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9 Nov 2017

Represented BMWFS in a Tax Litigation Seeking Cancellation of Acquisition Taxes on Leased Vehicles

Yulchon’s Tax Group successfully represented BMW Financial Services Korea ("BMWFS" or the "Client") in a tax dispute seeking cancellation of acquisition taxes worth approximately KRW 74.5 billion (appx. USD 68.2 million). In a five-year legal battle against Gangnam District Office of Seoul Special Metropolitan City, Korea, the Supreme Court finally ruled in favor of our Client.

 

Auto financing and lease companies including BMWFS had registered their regional branch offices as a "principal place of use" of their lease vehicles in the vehicle registration directory and paid acquisition taxes to corresponding regional local governments including Gyeongnam Province. In 2012, Seoul Special Metropolitan City argued that auto lease companies should pay acquisition taxes on lease vehicles to the city of Seoul since (1) their main offices were all located in Seoul, (2) their regional branch offices did not have physical facilities or manpower to be deemed as a principal place of use, and (3) acquisition taxes they had paid to regional local governments were not legitimate, and hence invalid. As such, the lease companies were faced with a possible double taxation situation in which they would have to pay acquisition taxes to the city of Seoul when they had already paid acquisition taxes to regional local governments.

 

Yulchon successfully represented BMWFS with meticulous reasoning, and the Supreme Court ruled that the "principal place of use" which determines the place of paying acquisition taxes under the Local Tax Act refers to the "principal place of use" stated in the vehicle registration directory, not the location of the main office of the corporation that had acquired the vehicle.

 

This is the first Supreme Court ruling which clearly defined "a principal place of use" which works as a basis for determining the place of paying acquisition taxes.

 

Under the overall direction of Seok Hoon Kang and Dong Soo Kim, Kang Min Lee and Kun Jai Kim advised on the matter.  

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