Whether the concept of “small and medium start-up venture enterprise” under Articles 119 and 120 of the former Restriction of Special Taxation Act that provides for the exemption of local taxes on a small and medium start-up venture enterprise shall be determined by applying Article 6 of the same Act (affirmative)

Articles 6, 119(3)1, and 120(3) of the former Restriction of Special Taxation Act (amended by Act No. 7003 of Dec. 30, 2003)

Supreme Court Decision 2004Du7412 Delivered on September 3, 2004

No. 13 of the Act on the Protection of Land, Infrastructure and Transport, Etc. (Law Firm U.S. and one other, Counsel for defendant-appellant)

The head of Dongjak-gu Seoul Metropolitan Government

Seoul High Court Decision 2006Nu7944 delivered on November 1, 2006

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

The grounds of appeal are examined.

1. The court below held that the disposition of this case imposing acquisition tax, registration tax, etc. on the premise that Article 6 (4) 1 of the former Restriction of Special Taxation Act (amended by Act No. 7003, Dec. 30, 2003; hereinafter the "Act") does not apply to exemption from local taxes, such as acquisition tax, registration tax, etc. under Articles 119 (3) 1 and 120 (3) of the Act, is unlawful, on the ground that Article 6 (2) 1 of the Act only provides that exemption from national tax exemption, such as income tax, corporate tax, etc. under Article 6 (2) of the Act, and that exemption from local tax is not applicable to exemption from local tax, such as acquisition tax, registration tax, etc. under Articles 119 (3) 1 and 120 (3) of the Act, by combining the company with the stock company through a merger with the stock company.

2. However, it is difficult to accept the above determination by the court below for the following reasons.

Article 6 (2) of the Act provides that "in the case of an enterprise prescribed by Presidential Decree among venture businesses under Article 2 (1) of the Act on Special Measures for the Promotion of Venture Businesses and confirmed as a venture business under Article 25 of the same Act (hereinafter "small and Medium Venture Businesses"), the tax amount equivalent to 50/100 of the income tax or corporate tax shall be reduced or exempted." Article 6 (4) of the Act provides that "in applying the provisions of paragraphs (1) through (3) of the same Article, where a small and medium venture enterprise falls under any of the following subparagraphs, it shall not be deemed a start-up business, and it shall not be deemed a start-up business in the case of Article 6 (2) of the Act, Article 6 of the Act shall apply to whether it falls under the "small and Medium Venture Enterprise" under Article 6 of the Act, and therefore, the relevant "small and Medium Venture Enterprise" under Articles 119 (3) 1 and 120 (3) of the Act shall also be determined in accordance with Article 6 (3) of the Act.

Nevertheless, the court below erred by misapprehending the legal principles on the interpretation of Article 6 (2) and (4) of the Act, which affected the conclusion of the judgment, on the premise that Article 6 (4) 1 of the Act cannot be applied in determining whether a small or medium venture enterprise constitutes a small or medium venture enterprise under Articles 119 (3) 1 and 120 (3) of the Act. The ground of appeal pointing this out has merit.

3. Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jeon Soo-ahn (Presiding Justice)