Where the transferee is deemed to comprehensively succeed to the transferor's business as a whole by acquiring part of the business assets as a successful bid through a voluntary auction procedure with the intention of comprehensively transferring or acquiring the business, such as by acquiring all rights and obligations on the remaining business assets and their business through a separate transfer contract with the transferor, the method of calculating "value of the acquired property" as the limit of the secondary tax liability to be borne by the transferee.

In a case where the transferee acquires part of the business assets through a voluntary auction procedure and acquires all the rights and obligations of the remaining business assets and the business in a case where it is deemed that the transferor comprehensively succeeds to the transferor's business through a separate transfer contract with the transferor, barring any special circumstance, the total evaluation of the economic value of the business is lacking. Thus, each transfer price stipulated in the auction price or the contract for the transfer of the remaining business assets cannot be deemed as the "amount paid or payable by the transferee" under Article 7 subparagraph 1 of the Enforcement Decree of the Local Tax Act, and in such a case, the "value of acquired property" under Article 7 subparagraph 2 of the Enforcement Decree of the Local Tax Act shall be calculated. In this case, in order to accurately reflect the economic value of the acquired business, the portion appropriated for the repayment of obligations by the transferor of the business among the auction price, i.e., the debt of the transferor extinguished by the auction shall be deemed to be included in the debt of the transferee, and thus, the value of the property acquired shall be calculated under Article 7 subparagraph 2 of the Enforcement Decree of the Local Tax Act.

Subparagraph 1 and 2 of Article 7 of the Enforcement Decree of the Local Tax Act

Busan Co., Ltd. (Attorney Lee Dong-dong, Counsel for defendant-appellee)

The head of Simsan-do, Chungcheongnam-do (Law Firm Han field, Law Firm, etc., Counsel for the plaintiff-appellant)

Supreme Court Decision 2006Du1166 Decided January 30, 2009

Daejeon High Court Decision 2009Nu391 Decided June 18, 2009

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

The grounds of appeal are examined.

1. Article 24(1) of the Local Tax Act provides that “If the impositions levied by a local government on the relevant business for which a transferor’s tax liability has become final and conclusive prior to the date of transfer is insufficient to cover the property of the transferor, the transferee shall be liable for secondary tax liability to the extent of the value of the property he/she acquired.” Article 24(3) provides that “The value of the property acquired under the provisions of paragraph (1) shall be determined by the Presidential Decree.” Article 7 of the Enforcement Decree of the Local Tax Act provides that “The value of the property acquired” shall be determined by the Presidential Decree. Article 7(1)1 of the Enforcement Decree of the Local Tax Act provides that “if there is any amount paid or to be paid by the transferee, if there is no value under subparagraph 1 or is remarkably lower than the market value, the value of the acquired property and liabilities shall be evaluated by applying mutatis mutandis the provisions of Articles 60 through 66 of the Inheritance Tax and Gift Tax Act and then the total

In a case where the transferee, with the intention to comprehensively transfer and take over the business, is deemed to comprehensively succeed to the transferor's business by acquiring part of the business assets through a voluntary auction procedure and acquiring all the rights and obligations related to the remaining business assets and the business through a separate transfer contract with the transferor, there is a lack of a comprehensive evaluation of the economic value of the transferor's business. Thus, barring any special circumstance, each of the transfer proceeds stipulated in the auction price or the contract for the transfer of the remaining business assets cannot be deemed to be "amount paid or to be paid by the transferee" under Article 7 subparagraph 1 of the Enforcement Decree of the Local Tax Act, and in such a case, it cannot be deemed that there is an amount corresponding to subparagraph 1 of Article 7 of the Enforcement Decree of the Local Tax Act, so the value of the acquired property should be calculated pursuant to Article 7

In this case, in order to accurately reflect the economic value of the acquired business, the part appropriated for the repayment of the obligation of the transferor of the business among the auction price, i.e., the obligation of the transferor of the business extinguished by the auction shall be deemed to be included in the obligation that the transferee acquired, and the "value of the acquired property" should be calculated in accordance with Article 7 (2) of the Enforcement Decree

The court below accepted the judgment of the court of first instance. The plaintiff acquired the second goods of this case through voluntary auction in KRW 29,99,99,999, and acquired them in KRW 4,62,647,473 under a separate transfer contract concluded with the non-party 1 corporation (hereinafter "non-party 2"), and acquired KRW 22,310,00,00 by transfer of the second goods of this case in KRW 970 (the total amount of KRW 33 goods of this case was acquired in KRW 383,974,00,00 and the total amount of KRW 90, KRW 979, KRW 90, KRW 290, KRW 97, KRW 90, KRW 97, KRW 90, KRW 97, KRW 90, KRW 90, KRW 97, KRW 90, KRW 290, KRW 97, KRW 90, the total amount of the second goods of this case was acquired by the non-party 1 and 3 goods of this case.

In light of the above legal principles and records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the interpretation and application of Article 24 of the Local Tax Act and Article 7 of the Enforcement Decree of the Local Tax Act as otherwise alleged in the

2. 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 Cha Han-sung (Presiding Justice)