Criteria for determining whether a non-profit corporation subject to acquisition tax exemption is acquired to use directly for its business

Whether a non-profit entrepreneur under Article 107 subparagraph 1 of the Local Tax Act (amended by Act No. 3878 of Dec. 31, 1986) is deemed to be an acquisition to use directly for his/her business shall be determined on the basis of the actual use relationship. The provisions of the articles of incorporation are not only one reference material in determining this. Thus, if a school foundation which establishes and operates a nursing junior college establishes a hospital and uses it as an practice for its students, and the above hospital provides free or reduced medical treatment for its students, and all profits accrued from the hospital are covered by the above school foundation's own operation and maintenance of the school, and facility management expenses of the hospital, the above school foundation's articles of incorporation shall not be subject to acquisition tax under the above provisions.

Article 107 subparagraph 1 of the Local Tax Act (amended by Act No. 3878 of Dec. 31, 1986), Article 79 of the Enforcement Decree of the Local Tax Act (amended by Presidential Decree No. 12028 of Dec. 31, 1986)

Supreme Court Decision 86Nu36 Decided July 22, 1986

Attorney Park Jong-il, Counsel for the plaintiff-appellant of the school foundation

[Judgment of the court below]

Daegu High Court Decision 89Gu42 delivered on May 27, 1987

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. According to Article 107 subparagraph 1 of the Local Tax Act (amended by Act No. 3878 of Dec. 31, 1986), "the acquisition tax shall not be levied on a non-profit entrepreneur who acquires property for the purpose of direct use for his business". According to Article 79 of the Enforcement Decree of the same Act (amended by Presidential Decree No. 12028 of Dec. 31, 1986), "non-profit entrepreneur" means a non-profit entrepreneur established under the Civil Act and other special Acts, and an individual who carries on such business for non-profit purposes as well as a non-profit entrepreneur established under the Civil Act and other special Acts, and whether a non-profit entrepreneur acquires property for the purpose of direct use for his business shall be determined based on the actual relation of use, and the provisions of the articles of incorporation shall not be applied to one reference material (see Supreme Court Decision 2006Nu26868 of Jul. 26, 1986).

2. According to the reasoning of the judgment of the court below, since the plaintiff corporation was established for the purpose of providing secondary education and nursing services based on the educational ideology of the Republic of Korea, it is found that it established and operated a school foundation under its control for the purpose of providing education for the above school, and that it is operated for a medical enterprise which is a profit-making business of the above school. Accordingly, the plaintiff established and operated a 3-year nursing junior college from December 28, 1978 with the authorization of the head of the above office of delivery for the purpose of establishing and operating the above 40% or more of the total hours of nursing for the above 40% or more of the total hours of teaching under the instruction of the above school, since the above school foundation was established for the purpose of using the above 5-year nursing hospital for the above 4-year nursing hospital, it is just for the court below to judge that the above 1-year nursing hospital was established for the purpose of using the above 14-year nursing hospital for the above 14-year nursing hospital, and it is without charge of the above 14-year.

3. Accordingly, the appeal shall be dismissed, and all costs of appeal shall be assessed against the losing party. It is so decided as per Disposition by the assent of all participating judges.

Justices Park Jong-dong (Presiding Justice)