[1] Requirements for the real estate acquired by the community credit cooperatives to be used for the activities under Article 28 (1) 1 through 4 of the former Community Credit Cooperatives Act, and to be exempted from the acquisition tax and registration tax under the main sentence of Article 272 (3) of the former Local Tax Act

[2] Method of determining whether a person is eligible for exemption from acquisition tax and registration tax under the main sentence of Article 272(3) of the former Local Tax Act

[3] The scope of acquisition tax and registration tax under the proviso of Article 272 (3) of the former Local Tax Act where a community credit cooperative removes the existing building after acquiring the existing building and land for the purpose of directly using the building for its business and constructing the new building on the land, but it does not directly use all or part of the new building for its business within one year from the acquisition date without justifiable reasons

[1] Real estate acquired by a community credit cooperative established under the former Community Credit Cooperatives Act (amended by Act No. 10437, Mar. 8, 201; hereinafter “ Community Credit Cooperatives Act”) is to be used for its business activities under Article 28(1)1 through 4 of the Community Credit Cooperatives Act, and falls under the scope of exemption from acquisition tax and registration tax under the main text of Article 272(3) of the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010); the main purpose of business activities to acquire and use real estate should be to raise and use funds, improve the economic, social and cultural status of its members, and develop local communities.

[2] In light of the text and purport of Article 272(3) of the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same), and the proviso of the same Article separately provides that “if the acquired real estate is used for any other purpose without directly using it for the corresponding purpose for two or more years from the date of its use, the exempted tax amount for the corresponding portion shall be collected additionally.” Thus, whether it is eligible for exemption from acquisition tax and registration tax under the main sentence of Article 272(3) of the former Local Tax Act should be determined by comprehensively taking into account the current status, use, purpose of its acquisition, etc. as of the

[3] Where a community credit cooperative removes the existing building after acquiring the existing building and land for the purpose of directly using the building for its business and constructs the new building on such land, even if it failed to construct the new building within one year from the acquisition date of the existing building and land, if there are justifiable grounds, it shall not be deemed that the ground for additional collection under the proviso of Article 272(3) of the former Local Tax Act (amended by Act No. 9924, Jan. 1, 2010; hereinafter the same shall apply) has occurred for the existing building and land. However, if the new building is newly constructed and used directly for its business within one year from the acquisition date, unless there are special circumstances, it shall be directly used for the new building for its business, and if all or part of it is not used directly for its business within one year from the acquisition date, it is reasonable to view that the portion equivalent to the ratio of the portion of the building not directly used for its business to the total floor area of the existing building

[1] Article 272(3) of the former Local Tax Act (Amended by Act No. 924, Jan. 1, 2010; see Articles 87 and 94 of the current Restriction of Special Local Taxation Act); Articles 1, 2(1), and 28(1)1, 2, 3, and 4 of the former Community Credit Cooperatives Act (Amended by Act No. 10437, Mar. 8, 201); / [2] Article 272(3) of the former Local Tax Act (Amended by Act No. 9924, Jan. 1, 2010; see Articles 87 and 94 of the current Restriction of Special Local Taxation Act) / [3] Article 272(3) of the former Local Tax Act (Amended by Act No. 9924, Jan. 1, 2010; see Article 97(3) of the current Restriction of Special Local Taxation Act)

[3] Supreme Court Decision 91Nu13281 delivered on June 23, 1992 (Gong1992, 2310)

Seoul High Court Decision 200Na1448 delivered on May 1, 200

Guang-si Market

Seoul High Court Decision 2010Nu35465 decided July 8, 2011

Of the part of the judgment below against the plaintiff, the imposition of acquisition tax of 319,870 won, registration tax of 13,492,760 won, total amount of local education tax of 2,50,080 won and special rural development tax of 29,660 won and the part against the defendant are reversed, and this part of the case is remanded to the Seoul High Court. The remaining appeal by the plaintiff is dismissed.

