[1] Whether real estate provided for the establishment and operation of a sanatorium for older persons under the former Welfare of Older Persons Act is eligible for exemption from acquisition tax, etc. under Article 287 (2) of the former Local Tax Act (negative)

[2] Whether the application for exemption from taxation under the municipal ordinance is a requirement for exemption (negative), and whether the disposition of additional collection is allowed in a case where the application for exemption from taxation under the municipal ordinance does not constitute exemption from taxation under the initial provision of exemption from taxation, but it constitutes exemption from taxation under other provisions of exemption from taxation

[1] In full view of the legislative intent of Article 287(2) of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010; hereinafter the same), Articles 3(1) and 49(1)3 of the Medical Service Act, and Articles 31 subparag. 2 and 34(1)1 of the former Welfare of Older Persons Act (amended by Act No. 10785, Jun. 7, 201; hereinafter the same) and Article 31 subparag. 2 and 34(1)1 of the former Welfare of Older Persons Act (amended by Act No. 1020, Mar. 31, 2010; hereinafter the same shall apply), the special Act on Special Cases concerning Taxation for Older Persons, etc. enacted by Act No. 1020, Jan. 1, 2011; thus, it cannot be deemed that a medical corporation directly provides medical treatment and recuperation for older persons under the former Local Tax Act.

[2] Even though a person who wishes to be exempted from taxation in municipal ordinances provides that he/she shall file an application with the competent authority along with documents proving the fact, the provisions on the application for exemption merely provide for the procedures for handling affairs for the convenience of handling exemption, the application cannot be deemed as a requirement for exemption. Furthermore, even if a certain taxable object does not fall under the scope of exemption under the provisions on reduction or exemption under the provisions on reduction or exemption, if it constitutes an exemption under other provisions on reduction or exemption, and if there are no grounds for exemption under other provisions, it is not allowed

[1] Article 287(2) of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010) (see current Article 38 of the Restriction of Special Local Taxation Act); Articles 3(1) and 49(1)3 of the Medical Service Act; Articles 31 subparag. 2 and 34(1)1 of the former Welfare of Older Persons Act (Amended by Act No. 10785, Jun. 7, 201); Articles 20 and 38 of the Restriction of Special Local Taxation Act / [2] Article 37(1) of the former Ordinance on the Reduction and Exemption of Special Local Taxation (Amended by Act No. 3333, Dec. 31, 2009) (see current Article 20) of the former Ordinance on the Reduction and Exemption of Local Taxes (Amended by Act No. 33333, Dec. 31, 2009)

[2] Supreme Court Decision 2001Du10639 Decided June 27, 2003 (Gong2003Ha, 1642) Supreme Court Decision 2010Du26414 Decided January 27, 2012 (Gong2012Sang, 383)

Medical Corporation Head of the Medical Corporation (Law Firm Han, Attorneys Yang Tae-heon et al., Counsel for the defendant-appellant)

High Military Court Decision 201Na1446 decided May 1, 201

Gwangju High Court Decision 2013Nu85 decided August 8, 2013

The part of the lower judgment against the Plaintiff is reversed, and that part of the case is remanded to the Gwangju High Court.

1. The grounds of appeal are examined.

A. Article 287(2) of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010; hereinafter the same) provides that “The acquisition tax and registration tax shall be exempted for the real estate acquired by a medical corporation established under Article 48 of the Medical Service Act to use directly for the medical business: Provided, That if such real estate is not used directly for the medical business within one year from the acquisition date without justifiable grounds, or if it is sold or used for other purposes without using directly for the medical business for two or more years from the date of its use, the exempted acquisition tax and registration tax for the corresponding portion shall be collected additionally.”

