Ministry of Legislation Alerts Tax Authorities on Acquisition and Property Tax Reductions for Relocation of Urban Factories to Provinces

Introduction of 2 Model Cases of Legal Interpretation Reflecting Citizen Opinions on the 16th
Central and Local Governments Prevent Double Taxation Due to Confusing Regulations
Recreational Area Building Coverage and Floor Area Ratios Are 'OK' If Overall Standards Are Met, Not by Facility

[Sejong=Asia Economy Reporter Moon Chaeseok] On the 16th, the Ministry of Government Legislation announced exemplary cases of clear legal interpretations to reduce instances where tax authorities such as central government and local governments do not apply tax reductions due to lack of knowledge of the system. It explicitly stated that urban-type factories are also eligible for acquisition tax and property tax reductions when relocating from the metropolitan area to local regions. Urban-type factories refer to factories of advanced industries, factories with low pollution levels, and factories closely related to citizens' lives under the Act on the Promotion of Industrial Cluster and Factory Establishment (Industrial Cluster Act).

The Ministry of Government Legislation introduced two cases of legal interpretations that reduced the burden on citizens by reflecting the opinions of civil petitioners. First, on the 27th of last month, the Ministry introduced a case that reduced confusion through an active interpretation related to tax reductions for urban-type factories. It interpreted the law to include urban-type factories as eligible for acquisition tax and property tax reductions when relocating to local areas.

According to the Ministry of Government Legislation, under the Local Tax Special Cases Restriction Act, urban-type factories are not excluded from the acquisition and property tax reduction requirements for real estate purchased when relocating factories from metropolitan cities to non-metropolitan areas. Here, metropolitan cities refer to the metropolitan area overconcentration control zone. The purpose of revising this regulation in 1994 was to include factories of urban-type industries as eligible for tax reductions, and the regulation has been maintained without significant amendments since then. A Ministry official explained, "It is reasonable to consider that acquisition and property taxes on real estate acquired for business purposes can be reduced when urban-type factories relocate outside metropolitan cities."

On the 12th of last month, the Ministry interpreted that the building coverage ratio and floor area ratio requirements for recreational areas need only be applied to the 'total area' rather than the 'area of each detailed facility.' This means that it is not necessary to meet the building coverage ratio and floor area ratio requirements for each facility individually, but only to comply with the regulations for the entire area, effectively easing regulations. The building coverage ratio is an indicator of how much building area can be constructed on land (site area), and the floor area ratio is a height-related standard that sums the floor areas of each floor relative to the land area. Higher building coverage ratios allow for larger building footprints, and higher floor area ratios allow for taller buildings, significantly affecting the profitability of real estate.

According to the Ministry of Government Legislation, the Enforcement Decree of the National Land Planning Act does not delegate authority to apply or calculate the building coverage ratio or floor area ratio for recreational areas separately by detailed facilities. Furthermore, the Ministry of Land, Infrastructure and Transport's ordinance stipulates that the detailed facility creation plan for recreational areas includes the sum of the areas and building areas of detailed facilities, but the Ministry interprets this not as an intention to lower the building coverage ratio or floor area ratio standards by facility. Since recreational areas are classified as urban or county planning facilities, a certain degree of public interest must be considered, but it is sufficient to satisfy the building coverage ratio and floor area ratio applied to the entire recreational area. A Ministry official stated, "When establishing recreational areas in natural green zones, it is reasonable to apply the building coverage ratio and floor area ratio only to the total building area and total floor area relative to the entire recreational area." The total floor area is the sum of the floor areas of each floor and is the basis for judging the floor area ratio.

Lee Kangseop, head of the Ministry of Government Legislation, emphasized, "There are cases where citizens bear economic burdens despite the absence of clear legal grounds," adding, "We will continue to actively review legal interpretation requests from civil petitioners and interpret laws in ways that expand public benefits, and introduce such cases."

This content was produced with the assistance of AI translation services.