2016Guhap51526 Revocation of corrective action, such as license tax, etc.

O20,000

Thai Market

March 17, 2017

March 31, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Registration license tax of KRW 938,424,980, and registration license tax of KRW 187,684,990, and registration license tax of KRW 265,616,00, and local education tax of KRW 53,123,200, which are subject to capital increase due to the Plaintiff’s debt-equity swap, and registration license tax of KRW 265,616,00, and registration license tax of KRW 53,123,200, are revoked on August 16, 2016.

1. Details of the disposition;

A. On August 27, 2014, the Thai Tourism Development Corporation received a decision to commence rehabilitation procedures in Seoul Central District Court Decision 2014 Ma10057, 157 (Merger), and obtained the authorization for rehabilitation plans in Seoul Central District Court Decision 2014 Ma10057 on February 25, 2016. Pursuant to the rehabilitation plan, the Thai Tourist Development Corporation converted its existing debt into 67,514,380,000 shares into 67,50,876 shares and shares issued on March 26, 2016 (hereinafter referred to as “the exchange before the instant investment”) and retired without compensation the said shares and shares issued on March 2, 2016 (hereinafter referred to as “the new shares issued on March 1, 2016”).

B. On April 28, 2016, the Taecheon Tourism Development Corporation reported and paid registration license tax of KRW 938,424,980, and local education tax of KRW 187,684,90, and KRW 320,000,000 and local education tax of KRW 64,00,000 on the ground that the registration following the instant conversion of investment was subject to taxation.

C. On May 17, 2016, Taecheon Tourism Development Corporation changed its organization to the Plaintiff and was dissolved upon the permission of the Seoul Central District Court (2014 Gohap10057).

D. On July 26, 2016, the Plaintiff filed a claim for rectification of non-taxation on the ground that no registration license tax and local education tax were imposed on the registration following debt-equity swap and the registration following the instant capital increase with capital increase.

E. On August 16, 2016, the Defendant issued a decision of correction that reduces KRW 320,000,000 to KRW 265,616,000, and the local education tax to KRW 64,00,00 to KRW 53,123,20, respectively (hereinafter “the remaining part without reduction or correction”).

【Facts without dispute over the ground for recognition, Gap evidence Nos. 1 through 7 (including branch numbers for those with additional numbers);

Each entry and the purport of the whole pleadings; hereinafter the same shall apply)

2. Whether the rejection disposition of this case is legitimate

A. The plaintiff's assertion

1) Claims on registration license tax and local education tax (hereinafter “registration license tax and local education tax, etc.”) subject to the registration following capital increase with consideration of the instant case

A) Articles 25(4) and 25(1), 23(1)4, 266(1), and 206(2) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “DRB”) are exempt from registration license tax for the registration following the offering of new shares by the corporate debtor. As such, registration license tax imposed on the registration following the offering of new shares for the purpose of taxation pursuant to the relevant issues ought to be exempted pursuant to the instant provision.

B) The Plaintiff issued new shares with the belief that the Plaintiff is not obligated to pay registration and license tax, etc. by reliance on the issues clause of the instant case and the rehabilitation plan, and thus, the instant refusal disposition is unlawful by violating the principle of trust protection.

C) Preliminaryly, registration license tax on the registration of a local government-invested public corporation established pursuant to the Local Public Enterprises Act shall be reduced by 50/100 of registration license tax by the proportion of stocks held by the local government (amended by Act No. 14477, Dec. 26, 2016; hereinafter “former Act on Special Cases Concerning Local Taxes”) pursuant to Article 85-2(1)2 of the former Act on Special Cases Concerning Local Taxation (amended by Act No. 14477, Dec. 26, 2016; hereinafter “former Act on Special Cases Concerning Local Taxes”). In this case, the proportion of stocks held by the local government-invested public corporation should be 60.98%, which is the proportion of stocks held at the time of

2) Claim on registration license tax, etc. which is subject to the registration following the conversion of investment in this case

A) The main text of Article 26(2)1 of the Local Tax Act provides that “registration or record by commission of the court concerning the liquidation of a company or special liquidation shall be exempt from taxation.” The proviso excludes registration following a debt-to-equity swap (hereinafter referred to as “the proviso of this case”) from non-taxation, and the proviso of this case, which excludes registration following a debt-to-equity swap from non-taxation in the event that a company immediately retires after the issuance of new stocks through a debt-to-equity swap in accordance with the rehabilitation plan, is unconstitutional.