1. The plaintiff's grounds of appeal are examined.

A. As to whether retail stores are exempted from acquisition tax and registration tax

The main sentence of Article 272(3) of the former Local Tax Act (amended by Act No. 924, Jan. 1, 2010; hereinafter the same) stipulates that real estate acquired by a community credit cooperative established under the Community Credit Cooperatives Act to use directly for its business under Article 28(1)1 through 4 of the same Act shall be exempted from acquisition tax and registration tax. Article 28(1) of the former Community Credit Cooperatives Act (amended by Act No. 10437, Mar. 8, 2011; hereinafter the “ Community Credit Cooperatives Act”) provides that “The Community Credit Cooperatives Act shall carry out all or part of the following business to achieve the purpose of Article 1 ( subparag. 1), thereby providing that “the Community Credit Cooperatives shall carry out the whole or part of the following business to achieve the purpose of Article 1 ( subparag. 2), cultural welfare projects (No. 3), educational projects to members, and development projects of the local community (No. 4). Meanwhile, Article 18(1) of the Community Credit Cooperatives Act provides that it shall contribute to the national economic and social cooperation of Korea’s.

In light of the language and purport of these provisions, real estate acquired by community credit cooperatives established under the Community Credit Cooperatives Act is to be used for business under Article 28(1)1 through 4 of the Community Credit Cooperatives Act, and is subject to exemption from acquisition tax and registration tax under the main text of Article 272(3) of the former Local Tax Act, the main purpose of business to acquire and use the real estate is to raise funds, improve the economic, social, and cultural status of members, and develop communities.

Based on its adopted evidence, the lower court determined that the part of the retail store of this case among the new buildings of this case is difficult to be deemed as eligible for the exemption of acquisition tax and registration tax provided for in the main sentence of Article 272 (3) of the former Local Tax Act, solely on the ground that there was a discussion by the Plaintiff at the time of acquisition of the new building of this case to use the retail store as welfare facilities of its members or neighboring residents, or that the retail store was used for free music practice rooms or conference rooms of the community organization in fact, unlike the part of the new building of this case.

In light of the above provisions, legal principles, and records, we affirm the above judgment of the court below as just, and there is no error in the misapprehension of legal principles as to the subject of exemption from acquisition tax and registration tax under the main sentence of Article 272 (3) of the former Local Tax Act, as otherwise alleged in the ground of appeal

B. As to the retail store and the actual acquisition value of the part of the financial business establishment, whether the installation cost of the 365 automated cos should be divided in proportion to the retail store.

(1) The lower court determined that, in light of the structure, location, and usage of the facility of the instant new building, it is reasonable to view that it constitutes an accessory facility to the part of the instant new building among the said new buildings (hereinafter referred to as the “facilities”). However, since it can be used for the entire new building due to the replacement, alteration of usage, etc. of the inside facilities in the future, the amount equivalent to the ratio of the retail store to the total floor area of the instant new building to the respective parts of the financial establishment, among the installation costs, shall be divided in proportion to the acquisition value of the instant retail store subject to the imposition of acquisition tax and registration tax, and the actual acquisition value of the portion of the financial establishment subject to the exemption of acquisition tax and registration tax under the main sentence of Article 272(3) of the former Local Tax Act, it is reasonable to determine that the Defendant’s imposition of acquisition tax and registration tax for the aggregate of KRW 319,870, KRW 127,92,360, KRW 1364,200, KRW 3676,3750.

(2) However, we cannot agree with the judgment of the court below for the following reasons.

In light of the language and purport of the main text of Article 272(3) of the former Local Tax Act and the proviso of the same Article stipulating that “where the acquired real estate is used for any other purpose without using it directly for the business for not less than two years from the date of its use, the exempted tax amount for the corresponding portion shall be additionally collected.” As a matter of principle, whether it is subject to exemption from acquisition tax and registration tax under the main text of Article 272(3) of the former Local Tax Act shall be determined by comprehensively taking into account the current status,

According to the reasoning of the judgment below and the records, the facility of this case is an unmanned automation store connected to the inside of the part of the first floor and used as a whole with the part of the financial business establishment during the business hours, and is used as an unmanned store after the business hours. On the other hand, the retail store is located on the second floor or underground, and it is separate from the facility of this case. The plaintiff paid 27,830,000 won for the installation of the facility of this case separately in addition to the internal facility construction cost of KRW 107,00 for the newly constructed building of this case.

