial complex designated under the Industrial Sites and Development Act, an inducement area under the Industrial Cluster Development and Factory Establishment Act, and a technopark constructed under the Act on Special Cases concerning Support of Technoparks, shall be exempted from acquisition tax and registration tax for the relevant portion, if such real estate is not used directly for the purpose of industrial building, etc. within three years from the date of its acquisition, or if it is sold or used for other purposes without using directly for the purpose of industrial building, etc. for two or more years from the date of its use, the exempted acquisition tax

2. After finding facts as indicated in its reasoning based on adopted evidence, the court below determined that the extended part of the case constitutes an object of exemption from acquisition tax and registration tax under Article 276 (1) of the former Local Tax Act, on the ground that the proviso of Article 276 (1) of the former Local Tax Act provides that "where an industrial building is not used directly for its original purpose" as a ground for collection of acquisition tax and registration tax. However, in light of the purport of the above provision, "direct use" of the pertinent property is sufficient if it is used for its original purpose, and it is not directly used for the original purpose, but it should not be deemed as if it is leased or entrusted to a third party. The plaintiff leased the extended part of the case corresponding to the industrial building in the Asan National Industrial Complex to Dr. Korea and Dr.D. Co., Ltd. (hereinafter "the lessee of this case") to use it for cooling, freezing, freezing, storing, processing by negligence, etc.

3. However, we cannot agree with the judgment of the court below for the following reasons.

Article 276 (1) of the former Local Tax Act (hereinafter "the overall provision of this case") contains "a case where a person wishes to lease real estate for factories to a small and medium enterprise owner" in the main provision of this case (hereinafter "the overall provision of this case"). In light of the legislative intent and amendment history of the above provision, the relationship between the main provision and the proviso thereof, etc., "real estate for factories" in the overall provision of this case shall not be deemed to be different from "industrial building" in the main provision of this case. Therefore, even if a person who intends to build or extend industrial buildings, etc. acquires real estate, it shall not be used directly for the purpose of industrial buildings, etc., and if it is intended to lease it to a third party, the lease shall not be deemed an object of exemption from acquisition tax and registration tax under the main provision of Article 276 (1) of the former Local Tax Act, unless it is leased to a small and medium enterprise owner

Examining the circumstances indicated in the reasoning of the judgment below in light of the above legal principles, the Plaintiff did not directly use the part of the extension of the instant building, which is an industrial building, for its original purpose and leased it to the lessee of the instant case. Thus, unless the lessee of the instant case is a small and medium enterprise under the overall provision of this case, the extended part of the instant case cannot be eligible for exemption from the acquisition tax and registration tax under the main sentence of Article 276 (1) of the former Local Tax Act. Thus, the court below should have deliberated and judged whether the lessee of the instant case is a small and medium enterprise under the overall provision of this case. However, the court below determined that the extended part of the instant case falls under the object of exemption from the acquisition tax and registration tax under the main sentence of Article 276 (1) of the former Local Tax Act without such deliberation and determination. The judgment below erred by misapprehending the legal principles on Article 276 (1) of the former Local Tax Act, which affected the conclusion

4. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min Il-young (Presiding Justice)