B) Since the Plaintiff issued new shares with the belief that it was not obligated to pay registration and license tax, etc. by trust in the rehabilitation plan, the instant refusal disposition is unlawful in violation of the principle of trust protection.

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

1) The portion of registration license tax, etc. imposed on the registration following the offering of new stocks in this case

A) Whether registration license tax imposed on the registration following the offering of new stocks is exempted pursuant to the key issues of this case

Comprehensively taking account of the following circumstances, whether to impose a registration license for the registration of capital increase with consideration for new stocks ought to be determined pursuant to Article 26(1)1 of the Local Tax Act. The key issues of this case cannot be the grounds for exemption. The Plaintiff’s assertion on this part is without merit.

1. Article 3(1) of the former Restriction of Special Local Taxation Act provides that exceptions to local taxes on general taxation under the Local Tax Act shall not be prescribed unless this Act, the Framework Act on Local Taxes, the Local Tax Act, the Act on Special Taxation Restriction, and the Treaty are complied with (hereinafter referred to as the “Special Exceptions Provisions”). Therefore, the key issue of the instant case cannot be the grounds for exemption from registration and license tax, which is a local tax.

1) Article 3 of the Addenda of the Restriction of Special Local Taxation Act (Act No. 1020, Mar. 31, 2010) was first introduced upon the enactment of Act No. 1020 on March 31, 2010. Article 3 of the Addenda of the Restriction of Special Local Taxation Act (amended by Act No. 1020, Mar. 31, 2010) provides that local taxes subject to reduction, exemption, imposition, or reduction under the former Local Tax Act prior to the enforcement of this Act shall be governed by the former Local Tax Act. Furthermore, there is no transitional measure regarding cases where local taxes are reduced or exempted under any Act other than the Local Tax Act. Accordingly, the legislative intent seems to have been to abolish the provisions on local tax reduction and exemption under any Act other than the Local Tax Act in the process of enacting the Restriction of Special Local Taxation Act. Accordingly, it accords with the legislative intent of the legal person to interpret that the instant dispute by the enactment of the Restriction of Special Local Taxation Act could no longer

③ Non-taxation of registration and license tax on registration by commission of the court on the liquidation of a company or a special liquidation is stipulated in the Local Tax Act since the former Local Tax Act was introduced as Act No. 2950 on December 31, 1976 until the date of its introduction (Article 128(4) and Article 26(2)1 after the amendment). However, under the Company Reorganization Act repealed by Act No. 7428 on March 31, 2005, the exemption of registration and license tax on registration and license tax on registration by commission of the court on the liquidation or special liquidation was not stipulated in the Company Reorganization Act, which was repealed by Act No. 7428 on March 31, 2005, with the enactment of the Debtor Rehabilitation Act by Act No. 7428 on March 31, 2005, the registration and license tax on registration of the company’s liquidation or special liquidation was non-taxation on the registration by commission of the court (Article 25(2)4 of the Local Tax Act).

④ If Article 26(2)1 of the Local Tax Act provides for a provision on the general record, such as registration by commission of a court, and the main issue clause of this case is a provision on the registration or enrollment by commission of a law officer concerning the reorganization of a company or special liquidation, there is room to regard the main issue clause of this case as a special law on Article 26(2)1 of the Local Tax Act. However, since Article 26(2)1 of the Local Tax Act and Article 26(2)1 of the instant provision provide for both the issue clause and Article 26(2)1 of the Local Tax Act as to whether registration or enrollment by commission of a law officer concerning the reorganization of a company or special liquidation, the issue clause of this case cannot be deemed as a special law on Article 26(2)1 of the Local

B) Whether the principles of trust protection are violated

Inasmuch as the Debtor Rehabilitation Act enacted by the National Assembly and the rehabilitation plan approved by the court, it cannot be deemed that the tax authority expressed this public opinion. The Plaintiff’s assertion on this part is without merit.

