KS Energy Co., Ltd. (Bae & Yang LLC, Attorneys Lee Ba-soo et al., Counsel for the plaintiff-appellant)

Incheon Metropolitan City (Law Firm Government Law Firm, Attorneys Lee Jae-sin et al., Counsel for the plaintiff-appellant)

December 21, 2011

Seoul Central District Court Decision 2010Gahap62630 Decided April 29, 2011

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The defendant shall pay to the plaintiff 7,680,000 won with 5% interest per annum from January 25, 2006 to July 1, 2010, and 20% interest per annum from the next day to the day of complete payment.

2. Purport of appeal

The judgment of the first instance is revoked. The plaintiff's claim is dismissed.

1. Basic facts

The following facts are not disputed between the parties, or are recognized by Gap evidence 1 through 11 (including each number), and the fact inquiry results to the head of Yeongdeungpo-gu court of the first instance and the whole purport of the pleadings.

A. On September 27, 2001, in the Incheon District Court 2001. In the case of the reorganization of the company, the company reorganization of Incheon District Court 2001. Upon the court's decision of commencement of the company reorganization procedure, part of the principal of reorganization securities and reorganization claims from the above court shall be converted into investment through the issuance of new stocks, and the remaining principal shall be adjusted by means of installment repayment, etc., but upon the court's permission, the court decided to approve the reorganization plan of March 25, 2003, which issued new stocks within the authorized capital

B. After that, the Incheon District Court concluded a merger agreement with the Plaintiff on January 18, 2006, and obtained a permit for the issuance of new shares and capital increase pursuant to the above contract from the Incheon District Court on January 18, 2006, and completed the registration of issuance of new shares based on the subscription for new shares (hereinafter “instant subscription for new shares”) on January 25, 2006 at the commission of the above court (e.g., the face value of KRW 50 million).

C. Article 128 of the Local Tax Act (amended by Act No. 7972, Sept. 1, 2006; hereinafter “former Local Tax Act”) which was in force at the time of the registration of capital increase with new stocks, provides that “No registration tax shall be imposed on any of the following matters” and subparagraph 3 of the same Article provides “registration or enrollment by commission of the court on the reorganization of a company or special liquidation”.

D. As of December 2, 2004, the Ministry of Public Administration and Security rendered an authoritative interpretation that “in case where a registration is made at the commission of the reorganization court with regard to the issuance of new stocks following the conversion of loans into equity investment of the reorganization company pursuant to the corporate reorganization plan under the Company Reorganization Act (amended by Act No. 7428 of March 31, 2005; hereinafter “former Company Reorganization Act”), the registration tax under Article 128 subparag. 3 of the Local Tax Act shall be exempted, but the capital increase registration by capital increase by capital increase by capital increase by capital increase issued by the reorganization company shall not be subject to non-taxation of registration tax” (hereinafter “the authoritative interpretation of December 2, 2004”).

E. In addition, Article 935 of the registered rules of the Supreme Court, which had been in force at the time of the registration of capital increase due to the execution of the reorganization plan and the registration of incorporation due to the merger of a company, provided that the registration official's commercial registration guidelines (in the company reorganization procedure under the Company Reorganization Act, the registered rules established by the commission of the reorganization court concerning the commercial registration to be a registered official was enacted on June 5, 1998, but the registered rules was repealed on March 29, 2006 pursuant to Article 1126 of the registered rules) of the registered rules of the Supreme Court, which had been in force at the time of the registration of capital increase due to the execution

F. On January 25, 2006, the Incheon District District Court reported and paid the registration tax of KRW 7,680,000,000 (including the local education tax equivalent to 20% of the registered tax amount; hereinafter “instant registration tax”) due to the registration of capital increase with capital increase, to the Seo-gu Incheon Metropolitan City Office. After the completion of the reorganization procedure on March 3, 2006, the Incheon District District Court was merged into the Plaintiff on February 4, 2008.

