One Law Partners, LLC represented a real estate development company that became subject to a joint local tax audit conducted by local authorities and successfully obtained a determination that the company was not subject to the heavy acquisition tax regime applicable to corporations in large metropolitan areas. The firm further secured the complete revocation of a proposed corporate local income tax assessment of approximately KRW 1.2 billion through a pre-assessment review proceeding.


1. Overview of the Matter

The client is a corporation engaged in housing construction and real estate leasing businesses. The company maintained its head office outside the metropolitan area and carried out development projects involving the acquisition of real property in other regions, followed by the construction of apartment complexes and commercial facilities.

The client reported and paid acquisition tax on acquired land and newly constructed properties at the ordinary tax rate and, with respect to certain properties, applied acquisition tax exemptions available under applicable law.

The client was subsequently selected for a joint regular tax audit conducted by local authorities and became subject to an investigation concerning the applicability of the heavy acquisition tax rules for corporations in large metropolitan areas and the appropriateness of its apportionment of corporate local income tax among local governments.

In particular, an issue arose because the client’s representative director concurrently served as an executive officer of an affiliated company and utilized that company’s office. The tax authorities examined whether the affiliated company’s office could be regarded as the client’s de facto head office or branch office and whether a portion of the office area should be included as the client’s business establishment for purposes of apportioning corporate local income tax.

Although the acquisition tax issue was resolved during the audit, the tax authorities issued a notice of proposed assessment asserting that the client should pay approximately KRW 1.2 billion in additional corporate local income tax by including a portion of the affiliated company’s office area in the client’s business establishment area.

Accordingly, the client retained One Law Partners, LLC to represent it both in the tax audit and in the subsequent pre-assessment review proceedings.


2. Key Issues

The first issue was whether the office of the affiliated company located in another region could be regarded as the client’s substantive head office or branch office.

When determining whether the heavy acquisition tax provisions applicable to metropolitan-area corporations apply, consideration must be given not only to the registered address of the corporation but also to the location where the corporation actually performs the functions of its head office or branch office.

In this case, the issue was whether the affiliated company’s office could be recognized as the client’s de facto head office or branch office merely because the client’s representative director concurrently held an executive position at the affiliated company and used that office.

The second issue was whether the area of the affiliated company’s office could be included in the apportionment formula for corporate local income tax.

Corporate local income tax is reported and paid based on an allocation formula that considers factors such as the number of employees and the gross floor area of business establishments located within each local government jurisdiction.

Accordingly, a key question was whether the affiliated company’s office qualified as the client’s business establishment and whether the human and physical facilities of that office could be regarded as belonging to the client solely because of the representative director’s dual roles.

In particular, the central issue was whether it was lawful for the tax authorities to impose approximately KRW 1.2 billion in additional corporate local income tax by including a portion of the affiliated company’s office area as part of the client’s business establishment.


3. Key Strategies and Actions

One Law Partners first conducted a detailed review of the client’s head office operations and the circumstances surrounding the use of the affiliated company’s office and focused on demonstrating that the business establishments of the two corporations were substantively separate and distinct.

To support this position, the firm established that the client maintained an actual office and employees at its registered head office and that the company’s principal business activities were conducted there.

The firm also submitted evidence including records of board meetings, business travel records of officers and employees, and documentation relating to workplace operations, demonstrating that the client’s substantive head office remained continuously located outside the metropolitan area and that the affiliated company’s office did not constitute an independent head office or branch office of the client.

In particular, One Law Partners emphasized the legal distinction between a representative director holding concurrent positions within multiple companies and a corporation itself establishing and operating a separate business establishment.

The firm further reviewed relevant Tax Tribunal decisions and argued that the mere fact that certain work was performed at an affiliated company’s office or that tax invoices were issued from that location was insufficient to conclude that the premises constituted the de facto head office of another corporation.

Through these efforts, One Law Partners successfully obtained a determination during the tax audit that the client had not established a substantive head office or branch office within a metropolitan area and thereby prevented the application of the heavy acquisition tax rules to the acquired land and newly constructed properties.

Subsequently, after the tax authorities issued a notice proposing approximately KRW 1.2 billion in additional corporate local income tax based on the inclusion of part of the affiliated company’s office area, One Law Partners filed a pre-assessment review petition on behalf of the client.

During the proceeding, the firm focused on the legal definition of a business establishment under local tax laws and the statutory allocation standards for corporate local income tax, arguing that the affiliated company’s office could not be included as the client’s business establishment merely because the representative director concurrently served in both companies.

The firm particularly emphasized that, for a location to qualify as a corporation’s business establishment, it must possess substantive human and physical resources and be a place where business or administrative activities are conducted continuously and independently.

As a result, the Local Tax Deliberation Committee accepted the arguments presented by One Law Partners and issued a decision revoking the entire proposed corporate local income tax assessment of approximately KRW 1.2 billion.


4. Significance of the Matter

This case demonstrates how a taxpayer successfully resolved issues relating to the heavy acquisition tax regime applicable to metropolitan-area corporations during a joint local tax audit while also preventing a substantial additional corporate local income tax assessment through a pre-assessment review proceeding.

In particular, the matter confirms that the mere fact that a representative director concurrently serves as an executive officer of an affiliated company or utilizes an affiliated company’s office does not automatically make that location the substantive head office or branch office of another corporation. Rather, the actual operation of each corporation’s business establishment and the existence of independent human and physical resources must be evaluated on a case-by-case basis.

The matter is also significant because the client not only secured a favorable determination regarding the inapplicability of heavy acquisition tax during the audit stage but also actively challenged the subsequent corporate local income tax assessment notice and eliminated the proposed additional tax burden entirely.

By relying on objective evidence concerning the client’s business operations, relevant Tax Tribunal precedents, and established local tax principles, One Law Partners successfully defended against the application of heavy acquisition tax and secured the complete cancellation of the proposed corporate local income tax assessment of approximately KRW 1.2 billion.

This case highlights the importance of demonstrating the substantive operation of each corporation’s business establishment from the earliest stages of a local tax audit and, where necessary, pursuing pre-assessment review procedures in matters involving shared executives and office-use arrangements among affiliated corporations.


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Sun-Seong Seo, Attorney | ssseo@onelawpartners.com
In-Sun Go, Attorney | isgo@onelawpartners.com
Myung-Chul Cheon, Advisor | mccheon@onelawpartners.com
Property One | Property One (the Local Tax & Levy Practice Group) is the first specialized team established by a law firm in Korea focusing on local taxes and levies, providing professional services throughout every stage of a matter, from tax audit defense to pre-assessment review proceedings, administrative appeals, and litigation.
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Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com