Examining these facts in light of the legal principles as seen earlier, it is reasonable to view that the Plaintiff acquired, as part of the part of the financial establishment of this case, to use directly for the business of community credit cooperatives, when comprehensively considering the current status, use, acquisition purpose, etc. of the facility of this case. Accordingly, the installation costs can not be included in the acquisition value of the retail part of this case, which is subject to imposition of acquisition tax and registration tax, and the entire acquisition value should be included in the part of the financial establishment of this case.

(3) Nevertheless, for reasons indicated in its holding, the lower court determined that it was lawful for the Defendant to divide the installation costs of the instant facilities into retail stores and de facto calculate the acquisition value of the financial business establishment. In so doing, it erred by misapprehending the legal doctrine on the base point for determining whether the Plaintiff is eligible for exemption from acquisition tax and registration tax as provided by the main sentence of Article 272(3) of the former Local Tax Act, which affected the conclusion of the judgment on the disposition imposing the tax related to retail stores (i.e., KRW 127,940 and KRW 13,364,820 among the disposition imposing the tax related to retail stores, and KRW 23,730 and KRW 23,730 and KRW 2,476,350, respectively, are identical taxation units, and thus, the latter is pointed out as a revised disposition

However, under Article 3 subparag. 1 and Article 5(1)1 of the former Act on Special Rural Development (amended by Act No. 10422, Dec. 30, 2010), imposition of special rural development tax on the tax base of acquisition tax or registered tax amount reduced or exempted in relation to the acquisition of the part of a financial business establishment pursuant to Article 3 subparag. 1 and Article 5(1)1 of the same Act, which is calculated by multiplying the tax rate of 20% by the tax rate of 20%. Thus, even if the cost of installing the facility of this case is calculated by including the acquisition value of the part of the financial business establishment, it is obvious that the tax amount would exceed the tax amount initially imposed by the Defendant (total of 61,480 won). Therefore,

Ultimately, the Plaintiff’s ground of appeal on this part is justified only for the imposition disposition related to retail stores.

C. As to the subject of registration tax heavy

Article 138(1)3 of the former Local Tax Act provides that registration tax shall be levied on real estate following the establishment of a juristic person in a large city and the establishment of a branch office or a branch office in a large city and the transfer of a main office, a main office, a branch office or a branch office in a large city. Article 102(2) of the former Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 21498, May 21, 2009; hereinafter the same shall apply) provides that the former part of Article 102(2) of the former Enforcement Decree of the Local Tax Act provides that "real estate registration based on the establishment, establishment, and transfer of a juristic person or a branch office in a corporation means all the real estate registration acquired prior to the establishment, establishment, and transfer of the former Enforcement Decree of the Local Tax Act. The term "real estate registration" in this context refers to the registration of real estate acquired prior to the establishment, etc. of the juristic person or a branch office in a large city, and it is interpreted that the whole real estate will be used for the business concerned (see, etc.).

The lower court determined that since the Plaintiff registered the acquisition of a new building of this case for the establishment of a rice branch, the registration of the new building of this case constitutes real estate registration following the establishment of a branch in a large city as provided in Article 138(1)3 of the former Local Tax Act and the former part of Article 102(2) of the former Enforcement Decree of the Local Tax Act, including both the part of the financial establishment and the retail store, and that the part of the new building of this case, among the new buildings of this case, constitutes real estate acquired for direct use in community credit cooperatives’ business, which is subject to exemption from registration tax, and thus, heavy taxation may not be at issue.