G. As of August 3, 2009, the Ministry of Public Administration and Security changed the authoritative interpretation that “where the registration of the issuance of new stocks by an interested party is made at the commission of the court in accordance with the provisions of the Debtor Rehabilitation and Bankruptcy Act, the registration tax exemption pursuant to the provisions of Article 128 subparag. 3 of the Local Tax Act shall be granted in case where the registration of the issuance of new stocks by interested parties is made at the commission of the court in accordance with the provisions of the Debtor Rehabilitation and Bankruptcy Act,” and on September 8, 2009, the authoritative interpretation that “the registration of capital increases made at the commission of the court by offering new stocks to a third party in accordance with the provisions of the Company Reorganization

H. The Plaintiff applied for the refund of the registration tax of this case to the Seo-gu Incheon Metropolitan City Office on October 2009, but the said Seo-gu Office rejected the refund on the ground that the new interpretation of the tax law is to apply the new interpretation since the date of new interpretation.

I. On the other hand, ELA Construction Co., Ltd. completed the registration of capital increase in the amount of KRW 287,000,000 upon commission of the court on November 9, 2006 during the company reorganization procedure. On November 8, 2006, registration tax of KRW 1,148,00,000 for the registration of capital increase in the above capital increase in Korea, and local education tax of KRW 229,60,000 for the above registration of capital increase in Korea was reported and paid respectively. However, Yeongdeungpo-gu revoked the imposition of the above registration tax, etc. according to the modified authoritative interpretation by the Ministry of Public Administration and Security, and the above registration tax, etc. was fully refunded on August 25, 20

2. Related statutes;

Article 128 (Non-Taxation on Registration, etc. of Acquisition of PseudoOwnership)

No registration tax shall be imposed on the following ones:

1. Registration or record of the acquisition of a property right by a trust (limited to the trust as prescribed by the Trust Act and accompanied by a trust registration) falling under any of the following items:

(a) Registration and record of the acquisition of a property right where a truster transfers it to a trustee;

(b) Registration or record of the acquisition of a property right where only the truster transfers the trust property which becomes the beneficiary of the original trust property to the beneficiary: Provided, That if the truster transfers the trust property to the heir of the truster, it shall be considered as a registration or record of the acquisition of the property right due to an inheritance, and

(c) Registration or record of the acquisition of the property right by a new trustee, in a case where the trustee is replaced;

2. Registration by exercise of a redemptive right, and falling under any of the following items:

(a) Registration of any real estate purchased by exercising a redemptive right under the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects;

(b) Registration of real estate purchased by exercising a redemptive right on the expropriation or use of land in an area subject to mobilization under the Act on Special Measures for Readjustment of Requisition or paragraph (2) of the Addenda to the Act on Special Measures for National Security;

3. Registration or record by a commission of the court on the liquidation of a company or a special liquidation;

2. Procedure for a commission of registration and the document appended thereto;

(a) Where a decision of the reorganization court following the progress of reorganization proceedings is entrusted with registration with the grounds for registration, the commission shall be accompanied by a copy or abstract of the decision (Articles 17 and 19 of the Act);

(b) Registration tax (Article 128 subparagraph 3 of the Local Tax Act), education tax (Article 3 subparagraph 5 of the Education Tax Act), application fee for registration (Article 5-3 (2) 1 of the Rule on Fees for Registration, etc. of Registers, Certified Copies, etc.), etc. shall be exempted with respect to the registration commissioned by the reorganization court in connection with the company reorganization procedure. However, the same shall not apply to the registration by commission of the reorganization court, other than the pure matters concerning the reorganization procedure (e.g., registration of capital increase following the implementation of the reorganization program

Article 17 (Registration of Commencement of Reorganization Proceedings)

(1) When a decision has been made to commence reorganization proceedings, the court shall, without delay, request ex officio to registry offices in the seat of the head office or branch offices (where there is a head office in a foreign country, the office in the Republic of Korea) of the company, along with a certified

