The East America Foundation (Law Firm Subdivision, Attorney Kim Tae-tae, Counsel for the defendant-appellant)

The head of Gangnam-gu Seoul Metropolitan Government (Law Firm Han-ro, Attorneys Hai-ro, Counsel for defendant)

December 4, 2015

1. The Defendant’s disposition rejecting to rectify the registration and license tax and local education tax made against the Plaintiff on July 2, 2015 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. On April 18, 2012, the Plaintiff was a corporation established with the establishment authorization as the principal office of Seongbuk-si ( Address 1 omitted) on the 30th of the same month with the establishment authorization as of April 18, 2012, and reported and paid registration license tax of 43,284,790 won and local education tax of 86,656,950 won to the head of Seongbuk-si, by applying the heavy taxation provision on the establishment of a corporation in a large city under the Local Tax Act at

B. On August 22, 2013, the Plaintiff transferred the principal office to Gangnam-gu Seoul ( Address 2 omitted) and reported and paid registration and license tax of KRW 620,784,790 and local education tax of KRW 124,156,950 to the Defendant by applying the heavy taxation provisions on the relocation of the principal office of a corporation within a large city under the Local Tax Act on September 5 of the same year.

C. On May 13, 2015, the Plaintiff filed a claim for the refund of the amount of registration license tax and local education tax initially filed, claiming that the Plaintiff’s relocation of its principal office to the Defendant was conducted in a large city and thus does not constitute subject to heavy taxation under the Local Tax Act, as follows. However, the Defendant rendered a disposition rejecting the Plaintiff’s claim for correction on July 2, 2015 (hereinafter “instant disposition”) based on Article 28(2) of the former Local Tax Act (amended by Act No. 12153, Jan. 1, 2014; hereinafter “former Local Tax Act”) and Articles 45(4) and 27(3) of the Enforcement Decree of the same Act (amended by Presidential Decree No. 25751, Nov. 19, 2014; hereinafter “former Enforcement Decree”).

Registration license tax of KRW 620,784,790, KRW 75,000, KRW 620,709,790, local education tax of KRW 124,156,950, KRW 15,000, total of KRW 124,141,950, and KRW 744,851,740, which are included in the main sentence;

[Ground of recognition] Unsatisfy, entry of Gap evidence 1 to 4 (including each number for a case with a serial number) and the purport of the whole pleadings

2. The plaintiff's assertion

According to the concept of "large city" under Article 28 (2) of the former Local Tax Act, the Plaintiff's relocation of its principal office from the Seongbuk-gu Seoul Metropolitan City to the "large city" from the "Large City" to the "large city" does not fall under the requirements for heavy taxation of registration and license tax under the above provision. Nevertheless, the Defendant issued the instant disposition based on Articles 45 (4) and 27 (3) of the former Enforcement Decree of the Local Tax Act. The above provision of the Enforcement Decree was extended beyond the scope of delegation under Article 28 (2) of the former Local Tax Act, which exceeds the scope of application of the heavy tax rate, and it cannot be recognized as effective against the principle of prohibition of comprehensive delegation, the principle of no taxation without law, and the principle of systematic legitimacy. Thus, the instant disposition based thereon is unlawful.

3. Relevant statutes;

It is as shown in the attached Form.

4. Determination

(a) Details, etc. of the relevant statutes;

Article 28 (1) 6 of the former Local Tax Act provides for the registration and license tax rate for the registration of a corporation. Paragraph (2) provides for the scope of taxation of registration and license tax for a large city under Article 6 (2) except for an industrial complex subject to the Industrial Cluster Development and Factory Establishment Act among over-concentration control regions under Article 6 of the Seoul Metropolitan Area Readjustment Planning Act (including where capital or amount of investment is increased within five years after establishment or transfer of a dormant corporation) or registration following the establishment of a branch or sub-office (including where capital or amount of investment is increased within five years after transfer) or the relocation of a corporation outside a large city into a large city into a large city (including where capital or amount of investment is increased within five years after transfer), Article 28 (2) of the former Local Tax Act provides for the scope of taxation of registration and license tax for a large city under Article 4 (2) 6 of the former Enforcement Decree of the Local Tax Act and Article 7 (2) of the former Enforcement Decree of the Local Tax Act provides for the scope of taxation of a large city under Article 45 (2) of the former Enforcement Decree of the Local Tax Act.

Meanwhile, according to Article 2 subparagraph 1 and Article 6 of the Seoul Metropolitan Area Readjustment Planning Act, Articles 2, 9, and 1 of the Enforcement Decree of the same Act, "Seoul Metropolitan City, Incheon Metropolitan City, and Gyeonggi-do" and "Seoul Metropolitan City and Sungnam-si both correspond to the Seoul Metropolitan area and overconcentration Control Zone under the same Act, and considering the overall purport of the pleadings in each of the statements in the evidence Nos. 6 through 8 (including the serial numbers) of the Seoul Metropolitan Area Readjustment Planning Act, the former location of the Plaintiff's principal office [the address No. 1 omitted] and the seat of the principal office [Seoul Gangnam-gu (the address No. 2 omitted)] shall not be an

B. Whether the instant disposition is lawful

1) Based on the provision of the Enforcement Decree of the instant case, the Defendant: (a) deemed that the Plaintiff’s relocation of its principal office from Sungnam-si to Seoul Metropolitan Government constitutes a heavy taxation requirement under Article 28(2)2 of the former Local Tax Act; and (b) held that the above disposition is reasonable.

2) As seen earlier, Article 27(3) that Article 45(4) of the former Enforcement Decree of the Local Tax Act applies mutatis mutandis mutatis mutandis mutatis mutandis provides that “in the case of the Seoul Metropolitan area, the relocation of the principal office from the area other than the Seoul Metropolitan Government to the Seoul Metropolitan City shall be deemed the relocation of the Metropolitan City to the Seoul Metropolitan City.” The Plaintiff’s relocation of the principal office from the Seongbuk-si to the Seoul Metropolitan City is deemed the relocation of the principal office from the Seoul Metropolitan City (excluding the Seoul Metropolitan

However, Article 28 (2) 2 of the former Local Tax Act requires that "head office or principal office outside a large city be transferred to a large city" as a requirement for heavy registration license tax on the transfer of the head office or principal office of a corporation. Thus, as alleged by the defendant, it cannot be deemed that the aforementioned case constitutes "transfer to a large city" under Article 27 (3) and immediately satisfies the heavy taxation requirement under Article 28 (2) 2 of the former Local Tax Act. In other words, Article 13 (2) 1 of the former Local Tax Act, which is the mother law of Article 27 (3) of the former Local Tax Act, provides that acquisition tax shall be imposed on "acquisition of real estate from a large city by transferring its head office, main office, branch office, or branch office to a large city," and therefore, it does not constitute "the former principal office outside the large city" under Article 27 (2) 2 of the former Local Tax Act, and thus, it does not constitute "the former principal office outside the large city" under Article 28 (2) of the former Local Tax Act.

3) Therefore, the Plaintiff’s case does not constitute subject to heavy registration and license tax under Article 28(2)2 of the former Local Tax Act. Thus, the instant disposition based on a different premise is unlawful (as long as the instant disposition is revoked in entirety by rejecting the Defendant’s grounds for disposition, the Plaintiff’s remaining assertion is not further determined).

5. Conclusion

The plaintiff's claim of this case is reasonable, and it is so decided as per Disposition.

[Attachment]

Judges Kim Byung-soo (Presiding Judge) et al.;