C) Whether the ratio of stocks held by a local government should be based on the ratio of stocks held by the local government before the conversion into investment at the time of reduction or exemption under Article 85-2(1)2 of the former Restriction

According to the background of the aforementioned disposition, Gap evidence No. 6 and the purport of the entire pleadings, the share ownership ratio in the Taecheon Tourism Development Corporation was 60.98% at the time when the corporate rehabilitation plan was authorized for the Taecheon Tourism Development Corporation on February 25, 2016. However, on March 1, 2016, at the time of the instant capital increase with capital increase, 33.9% was reduced due to the instant equity investment. On August 16, 2016, the defendant reduced registration license tax, etc., which was registered as the instant capital increase with capital increase pursuant to Article 85-2(1)2 of the former Act on Special Cases Concerning the Restriction of Local Taxes, and recognized the reduction or exemption of registration license tax, etc., which was 33.9% at the time of the instant capital increase with capital increase with capital increase on March 1, 2016, based on 33.99% at the time of the instant capital increase with capital increase.

Comprehensively taking account of the following circumstances, it is justifiable that the Defendant reduced or exempted registration and license tax, etc. according to the share ownership ratio (33.99%) at the time of the instant capital increase for new shares issued on March 1, 2016, and as alleged by the Plaintiff, it cannot be reduced or exempted according to the share ownership ratio (60.98%) at the time of the birth before the instant capital increase for new shares.

① Under the principle of no taxation without representation, the interpretation of tax laws and regulations shall be interpreted in accordance with the text of the law, barring special circumstances, and shall not be extensively interpreted or analogically interpreted without any reasonable attention. In particular, it accords with the principle of equity in taxation to strictly interpret the provisions that clearly indicate preferential provisions among the requirements for reduction and exemption (see, e.g., Supreme Court Decision 20081372, Aug. 20, 2009).

② Even if the rehabilitation plan was planned to retire the stocks from the conversion of investment in this case under the rehabilitation plan, as long as the stocks were not retired from the stock due to the conversion of investment in this case at the time of the conversion of investment in this case, it cannot be excluded from the calculation of the share ownership ratio of local government due to the conversion of

2) The portion of registration license tax, etc. imposed on capital increase following the conversion into investment of this case

A) Whether the proviso of this case is unconstitutional

In full view of the following circumstances, the instant proviso cannot be deemed as unconstitutional because it infringes on the essential contents of the property right. The Plaintiff’s assertion on this part is without merit.

① Registration license tax is imposed on matters concerning the acquisition, transfer, change, or extinguishment of property rights or other rights, in cases where registration or enrollment is made in the public register book book book book, and whether such registration or enrollment is void or substantial rights are subject to registration license tax (see, e.g., Supreme Court Decision 95Nu14855, Jul. 26, 1996). Although a registration act based on a debt-to-equity swap, which is anticipated to be retired due to a debt-to-equity swap, exists in the rehabilitation plan itself, and thus, it cannot be said that it goes against the essence of the taxation if it is registered.

② Even in individual and specific cases, even if an existing creditor’s claim was returned prior to investment in accordance with the rehabilitation plan and the retirement thereof is made, insofar as the Debtor Rehabilitation Act does not necessarily stipulate that stocks issued prior to investment be retired, there is no inevitable reason to stipulate the registration of conversion of investment as non-taxation.

B) Whether the principles of trust protection are violated

It cannot be deemed that the tax authority expressed a public opinion with the rehabilitation plan authorized by the court. The plaintiff's assertion on this part is without merit.

3. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit, and it is so decided as per Disposition.

