[1] The meaning of "establishment of a corporation" under Article 138 (1) 1 and 3 of the former Local Tax Act

[2] Where a third party purchases all the shares of a corporation with no business performance by closing its business after the completion of its establishment registration and then changes its executive officer, capital, trade name, purpose of business, etc., whether the registration tax may be imposed on the corporation by deeming it as "establishment of a corporation" (negative)

[1] Article 138(1)1 and 3 of the former Local Tax Act (amended by Act No. 8147 of Dec. 30, 2006); Article 102(2) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 20708 of Feb. 29, 2008); Article 33 of the Civil Act; Articles 171(1) and 172 of the Commercial Act / [2] Article 138(1)1 and 3 of the former Local Tax Act (amended by Act No. 8147 of Dec. 30, 2006)

[1] Supreme Court Decision 2007Du26629 Decided April 9, 2009 / [2] Supreme Court Decision 98Du14082 Decided November 9, 1999 (Gong1999Ha, 2531) Supreme Court en banc Decision 98Du11731 Decided March 16, 200 (Gong2000Sang, 989) (Gong200Du963 Decided August 21, 2001)

Plaintiff (Attorney Kim full-time et al., Counsel for the plaintiff-appellant)

The head of Yangcheon-gu Seoul Metropolitan Government (Law Firm KEL, Attorneys Lee Dong-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2007Nu11957 decided Feb. 1, 2008

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

We examine the grounds of appeal.

Article 138(1)1 of the former Local Tax Act (amended by Act No. 8147 of Dec. 30, 2006; hereinafter “the Act”) provides that “registration following the increase of capital within five years after the establishment of a corporation in a large city” under Article 138(1)3 of the former Local Tax Act provides that “registration following the establishment of a corporation, the establishment of a branch office or a branch office in a large city, and the relocation of a corporation’s head office, a main office, or a branch office in a large city into a main office, a branch office in a large city, and real estate registration after the establishment, establishment, and transfer shall be subject to imposition of registration tax.” Article 102(2) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 20708 of Feb. 29, 2008) provides that “Real estate registration for non-business business purposes” under Article 138(1)3 of the Act refers to “after the establishment, relocation, or transfer of a corporation or a branch office.”

However, according to the provisions of the Civil Act and the Commercial Act concerning the incorporation of a corporation, it is basically necessary to establish a corporation and register its incorporation. The establishment of a corporation is completed at the same time with the establishment registration through the act of establishment (see, e.g., Article 33 of the Civil Act, Articles 171(1) and 172 of the Commercial Act). Thus, it cannot be established without the establishment registration. On the other hand, a corporation cannot be established through the same establishment registration unless it is extinguished after its establishment registration. This legal principle is stipulated under the Civil Act and the Commercial Act, which are the basic law governing the procedures for the establishment, and is a basic principle concerning the establishment. The establishment registration of a corporation is a newly effective provision unlike the registration or commercial registration, and it is not a mandatory provision, and it is not necessary to establish a corporation in accordance with the above provision concerning "establishment of a corporation" in the Local Tax Act, and it is not necessary to establish a corporation with the meaning that it constitutes "an act of acquiring its entire or part of its business establishment under the same provision concerning the establishment of a corporation."

In the same purport, based on the facts of recognition of the first instance court as stated in its holding, the court below held that the disposition of this case was unlawful on the ground that the above act constituted the establishment of a Dormant Company under Article 520-2 (1) of the Commercial Act on December 26, 2005, after the registration of incorporation was completed with the trade name of Non-Party 1 and two other corporations on July 10, 2006, instead of establishing a separate corporation for the purpose of escaping from heavy registration tax, etc. in a large city, and the establishment was deemed dissolved as a Dormant Company on September 20, 200, and the registration was made on June 26, 2006, but it was only the fact that the registration tax was paid at the time of the above establishment registration and the continuous registration was made on June 26, 2006.

This part of the judgment of the court below is not erroneous in the misapprehension of legal principles as to the interpretation and application of Article 138 (1) 1 and 3 of the Act as alleged in the ground of appeal.

On the other hand, as seen above, insofar as the fact that the Plaintiff’s share acquisition and its trade name, the location of the head office, the purpose business, the officers, etc. are deemed not to be established by the previous corporation, the lower court is just to have rejected the assertion of the Defendant’s corporate personality or anti-social order based on the premise that the Plaintiff corporation exists separately and is a party to the instant real estate transaction, which serves as the basis for the instant disposition, and there is no violation of law as otherwise alleged in the ground of appeal

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 Yang Chang-soo (Presiding Justice)