Korean Commercial Arbitration Board: "Corporate tax and land price fluctuations excluded from profit calculation"
Lee Sangil: "Development profits to be reinvested in local public facilities for citizens' benefit"
Yongin City in Gyeonggi Province has won the final victory in the dispute with Gyeonggi Housing and Urban Corporation (GH) over the calculation of development profits from the Gwanggyo New Town project.
On the 22nd, Yongin City announced that it had won the arbitration at the Korean Commercial Arbitration Board, jointly participated by Suwon City, against GH regarding the calculation of development profits from the Gwanggyo New Town project.
This dispute began in 2021 when Yongin City and Suwon City, as joint developers of the Gwanggyo New Town project, and GH showed differing opinions over the method of calculating development profits.
GH argued that the 160 billion KRW corporate tax incurred from the 480 billion KRW execution fees received from Yongin City and Suwon City during the project implementation should be deducted from the development profits, and that the 'Development Profit Recovery Act' should be applied to reflect the changes in land prices during the development period when calculating profits. On the other hand, the two cities rebutted that GH's claims were matters not agreed upon between the joint developers.
As the conflict continued, the related parties agreed in April 2023 to abide by the arbitration results of the Korean Commercial Arbitration Board, and in October of the same year, GH filed for arbitration on the case of 'confirmation of non-existence of development profit payment obligations, etc.'
After 17 months of hearings, the arbitration board recently dismissed all of GH's claims. As a result of this decision, GH must bear all corporate taxes itself and cannot reflect the increase in land prices during the development period in the profit calculation.
Accordingly, Yongin City will be able to settle approximately 43.8 billion KRW (estimated) of development profits corresponding to its 12% share of the remaining development profits of about 364.8 billion KRW. The Gwanggyo New Town project was completed at the end of last year, and only the project settlement procedures among the joint developers remain.
Lee Sang-il, Mayor of Yongin City, said, "The development profit settlement secured through this victory will be reinvested in public facilities within the region to provide tangible benefits to the citizens."
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