Relationship between the scope of effect of the provisoins on deeming authorization or permission and the separate taxation provisions of the Local Tax Act. : Supreme Cour Decision 2021Du40027 delivered on Sept. 14, 2021
Authors:   KOREAN SOCIETY OF TAX LAW, Yun Hyunjun 
Published: May 2024

Recently, the Supreme Court of Korea ruled in a decision dated September 14, 2023, 2021Du40027 (hereinafter referred to as the “Subject Judgment”) that the effect of the provisions on deeming authorizations, or permissions under the Integrated Energy Supply Act does not extend to the provisions on Classification of Land and Houses Subject to Taxation under Local Tax Act. Article 48 of the Integrated Energy Supply Act stipulates that if a business is licensed under this act, it is deemed to be obtained a license under Article 7 (1) of the Electric Utility Act, and the Enforcement Decree of the former Local Tax Act stipulates that land used for infrastructure by an electricity business under the Electric Utility Act is subject to separate taxation. In interpreting the above former Local Tax Act separate taxation provisions, the Supreme Court held that a person licensed under the Integrated Energy Supply Act cannot be treated as the same as who licensed under the Electric Utility Act. It is necessary that the provisions on separate taxation under Local Tax Act should be strictly construed because those provisions provide taxpayers with permanent benefit of tax reduction or exemption. Supreme Court, in its 2006Du2626 decision, had been inclined to recognize a broad scope of effect of the separate taxation in property tax. However, Supreme Court, in its 2011Du5551 en banc decision, has shifted its position on the scope of effect of the separate taxation in property tax. In that decision, Supreme Court held that the effect of deeded authorization or permission under the other Acts cannot be applied to the Acts related taxation. After Supreme Court’s 2011Du5551 decision, inferior courts have followed Supreme Court’s rulling. Recently Supreme Court, in the subject judgment, was even more strict and rigid in its interpretation of the provisions of separate taxation in property tax than the 2011Du5551 en banc decision. It is believed that the recent Supreme Court's position of not extending the scope of deeming authorizations, or permissions to separate taxation in property tax is reasonable and should be maintained. In particular, it is worth noting that the subject judgment compared the Integrated Energy Supply Act and the Electric Utility Act before determining whether the procedural and substantive requirements of the relevant laws were met. In other words, Supreme Court focuses on the legislative intent of each law and examines closely whether it is reasonable to give equal legal effect in terms of procedural and substantive requirements. Supreme Court is showing a willingness to try to interpret the provisions on separate taxation in property tax that are specified to each usage and owner in a way that conforms to the scheme. This Supreme Court's position is interpreted as willing to give preference to the plain language and legislative intent of the Local Tax Act.