(3) The provisions of paragraph (1) shall apply mutatis mutandis where any change occurs in the matters prescribed in the preceding paragraph, and where any matters to be registered with respect to the company or new company occurs, before the execution of the reorganization program, or the reorganization proceedings are completed pursuant

Article 222 (Issuance of New Stocks)

(1) If the company issues new stocks without requiring the reorganization creditors, security holders, or stockholders to make a new payment or contribution in kind, the following matters shall be determined:

1. Class and number of new shares;

2. Matters concerning the allotment of new shares;

3. The amount of capital and reserve funds to be increased by the issuance of new stocks.

(2) If the company requires the reorganization creditors, security holders or stockholders to make a new payment or contribution in kind, and issues new stocks, the following matters shall be determined:

1. Matters as referred to in subparagraphs 1 and 3 of the preceding paragraph;

2. Matters concerning the amount of payment and the allotment of new shares, and the date of payment on new shares (this date shall be the date after three or more months have elapsed from the date on which the approval of reorganization programs

3. When a person makes a new contribution in kind, the person, property which is the object of such contribution, price and the class and number of shares to be given therefor;

(3) Except as provided in the preceding two paragraphs, if the company issues new stocks, it shall determine the following matters:

1. Matters as referred to in paragraph (1) 1;

2. Matters as referred to in subparagraph 3 of the preceding paragraph;

3. The issue price of new shares and the date of payment thereof (this date shall be not less than three months after the date on which the approval of plan has been decided).

Article 24 (Commission of Register, etc. of Registered Rights)

(2) Where any acquisition, loss, or alteration of the rights registered before the implementation of the rehabilitation plan or the rehabilitation procedure is completed pursuant to the provisions of this Act, the court shall entrust the registration thereof ex officio: Provided, That the same shall not apply to the registration made by any debtor, creditor, secured creditor, shareholder, equity right holder, and any person other than the new company as

Article 25 (Duties of Registry Offices and Exemption of Registration Tax)

(1) Every registry office shall, when it is commissioned to perform the registration provided for in the provisions of Article 23 or 24, perform without delay the commissioned registration.

(2) Where any registration is made to grant authorization for the rehabilitation plan, the registry office shall ex officio cancel the registration where the debtor is registered bankrupt.

(3) Where any registration is made to cancel authorization for the rehabilitation plan and any registration is made pursuant to the provisions of paragraph (2), such registration shall be restored ex officio.

(4) No registration tax shall be imposed on the registration under the provisions of paragraphs (1) through (3).

3. The parties' assertion

A. The plaintiff's assertion

1) The registration of capital increase with consideration of the instant case constitutes “registration by commission of the court concerning corporate reorganization” as stipulated in Article 128 subparag. 3 of the former Local Tax Act and is exempt from the registration tax. The Plaintiff’s act of filing the registration tax of the instant case is significant and apparent, and the Plaintiff’s act of filing the registration tax of the instant case is not only significant and obvious, but also there exists a cause attributable to the tax authority, which caused the Plaintiff to return and pay the registration tax of the instant case in accordance with the erroneous authoritative interpretation of the Ministry of Public Administration and Security, the act of filing the registration tax of the instant case between the taxpayer and the tax authority, which is conducted between the taxpayer and the tax authority, and

2) Therefore, the Defendant is obligated to pay the Plaintiff the instant registration tax of KRW 7,680,00,000 paid by the Plaintiff according to the Plaintiff’s act of filing the registration tax of this case, which is automatically null and void, as unjust enrichment.

B. Defendant’s assertion

1) Article 128 subparag. 3 of the former Local Tax Act refers to “registration by commission of a court with respect to the reorganization of a company” means only the case where a court entrusts it ex officio as an active subject, and the case where a commission is made upon request of a party is not included in the above provision. Unlike the issuance of new stocks through a conversion into equity investment, the registration of capital increase with new stocks is made in the process of the merger by the plaintiff as an active subject, and it is not a case where the court entrusts it ex officio and registers it. Thus, the registration of capital increase with new stocks is not subject to tax exemption under the former Local Tax Act. Thus, the Plaintiff’s return and payment of this case is lawful

