ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Tax Issues in the Acquisition Tax and the Registration License Tax on Equipment Leasing Transaction

  • Kang SungMo Yulchon LLC

Asian Tax Journal Vol. 13 No. 3 (2012), pp. 449-470

Abstract

Recently, the local tax system has undergone many changes. While many of them are welcome changes, there are also criticisms that some of the provisions still have much room for improvement. In particular, regarding equipment leasing transactions, unsophisticated legislation of the relevant provisions of Local Tax Act which was completely revised as of March 31, 2010(enforced on January 1, 2011) caused much confusion in its interpretation. In an equipment leasing transaction, the ownership of a leased asset belongs to the equipment leasing company (i.e., the lessor), and the leased asset is registered in the name of the equipment leasing company. But, the special provision for the Specialized Credit Financial Business Act allows the registration of construction equipment and vehicles in the name of the user (i.e., the lessee) of the leased equipment. In the latter case, the proper interpretation of the amended provisions seems to be that the lessee bears the burden of the registration license tax based on the registration tax rates while the equipment leasing company is responsible for the acquisition tax based on heavy tax rates, which is in line with the previous provisions. The problem, however, would lie with the former case. Under the amended Local Tax Act, no one appears to bear the burden of the registration license tax while the equipment leasing company is required to pay the acquisition tax calculated based on heavy tax rates. As a result, the overall tax burden in the said equipment leasing transactions under the current Local Tax Act appears less than that before the amendment. If such result has not been intended by the legislators, it is a legislation defect which requires a further revision.

Keywords

  • Equipment Leasing Transaction
  • Local Tax
  • Acquisition Tax
  • Registration License Tax
  • Tax Objects
  • Taxpayer
  • Tax Rate

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