Meanwhile, under Article 3(1) of the Medical Service Act, the Medical Service Act defines the medical service as “the business of medical treatment and assistance in child delivery for the general public or a large number of people,” and Article 49(1) of the same Act provides that “a medical corporation may conduct the following incidental business, other than the business of medical treatment that a medical corporation may conduct at a medical institution,” and Article 31 subparag. 2 of the Welfare of Older Persons Act provides that “the establishment and operation of a medical welfare facility for older persons under Article 31 subparag. 2 of the Welfare of Older Persons Act.” However, Articles 31 subparag. 2 and 34(1)1 of the former Welfare of Older Persons Act (amended by Act No. 10785, Jun. 7, 201; hereinafter the same) define “the elderly’s sanatorium, one of the medical welfare facilities for older persons, as “facilities that provide meals, medical treatment, and other convenience necessary for daily life by entering the aged who need help due to a serious mental and physical disorder due to dementia, such as dementia, paralysis

In full view of the language and text of the relevant statutes and the legislative purport of the Restriction of Special Local Taxation Act enacted by Act No. 10220 on Mar. 31, 201 and enacted as of Jan. 1, 2011, the Special Act on Special Cases concerning Taxation for Medical Corporations, etc. (Article 38) provides for the reduction and exemption of acquisition tax (Article 20) on real estate acquired to use for welfare facilities for the aged separately from the special taxation for medical corporations, etc., the real estate provided for the establishment and operation of a sanatorium for the aged under the former Welfare Act cannot be deemed to be directly used for medical business by a medical corporation. Therefore, it does not constitute exemption from acquisition tax, etc. under

B. The lower court determined that the land provided to establish and operate a sanatorium for older persons does not constitute real estate used directly for medical services. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the subject of exemption from acquisition tax under Article 287(2) of the former Local Tax Act.

In addition, insofar as the land provided for the establishment and operation of the sanatorium of this case is not subject to exemption from acquisition tax, the argument in the grounds of appeal that there is justifiable reason for not being used directly for the medical business within one year from the date of acquisition shall not be accepted without further review.

2. It shall be deemed ex officio.

A. (1) The old Do Tax Reduction and Exemption Ordinance of Do Tax Reduction and Exemption (amended by Ordinance No. 333, Dec. 31, 2009; hereinafter “Do Tax Reduction and Exemption Ordinance”) stipulates in Chapter 2 that any real estate acquired to establish a welfare facility for the aged under Article 31 of the Welfare of the Aged Act shall be reduced and exempted from the acquisition tax and registration tax as provided in the following subparagraphs: Provided, That the real estate acquisition tax and registration tax shall be collected additionally for the corresponding portion if it is not used directly for the welfare facility for the aged or used for other purposes without any justifiable reason within one year from the date of its acquisition, and if it is sold or used for other purposes without using it directly for the welfare facility for the aged for two or more years, without any justifiable reason, and subparagraph 2 of Article 8 provides that “50/100 of the acquisition tax and registration tax for the pay welfare facility for the aged”.

Article 8 of the Do Tax Reduction and Exemption Ordinance includes “justifiable cause” (i.e., “where a person liable for tax payment fails to use the real estate for a welfare facility for the aged within one year from the date of acquisition of the real estate directly or does not start construction works within one year from the date of acquisition of the real estate without justifiable grounds”; and (ii) an internal reason beyond the grace period due to lack of time for the taxpayer to make normal efforts to use the real estate for the purpose business or to start construction works; and (iii) determination of whether there is a justifiable cause, considering the legislative intent of not imposing acquisition tax in light of the public interest of the business performed by the taxpayer, the determination should be made on an individual basis based on specific matters, including the long-term period required for direct use or construction works in light of the purpose of acquisition of the real estate; (iv) the statutes that cannot be used for the purpose business; (v) the actual cause and degree of disability; and (v) whether the taxpayer has made efforts to use it for the purpose or start construction works (see, e.g., Supreme Court Decision 95Nu1304, Jan. 26, 196).