In addition, the Ministry of Public Administration and Security issued authoritative interpretation that the registration of capital increase is not subject to non-taxation at the time of the registration of capital increase, and the registered regulations of the Supreme Court at the time also stipulated that the registration of capital increase is not subject to non-taxation. Article 128 of the former Local Tax Act provides that the registration of capital increase shall not be subject to non-taxation, and Article 128 of the former Local Tax Act provides that registration tax shall not be imposed only when the title is related to the legal relations such as trust, repurchase, requisition, etc., and the ownership is not changed, and the registration of capital increase does not fall under the case where the ownership is changed to a "actual" rather than a "form". Thus, the registration of capital increase does not fall under the case where the ownership is changed to a "registration or enrollment by commission of the court concerning the reorganization or special liquidation of the company"

2) Even if the registration of capital increase with consideration for family affairs is subject to non-taxation under the former Local Tax Act, there was an authoritative interpretation that the registration of capital increase with consideration for family affairs at the time is not subject to non-taxation, and there was a provision that the registration of capital increase with consideration for family affairs at the time is not subject to non-taxation, and the registration of capital increase with consideration for family affairs in this case under the registered regulations of the Supreme Court at the time is not subject to non-taxation. After that, it cannot be said that the defect of the

4. Determination

A. Whether the registration of capital increase with new stocks of this case is non-taxable

Article 128 subparag. 3 of the former Local Tax Act provides that registration tax shall be non-taxation for the reorganization of a company's reorganization or special liquidation. Article 128 subparag. 2 of the same Act provides that the court shall entrust ex officio the registration due to the entrustment of the court in the process of reorganization procedures and shall not apply to the case where the court entrusts the registration upon the request of the party concerned. Article 17(3) of the former Company Reorganization Act provides that registration shall be entrusted to the court by applying mutatis mutandis the provisions of paragraph (1) of the same Article to the case where the matters to be registered with respect to the reorganization company prior to the completion of reorganization procedures," and Article 128 subparag. 2 of the former Company Reorganization Act provides that registration tax shall not be classified into the issuance of new shares by conversion of investment and capital increase by third parties, and the Act on Debtor's Recovery and Bankruptcy, which provides that registration tax shall not vary by the court for the purpose of Article 24(2)1 of the former Local Tax Act if the rights acquired by the court prior to the completion of rehabilitation procedures or ex officio.

Meanwhile, even if the Ministry of Public Administration and Security, at the time of the registration of capital increase, issued the authoritative interpretation that the registration of capital increase is not subject to non-taxation with respect to Article 128 subparag. 3 of the former Local Tax Act, as seen earlier, the above authoritative interpretation is unlawful, and Article 935 of the registered rules of the Supreme Court to the same purport as the above authoritative interpretation is not only a court’s business execution standard, but also has no validity on the same ground as the above authoritative interpretation.

B. Whether the instant reporting act is void as a matter of course

1) Criteria for determining the invalidity of a contract;

The registration tax is a tax by the method of return and payment, in principle, a taxpayer's tax liability is specifically determined by the act of filing a tax base and amount of tax and the act of filing a return is the performance of specific tax liability confirmed by the return, and the local government holds the tax amount paid based on the final tax claim. Thus, in order for the taxpayer's act of filing a return to be null and void as a matter of principle, the defect shall be significant and apparent. In addition, as to whether the act of filing a return falls under the void as a matter of course because of a significant and apparent defect, the purpose, meaning, function, and legal remedy for the act of filing a report shall be considered as a basis for the act of filing a report, and it shall be reasonably determined by considering the specific circumstances arising from the act of filing a return individually (see Supreme Court Decisions 94Da31419, Feb. 28, 1995; 2004Da64340, Jan. 13, 2006).