The judgment of the court below is just in accordance with the above legal principles, and there is no error of law by misapprehending the legal principles on the registration of real estate subject to heavy registration tax as otherwise alleged in the ground of appeal.

2. The defendant's grounds of appeal are examined.

The proviso of Article 272(3) of the former Local Tax Act provides that a community credit cooperative shall collect exempted acquisition tax and registration tax for the corresponding portion from the date of acquisition, if it fails to directly use the real estate acquired by it for its business within one year from the date of acquisition without justifiable grounds. Here, “justifiable grounds” as referred to in the main sentence includes not only external grounds for which the community credit cooperative under the main sentence is unable to use it for its business, but also internal grounds for the grace period beyond the grace period due to lack of time. In determining the existence of justifiable grounds, considering the legislative intent of not imposing acquisition tax in light of the public interest of the business performed by the community credit cooperative, in full view of the legislative intent of not imposing real estate acquisition tax, it shall be determined individually by taking into account the length of preparation period required for its direct use for the business in light of the purpose of acquisition of real estate (see Supreme Court Decision 201Du1948, Dec. 13, 2012, etc.).

Meanwhile, if a community credit cooperative removes the existing building after acquiring the existing building and land for the purpose of directly using the building for its business, and constructs the building on such land, even if it fails to construct the new building within one year from the acquisition date of the existing building and the land, if there are justifiable grounds, it shall not be deemed that the ground for additional collection under the proviso of Article 272 (3) of the former Local Tax Act for the existing building and the land has occurred. However, if a new building is newly constructed and used for business, unless there are special circumstances, it shall directly use the new building for its business. Therefore, if the whole or part of the new building and the land are not used directly for business within one year from the acquisition date without any justifiable reasons, it shall be deemed that the portion equivalent to the ratio of the building that is not directly used for business to the total floor area of the new building and the land shall also be subject to additional collection of the acquisition tax and the registration tax as provided in the proviso of Article 272 (3)

citing the reasoning of the judgment of the court of first instance, the court below acknowledged the fact that the rejection of delivery by the lessee of the existing building of this case and the commencement of construction of new building of this case due to the ground ground located 1.2 meters underground of the land of this case, etc., were delayed, and determined that the Defendant’s imposition of acquisition tax, registration tax, etc. on the Plaintiff in relation to the acquisition of the land of this case and the existing building of this case was unlawful on the ground that the Plaintiff has justifiable grounds for not using the land of this case

In light of the above legal principles and records, the part of the court below's determination that the plaintiff had justifiable grounds for not using the land and existing building of this case directly for business within one year from the date of acquisition is just, and there is no error of law by misapprehending the legal principles as to "justifiable grounds" under the proviso of Article 272 (3) of the former Local Tax Act, as

However, according to the facts acknowledged by the court below, retail stores among the new buildings of this case constructed on the land of this case did not directly use them for their business without any justifiable reasons until one year after the date on which the plaintiff acquired them, since the construction is completed and the part corresponding to the ratio of retail stores to the total floor area of the land of this case and the new buildings of this case among the new buildings of this case shall be subject to collection of acquisition tax and registration tax under the proviso of Article 272 (3) of the former

Nevertheless, on different premises, the lower court determined that the disposition of acquisition tax, registration tax, etc. related to the acquisition of the instant land or existing building was unlawful. In so doing, the lower court erred by misapprehending the legal doctrine on the subject of additional collection of acquisition tax and registration tax under the proviso of Article 272(3) of the former Local Tax Act, thereby adversely affecting the conclusion of the judgment. The Defendant’s allegation in the grounds of appeal

4. Conclusion

Therefore, of the part of the judgment below against the plaintiff, the imposition of acquisition tax of 319,870 won, registration tax of 13,492,760 won, total amount of local education tax of 2,500,080 won and special rural development tax of 29,660 won, and the part against the defendant are reversed, and this part of the case is remanded to the court below for a new trial and determination, and the remaining appeal by the plaintiff is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim So-young (Presiding Justice)