(2) In addition, Article 37(1) of the Do Tax Reduction and Exemption Ordinance provides that “A person who intends to obtain a tax reduction or exemption under this Ordinance shall apply to the head of a Si/Gun by submitting an application for tax reduction or exemption of Do tax in accordance with attached Form 1 and documents evidencing such fact. However, in the case of Chapter II of this Ordinance, when the head of a Si/Gun is aware that it is a tax reduction or exemption, it may be ex officio

Even though a person who intends to be exempted from taxation in municipal ordinances provides that he/she shall file an application with the competent authority along with documents proving such fact, the provisions on the application for exemption are merely those on the procedures for handling affairs for the convenience of handling exemption, and such application cannot be deemed a requirement for exemption (see, e.g., Supreme Court Decision 2001Du10639, Jun. 27, 2003). In addition, even though a certain taxable object does not constitute an exemption under the provisions originally granted exemption, if it constitutes an exemption under other provisions on exemption and exemption, if it does not have any ground for exemption and exemption, it is not allowed to impose an additional collection as long as there is no other reason for exemption and exemption (see Supreme Court Decision 2010Du26414, Jan. 27, 2012).

B. According to the reasoning of the lower judgment and the record, the Defendant: (1) had been newly built on November 29, 200; (2) had 1,692 square meters of forest land ( Address 1 omitted); (3) had been divided into 7,506 square meters (hereinafter “instant land”); and (4) had been filed an objection to increase in the value of the instant land on February 14, 2012 with the Plaintiff for KRW 25,671,767,160; and (2) had been subject to the instant disposition of KRW 28,238,90 from the date on which the Plaintiff had received 100,000 for the first time to 20,000 for the first time to 10,000,000 for the first time to 20,000,0000 for the first time to 30,000,0000 for the first time to 20,000,000).

C. Examining these facts in light of the legal principles as seen earlier, (1) The instant sanatorium is a charged welfare facility for the aged under Article 8(1)2 of the Do Tax Reduction and Exemption Ordinance, and falls under the reduction and exemption of 50% of acquisition tax, etc. (2) Although the construction of the instant sanatorium was commenced only 1 year and 11 months after the lapse of one year after the date on which it is deemed that real estate acquisition was made due to the change of land category, which is the ground for collection of the instant disposition No. 2, even though the construction of the instant sanatorium was commenced, it is insufficient to view that there was a considerable period of time to prepare for the commencement of the elderly sanatorium in light of the scheduled location and scale of the establishment of the instant sanatorium, and that the Plaintiff neglected the construction of the instant sanatorium. In full view of the series of procedures from the acquisition of the site necessary for the construction of the instant sanatorium to the commencement and completion thereof, and in particular, the circumstances spent by the Defendant for one year period from the date on which the Plaintiff acquired the said real estate.

D. Therefore, the lower court should have determined whether the provision on reduction and exemption of 50% of the Do Tax Reduction and Exemption Ordinance and the provision on additional collection for the land of this case used as the site of the instant sanatorium by the materials indicated in the records, such as litigation materials submitted by the Plaintiff, and whether there are justifiable grounds for failing to commence construction within one year from the acquisition date of the real estate following the change of land category until the commencement date of the instant sanatorium, and should have determined whether the disposition No. 2 of this case was unlawful (see, e.g., Supreme Court Decision 2009Du18035, Feb. 11, 2010).

Nevertheless, the lower court recognized the second disposition of this case as lawful without any deliberation and determination as to whether the provisions of Article 8(1)2-2 of the Do Tax Reduction and Exemption Ordinance and whether the provisions of additional collection are applied, and whether there exist justifiable grounds for the expiration of the grace period. In so doing, the lower court erred by misapprehending the legal doctrine as seen earlier, including the grounds for reduction and exemption under the Do Tax Reduction and Exemption Ordinance and the reasons for additional collection, thereby failing to exhaust all necessary deliberations, thereby adversely affecting

3. Therefore, the part of the lower judgment against the Plaintiff is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)