Whether a small and medium enterprise is eligible for exemption from acquisition tax and registration tax under the main sentence of Article 276(1) of the former Local Tax Act in cases where industrial buildings, etc. are leased to a small and medium enterprise prescribed in the main sentence of Article 276(1) of the former Local Tax Act and the small and medium enterprise owner newly constructed industrial buildings (negative)

Article 276(1) of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005; hereinafter the same) contains “cases where real estate for factories is leased to small and medium enterprise owners” (hereinafter “instant overall provision”) subject to exemption from acquisition tax and registration tax under the main sentence. In light of the legislative intent and amendment history of the above provision, the relationship between the main sentence and the proviso, etc., “real estate for factories” of the instant provision is difficult to view “industrial buildings, etc.” different from “industrial buildings, etc.” of the main provision. Therefore, since industrial buildings, etc. are not included in “real estate for factories” of the instant provision, it is reasonable to interpret that the above factory site is leased to small and medium enterprise owners under the overall provision of the instant case, and even if the small and medium enterprise owner constructed industrial buildings, it does not constitute subject to exemption from acquisition tax and registration tax under the main sentence of Article 276(1) of the former Local Tax Act.

Article 276 (1) of the former Local Tax Act (amended by Act No. 7843 of Dec. 31, 2005) (see current Article 78 (1) of the Restriction of Special Local Taxation Act)

Supreme Court Decision 2012Du17179 Decided November 29, 2012 (Gong2013Sang, 97)

Hyundai Heavy Industries Co., Ltd. (Attorney Yoon Jae-in, Counsel for the defendant-appellant)

Ulsan Metropolitan City Head of Nam-gu (Law Firm International Law Firm, Attorneys Ha Man-young et al., Counsel for the defendant-appellant)

Busan High Court Decision 2012Nu1495 decided September 28, 2012

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

The grounds of appeal are examined.

1. Article 276(1) of the former Local Tax Act (amended by Act No. 7843, Dec. 31, 2005; hereinafter the same shall apply) provides that "any real estate acquired by a person (including a person who intends to lease real estate to a small or medium enterprise owner for factories) who intends to construct or extend an industrial building, research facility, or pilot-production building prescribed by Presidential Decree (hereinafter referred to as "industrial building, etc.") within an industrial complex designated under the Industrial Sites and Development Act, a promotional zone under the Industrial Cluster Development and Factory Establishment Act, and an industrial technology complex created under the Act on Special Cases concerning Support for Industrial Technology Complexes, shall be exempted from acquisition tax and registration tax: Provided, That if such real estate is not used directly for the purpose of industrial building, etc. within three years from the date of its acquisition without justifiable grounds, or if it is sold or used for other purposes without using directly for the purpose of industrial building, etc

Article 276(1) of the former Local Tax Act contains exceptional cases where “to lease real estate for factories to a small and medium enterprise owner” (hereinafter “instant overall provision”). In light of the legislative intent and amendment history of the instant provision, the relationship between the main text and proviso thereof, etc., “real estate for factories” under the instant overall provision is difficult to be deemed different from “industrial buildings, etc.” under the main provision (see Supreme Court Decision 2012Du17179, Nov. 29, 2012). Therefore, since industrial buildings, etc. are not included in “real estate for factories” under the instant overall provision, it is reasonable to interpret that the aforementioned land for factories is leased to a small and medium enterprise owner under the instant overall provision and thus, even if the small and medium enterprise owner newly constructed industrial buildings, it does not constitute the subject of exemption from acquisition tax and registration tax under the main sentence of Article 276(1) of the former Local Tax Act.

2. However, in this case where the Plaintiff acquired the land for a factory in this case and leases part of it to the small and medium enterprise in the state of site, and the lessee constructed a new building for industrial use, the lower court determined that this case is subject to exemption from acquisition and registration unlike the aforementioned legal principles. In so doing, the lower court erred by misapprehending the legal principles on interpretation of Article 276(1) of the former Local Tax Act, thereby adversely affecting the conclusion of the judgment. The

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)