(Presiding Judge)

Mashee

United Kingdom of America

Site of separate sheet

Relevant statutes

/ The Debtor Rehabilitation and Bankruptcy Act

Article 23 (Commission of Registers of Corporations)

(1) Where a corporate debtor falls under any of the following subparagraphs, a court administrative officer, etc. shall, ex officio, entrust a registry office in the seat of the office or business office (referring to the office or business office located in the Republic of Korea, if any, in a foreign country; hereafter the same shall apply in this Article) of a person without permission with a written commission, along with the certified copy or abstract of the written decision and other related documents:

4. Where there exists the issue of new stocks under Article 266, the issue of bonds under Article 268, the all-inclusive exchange of stocks under Article 269, the comprehensive transfer of stocks under Article 270, the merger under Article 271, the division or the merger by split under Article 272 or the establishment of a new company under Articles 273 and 274;

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, carry out the registration without delay.

(4) No registration tax shall be imposed on the registration as provided in paragraphs (1) through (3).

Article 206 (Issuance of New Shares by Stock Companies and Limited-Liability Companies)

(2) When the debtor who is a stock company has rehabilitation creditors, rehabilitation secured creditors or shareholders make new payments or make investments in kind and issues new shares, the matters falling under each of the following subparagraphs shall be determined in the rehabilitation plan:

1. Matters under paragraph (1) 1 and 3;

2. Matters concerning the amount of payment and the allotment of new shares, and payment date for new shares;

3. When a person makes a new contribution in kind, the value of the property that is the object of the contribution, and the class and number of shares to be given by substitute for that value, if any;

Article 266 (Special Cases Concerning Issuance of New Shares for which Payments, etc. are Made)

(1) When it is prescribed in the rehabilitation plan that the debtor issues new shares pursuant to the provisions of Article 206 (2) and (3), new shares may be issued according to the rehabilitation plan.

m. Restriction of Special Local Taxation

ADiplomatic Act (Law No. 10220, March 31, 2010)

Article 3 (General Transition Measures) The previous provisions shall apply to the local tax that has been reduced or exempted, or to be imposed, or to be reduced or exempted pursuant to the provisions of the former Local Tax Act (including the previous municipal ordinance under Article 9 of the Local Tax Act) before this Act enters into force.

/ former Restriction of Special Local Taxation Act (amended by Act No. 14477, Dec. 27, 2016)

Article 3 (Restrictions on Exceptions to Local Tax)

(1) Except as otherwise provided for in this Act, the Framework Act on Local Taxes, the Local Tax Act, the Restriction of Special Taxation Act, and treaties, exceptions to local taxes on general taxation provided for in the Local Tax Act shall not be prescribed.

Article 85-2 (Reduction and Exemption for Local Public Enterprises, etc.)

(1) Local tax on behalf of a local government-invested public corporation (excluding agricultural and fishery products corporations and urban railroad corporations) established pursuant to the Local Public Enterprises Act shall be reduced or exempted until December 31, 2016, as follows:

2. Registration license tax on the registration of such corporation shall be reduced by an amount computed by multiplying 50/100 (where municipal ordinance prescribes a separate rate within 50/100, such rate shall apply thereto) of registration license tax by the proportion of stocks held by the local government;

/ former Restriction of Special Local Taxation Act (amended by Act No. 10220, Mar. 31, 2010)

Article 3 (Restrictions on Exceptions to Local Tax)

(1) Unless otherwise governed by this Act, the Local Tax Act, and the Act on Special Cases concerning the Restriction of Special Taxation in 1, exceptions to local taxes on the fixed amount of taxation shall not be prescribed by the Local Tax Act.

【Local Tax Act

Article 26 (Non-Taxation)

(2) No registration and license tax shall be imposed on any of the following registrations, registrations, or licenses:

1. Registration or record by a commission of the court on the liquidation of a company or a special liquidation: Provided, That registration or record following the payment of capital or investment of a corporation, increase of its capital and conversion into investment shall be excluded;

Local Tax Act (Amended by Act No. 13636, Dec. 12, 2015)

Article 26 (Non-Taxation)

(2) Registration license tax shall be imposed on any of the following registrations or licenses:

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

Local Tax Act (Amended by Act No. 10221, Mar. 21, 2010)

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

No registration tax shall be imposed on the following ones:

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