In a case where the tax authority imposed property tax on the land owned by the Incheon Metropolitan City Federation on the premise that it constitutes a separate aggregate taxation under Article 106 (1) 2 of the former Local Tax Act, and 50/100 of property tax is reduced pursuant to Article 84 (2) of the former Restriction of Special Local Taxation Act, the case affirming the judgment below which held that the tax base and tax rate should be applied according to the example of separate taxation because the land 50/100 of the property tax among the above land is considered as a separate taxation of property tax and the tax base and tax rate should be applied in the same manner as the property tax is subject to the separate taxation of property tax.

Article 106(1)1(b), 2, and 3 of the former Local Tax Act (Amended by Act No. 14475, Dec. 27, 2016); Article 84(2) of the former Restriction of Special Local Taxation Act (Amended by Act No. 14477, Dec. 27, 2016); Article 2 subparag. 13 of the National Land Planning and Utilization Act

The Incheon Metropolitan City Mayor (Law Firm LLC, Attorneys Kang Han-hun et al., Counsel for the plaintiff-appellant)

The head of Jung-gu Incheon Metropolitan City (Government Law Firm Corporation, Attorneys Cho Jae-ho et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2017Nu87441 decided May 3, 2018

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. Article 106(1) of the former Local Tax Act (amended by Act No. 14475, Dec. 27, 2016; hereinafter the same) provides that “land subject to property tax on land shall be classified into general aggregate taxation, special aggregate taxation, and separate taxation.” Accordingly, Article 106(1)1 of the same Act provides that “land subject to general aggregate taxation excluding land subject to special aggregate taxation or separate taxation among land owned by a person liable to pay tax as of the base date for taxation” Provided, That the proviso provides that “land subject to special aggregate taxation” shall not be deemed land subject to property tax exemption or exemption pursuant to this Act or other relevant Acts and subordinate statutes [a] and land [b] equivalent to the reduction rate of property tax on which property tax is reduced pursuant to this Act or other Acts and subordinate statutes (amended by Act No. 1475, Dec. 27, 2016; however, Article 106(1)2 provides that “land falling under any of the following items among land owned by a person liable to pay tax as at the base date for taxation” provided for separate taxation:

2. The lower court determined to the following purport by citing the reasoning of the first instance judgment.

A. Of the instant land, the land constitutes a special aggregate taxation under each item of Article 106(1)2 of the former Local Tax Act, but the land for which 50/100 of the property tax is reduced pursuant to Article 84(2) of the former Restriction of Special Local Taxation Act (Amended by Act No. 14477, Dec. 27, 2016) (hereinafter “instant land”) constitutes “land for which the property tax is reduced pursuant to the former Local Tax Act or any other Act and subordinate statutes” under Article 106(1)2 proviso and proviso of Article 106(1)2 proviso and proviso of Article 106(1)1 proviso of the former Local Tax Act.

B. Meanwhile, Article 106(1) of the former Local Tax Act classifys land subject to property tax as objects of separate taxation, separate taxation, and general aggregate taxation. As such, the portion equivalent to 50/100 of the pertinent land subject to property tax reduced shall also be included in any of the objects of separate taxation, separate taxation, and general aggregate taxation.

C. However, Article 106(1) of the former Local Tax Act does not regard “land subject to the reduction rate of land subject to the reduction rate of property tax pursuant to the former Local Tax Act or other Acts and subordinate statutes” as “special aggregate taxation” [Article 106(1)2 proviso, proviso 1 proviso (b) of the former Local Tax Act], and Article 106(1) proviso of the former Local Tax Act does not constitute general aggregate taxation [Article 106(1)1 proviso (b) of the former Local Tax Act]. Thus, even if the said land does not explicitly fall under the special aggregate taxation under Article 106(1)3 of the former Local Tax Act, it should be considered that it is subject to separate taxation, not subject to special aggregate taxation or general aggregate taxation, which is established according to policy consideration.

D. Therefore, land equivalent to 50/100 of the key land of this case is deemed property tax to be subject to separate taxation, and thus the tax base and tax rate should be applied according to the precedent of separate taxation. Nevertheless, the pertinent 50/100 of the key land of this case among the disposition of this case is deemed to be subject to separate taxation of property tax, and thus, is unlawful

3. Examining the records in accordance with the above provisions and related legal principles, the above determination by the court below is just, and there is no error by misapprehending the legal principles on the property tax subject to separate taxation under the Local Tax Act.

4. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Sang-ok (Presiding Justice)