KT loses first trial of acquisition tax lawsuit worth 13 billion won

It has been belatedly confirmed that KT lost the first trial over the acquisition tax of its office building in Gwanghwamun East, Seoul, which was completed in 2015. KT is also in conflict with construction companies over expenses related to its main office building, including the West office building.

According to related industries on the 25th, the Administrative Department 4 (Judge Kim Young-min) of the Seoul Administrative Court ruled in favor of the Jongno-gu Office on April 18 this year in a lawsuit against the head of the Jongno-gu Office in 2023.

The case dates back to 2010. KT spent about 180 billion won (130 million U.S. dollars) to build the Gwanghwamun East office building with 25 stories above ground and six stories below ground in Cheongjin-dong redevelopment zone 1 in central Seoul. Since then, KT has carried out the project by allocating half of the total floor space to the existing landowners (replacing land) and receiving the other half from the Jongno district office for self-use (celebrating land) to pay for the project.

KT paid only about 300 million won in acquisition tax to Jongno-gu in 2015, claiming that the supplied chebage is subject to acquisition tax exemption under the local tax law. On the other hand, the Jongno-gu District Office decided that KT was not eligible for the reduction, citing that it used the property for its own rental purposes instead of selling it to the public. The Jongno-gu District Office imposed an additional acquisition tax of 20.5 billion won in 2019.

KT protested against the Jongno District Office and filed a request for a trial with the Tax Tribunal in 2020. The Tax Tribunal cancelled 7.5 billion won (7.5 billion won) in additional tax, but decided that the remaining 13 billion won (130 million dollars) was a fair taxation. KT filed a lawsuit with the court, claiming that "In order to get a reduction in the acquisition tax, it is not necessary to make general sales." However, the court did not accept the request, saying that the requirement for reduction of acquisition tax should include not only designation of the tax but also general sales.

KT has appealed against the ruling of the first trial and is currently undergoing appeals. "The lawsuit was filed with the intention of refunding the acquisition tax that has already been paid," a KT official said. "It is nothing special as other companies are already filing similar lawsuits."

Meanwhile, KT is headquartered in Bundang, Seongnam, and has its East and West offices in Gwanghwamun, Songpa and Pangyo. Some of them are in conflict with contractors during the construction process. Recently, the company is engaged in a tug-of-war with Hyundai E&C, the contractor, over the construction cost of the Gwanghwamun West office building, which has been remodeled. Hyundai E&C is demanding an increase of about 30 billion won in construction costs due to rising material prices, and KT is reluctant to do so.

The Pangyo headquarters is also subject to dispute. Ssangyong Engineering & Construction, which completed the construction of the new headquarters, demanded an additional 17.1 billion won (10.7 million U.S. dollars) in construction costs, claiming that the construction period has been extended. KT has filed a lawsuit with the court in May 2024, claiming that it has no obligation to pay the construction costs.

KT is also in dispute with Lotte Engineering and Construction over additional construction costs at the construction of the Jayang 1 Reorganization Promotion Zone in Gwangjin-gu, Seoul, which includes the former Gangbuk headquarters site. When Lotte Engineering and Construction demanded an increase of around 100 billion won, KT reportedly rejected the demand.

fun3503@chosunbiz.com