One Law Partners, LLC represented a housing construction and real estate development company that received a notice of a proposed heavy acquisition tax assessment based on a corporate relocation into a metropolitan area.
On behalf of the taxpayer, the firm filed a pre-assessment review petition and successfully obtained a decision cancelling in full approximately KRW 500 million in proposed acquisition tax and related taxes before any tax assessment notice was issued.
1. Case Overview
An executive of the taxpayer company operated a separate affiliated corporation.
The tax authority regarded the affiliated company's office as the taxpayer's de facto headquarters and therefore concluded that the taxpayer's real estate acquisition fell within the scope of property acquired within five years after relocating its headquarters into a metropolitan area, making it subject to the increased acquisition tax rate.
The tax authority subsequently notified the taxpayer of the results of its tax investigation and its intention to assess additional acquisition tax and related taxes.
In response, the taxpayer argued that it had actually used the registered business premises as its headquarters and filed a pre-assessment review petition challenging the proposed assessment on the ground that the heavy acquisition tax applicable to corporations relocating into metropolitan areas should not apply.
2. Key Issues
The principal issues in this case were:
-
Whether the office of the affiliated company could be regarded as the taxpayer's de facto headquarters
-
Whether the increased acquisition tax rate applicable to corporations relocating into metropolitan areas could be imposed on that basis
3. Legal Strategy
Attorneys Soon-sung Seo and Da-ae Kim, together with Senior Advisor Myung-chul Cheon of One Law Partners, LLC, advanced the following arguments:
· Demonstrating Actual Use of the Registered Headquarters
The taxpayer demonstrated that it had lawfully entered into a lease agreement for the premises, continuously paid the deposit and rent, maintained the location as its registered headquarters, retained its housing construction business registration, and consistently filed national and local taxes from that address.
The legal team also emphasized that, during its investigation, the tax authority had directly confirmed the existence of tenant signage bearing the taxpayer's name, office equipment, and workspace, thereby establishing that the premises had actually been used for business operations.
· Establishing the Performance of Headquarters Functions in Light of the Nature of the Business
The taxpayer explained that it had used the premises for major business discussions and decision-making while carrying out rental housing development projects with business partners.
It further argued that, given the nature of the real estate development industry, frequent visits to project sites are common and business operations are often conducted through mobile work arrangements using laptops and mobile phones.
Accordingly, the mere fact that the representative director did not remain at the office for extended periods could not negate its status as the headquarters.
· Rebutting the Tax Authority’s Evidence
The taxpayer argued that the evidence relied upon by the tax authority, including telephone usage records, corporate card transaction locations, banking transaction history, and building access records, could not serve as direct evidence of the actual headquarters location.
In particular, it explained that corporate card usage naturally reflected project sites and business activity locations and that the access records preserved only part of the actual usage history and therefore did not accurately reflect the use of the premises.
The taxpayer also emphasized that the tax authority failed to produce objective evidence showing that personnel or business facilities belonging to the taxpayer existed at the location alleged to be the actual headquarters.
· Invoking the Substance-Over-Form Principle Based on Tax Tribunal Decisions and the Business Structure
The legal team cited multiple Tax Tribunal decisions recognizing headquarters status in cases involving real estate development businesses and shared-office arrangements, arguing that actual use of the premises and the nature of the business should be considered comprehensively.
The taxpayer further emphasized that it had always operated as an independent development company based on its corporate purpose and business structure and therefore had neither motive nor necessity to disguise its headquarters location to avoid higher taxation.
It also argued that the tax authority failed to objectively prove that another location was being used as the taxpayer’s actual headquarters and therefore could not justify imposing the increased acquisition tax rate applicable to metropolitan-area relocations.
4. Significance of the Case
Following review by the Local Tax Deliberation Committee, the tax authority accepted the arguments presented by One Law Partners, LLC and granted the pre-assessment review petition.
As a result, the entire proposed heavy acquisition tax assessment based on a corporate relocation into a metropolitan area was cancelled.
This case is particularly significant because the proposed assessment was completely withdrawn at the pre-assessment review stage, before any formal tax assessment notice had been issued.
Had a tax assessment notice been issued, the taxpayer would have remained obligated to pay the assessed amount even while pursuing objections, administrative appeals, or litigation.
As a practical matter, the taxpayer would have faced the burden of paying the disputed tax in advance or incurring additional penalties and collection measures during the dispute process.
By resolving the matter at the pre-assessment stage, the taxpayer avoided the need to make an upfront payment of approximately KRW 500 million and was spared the time and expense associated with lengthy tax dispute proceedings.
The Local Tax Deliberation Committee determined that the mere use of a shared office or the fact that the representative director did not spend substantial time at the premises was insufficient to conclude that the location was merely a nominal headquarters.
Taking into account the lease agreement, business registration, physical facilities, and actual business activities, the Committee recognized that the premises functioned as the taxpayer’s headquarters.
This case confirms that, when determining whether increased acquisition tax rates apply, the analysis should focus not on the formal appearance of a headquarters location but on the actual operation of the business and the performance of headquarters functions.
The decision is also significant because it reaffirms that headquarters status may be recognized even where a company operates from a shared office or common workspace, provided that actual headquarters functions are performed there, and that the tax authority bears the burden of proving its assertion that a company has, in substance, relocated its headquarters elsewhere.
Attorney Soon-sung Seo | ssseo@onelawpartners.com
Attorney Da-ae Kim | dakim2@onelawpartners.com
Senior Advisor Myung-chul Cheon | mccheon@onelawpartners.com
Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com