However, since registration tax returns are conducted between taxpayers and tax authorities, and the protection of a third party trusting the existence of acquisition tax returns is not particularly problematic, even if such returns are null and void, it does not seriously undermine legal stability. On the other hand, even if there are serious defects in taxation requirements, etc., and the legal remedies are relatively insufficient compared with national taxes, and it is reasonable to exceptionally consider special circumstances to consider the stability of tax administration and the request for smooth operation thereof, if there are special circumstances to deem that such defective returns are remarkably unreasonable from the perspective of protecting rights and interests of taxpayers (see Supreme Court Decision 2008Du11716, Feb. 12, 2009).

2) Special characteristics of local tax payment declaration

Legal relations and remedies concerning local taxes have the following characteristics compared with those concerning general administrative measures and national taxes:

(1) A general administrative disposition is issued for public interest and has a large number of impacts on a large number of interests. However, tax law relations is a simple monetary payment relationship between a tax authority and a taxpayer, and there is no substantial difference between a tax authority and a taxpayer in substance, and thus does not affect a third party’s interest in general between the tax authority and the taxpayer.

② Even if there is a defect in the taxation disposition, the tax authority can secure the national finance by its own executory power, such as the disposition on default. Since the taxpayer can receive a refund of the tax erroneously paid through the legal remedy procedures, it is relatively less necessary to determine the validity of the disposition at an early stage.

(3) In the case of national taxes, if the reported amount of tax exceeds the reported amount of tax under tax-related Acts, a request may be made to the head of the competent tax office for rectification of the tax base and amount of national taxes. This may be made not only for the reason that occurred at the time of the report, but also for the reason that occurred ex post facto after the report, and the period for request is relatively long-term period of three

On the other hand, local taxes may be revised when the reported amount of tax exceeds the amount of tax to be reported under the tax laws, but only for the reasons that arise after filing a return, and the period is limited to 60 days from the date prescribed by the Presidential Decree (Article 71(1) of the former Local Tax Act) and the remedy is limited [in the case of local taxes, the application of the correction claim system under the Framework Act on National Taxes is not applicable (Supreme Court Decision 98Du9608 Decided July 23, 199). Meanwhile, the Framework Act on Local Taxes enacted on March 31, 2010 provides that when filing a return by adopting the correction request system under the Framework Act on National Taxes, a revised return may be filed, and in the case of excessive return, a request for correction may be filed within three years after the statutory filing deadline expires, but the above Act was enforced from January 1, 2011).

3) Whether the act of filing the registration tax of this case is automatically null and void

First, as seen earlier, the registration of capital increase in Korea constitutes non-taxation subject to the registration tax under Article 128 subparag. 3 of the former Local Tax Act. Thus, the act of reporting and paying the registration tax of this case is serious defect. Furthermore, the act of reporting and paying the registration tax of this case is based on the authoritative interpretation of the Ministry of Public Administration and Security on December 2, 2004. Since the above authoritative interpretation is unlawful, it is necessary to protect the plaintiff who reported and paid the registration tax in trust of the public expression of the tax authority. Since the act of reporting and paying the registration tax of this case is done only between Incheon oil corporation and the defendant, which is the taxpayer, and it is not a special issue to protect the third party who trusted the existence of the above reporting act, and it is reasonable to view that the payment of capital increase in Incheon oil company was appropriated for the above company's reorganization security and repayment of the reorganization claim, and thus, it is unreasonable to deem that the plaintiff's act of reporting and paying the registration tax of this case is considerably unreasonable in view of the above legal principles, such as the above act of reporting and remedy.

4) Sub-committee

Therefore, the Defendant is obligated to pay to the Plaintiff 7,680,000 won with unjust enrichment, and damages for delay at each rate of 5% per annum under the Civil Act from January 25, 2006, the date of payment of the registration tax of this case, to July 1, 2010, which is clear that it is the date of delivery of a copy of the complaint of this case, and 20% per annum under the Act on Special Cases concerning Expedition, etc. of Legal Proceedings from the next day to the date of full payment.

5. Conclusion

Therefore, the plaintiff's claim of this case is justified, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed as it is without merit, and it is so decided as per Disposition.

Judges Cho Jae-young (Presiding Judge)