[1] Meaning of “a building under construction” under Article 103(1) of the former Enforcement Decree of the Local Tax Act (i.e., a building under construction as of the date of taxation)

[2] In a case where Company A, while carrying out a new building project, carried out the construction of a new building on its own land the shot beam beam for the installation of the shot beam for the soil removal work, etc., and the competent authority divided Company A’s land into a separate aggregate taxation and did not actually commence construction work, and again corrected and notified property tax, etc. by dividing it into general aggregate taxation at the time of the tax base date, the case holding that the construction work shall be deemed to have already started at the time of construction of a new building, and thus the construction work

[1] Property tax imposed on land is divided into aggregate taxation subject to general aggregate taxation, separate taxation subject to separate taxation, and separate taxation subject to separate taxation (Article 106(1) of the Local Tax Act prior to amendment by Act No. 12153, Jan. 1, 2014); land annexed to a specific building shall be subject to the tax rate lower than that subject to general aggregate taxation subject to separate taxation [Article 106(1)2(a), Article 111(1)1(b), and Article 113(1)2 of the Local Tax Act]; and the Enforcement Decree of the Local Tax Act enacted upon delegation by the Local Tax Act includes not only the land annexed to the building subject to separate aggregate taxation, but also the land annexed to the building under construction, which has been suspended for not less than six months without good cause as of the tax base date (Article 101(1)2(a) and Article 113(1)3 of the Enforcement Decree of the Local Tax Act prior to amendment by Presidential Decree No. 2425, Mar. 23, 2013).

In this context, the term "building under construction" means a building under construction which commences and is under construction as of the tax base date. A building that is under construction may not be considered as being under construction unless it is merely a simple preparatory work necessary for the commencement of construction. However, if it is deemed that the construction of the building has been actually implemented even in the case of commencement of construction for the construction of the building, such as a ground-breaking or structure construction, as well as the case of commencement of construction for the construction of the building, if it is essential to

[2] The case holding that the court below erred by misapprehending the legal principles as to the construction of new structures, on the ground that, in case where Gap corporation’s construction of new structures was commenced prior to the property tax assessment basis date, and the construction of new structures was completed through soil-proof work, ground-breaking work, construction work, etc. according to ordinary schedule, and the ground-breaking work, etc. was conducted in order to indicate the location and height of the building, and the width and depth of the ground-breaking work, etc. on its own land, and the shot beam work, etc. was conducted in accordance with fair order, and the shot beam work installed pursuant to the ground-breaking work, etc. was not easily movable or separated in light of the size and state of materials and the construction of new structures, and thus, it can be seen that the construction of new structures was done within 2 months after the construction of new structures.

[1] Articles 106(1)2(a), 111(1)1(b), and 113(1)2 of the former Local Tax Act (Amended by Act No. 12153, Jan. 1, 2014); Articles 101(1)2 and 103(1) of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 24425, Mar. 23, 2013); / [2] Articles 106(1)2(a), 111(1)1(b), and 113(1)2 of the former Local Tax Act (Amended by Act No. 12153, Jan. 1, 2014); Article 106(1)2(a); Article 113(1)2 of the former Enforcement Decree of the Local Tax Act (Amended by Presidential Decree No. 12134, Mar. 13, 2013); Article 103(1)4(1)2)2 of the former Enforcement Decree of the Local Tax Act

[1] Supreme Court Decision 95Nu7857 delivered on September 26, 1995 (Gong1995Ha, 3554)

Pool Co., Ltd. (Law Firm Squa, Attorneys Yu Jong-ho et al., Counsel for the plaintiff-appellant)

The head of Gangdong-gu Seoul Metropolitan Government

Seoul High Court Decision 2016Nu33652 decided September 28, 2016

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Objects of property tax on land are classified into aggregate taxation subject to general aggregate taxation, separate taxation subject to separate taxation, and separate taxation subject to taxation (Article 106(1) of the Local Tax Act prior to amendment by Act No. 12153, Jan. 1, 2014); land annexed to a specific building shall be subject to the tax rate lower than that subject to general aggregate taxation subject to separate taxation [Article 106(1)2(a), Article 111(1)1(b), and Article 113(1)2 of the Local Tax Act]; and the Enforcement Decree of the Local Tax Act enacted upon delegation of the Local Tax Act includes not only the land annexed to the building subject to separate aggregate taxation, but also the land annexed to the building under construction, which has been suspended for not less than six months without good cause as of the tax base date (Article 101(1)2(a) and Article 113(1)3 of the Enforcement Decree of the Local Tax Act prior to amendment by Presidential Decree No. 2425, Mar. 23, 2013).

In this context, the term “building under construction” means a building under construction which started and is under construction as of the tax base date. It cannot be considered as a building being under construction unless it is merely a simple preparatory work necessary for the commencement of construction. However, if it is deemed that the construction of the building was actually executed even in the case of the commencement of construction for the construction of the building, such as the ground destruction or structure construction, and where it is naturally premised on the construction of the building prior thereto, it shall be deemed that the construction was already commenced at that time (see Supreme Court Decision 95Nu7857 delivered on September 26, 1995, etc.).

2. The reasoning of the lower judgment and the record reveal the following facts.

A. The Plaintiff, a corporation established for the purpose of housing construction business, etc., applied for a construction permit in the name of Korea Land Trust Co., Ltd. while implementing a new construction project of the main complex building of 4th underground, 2nd ground, and 20th ground (hereinafter “instant building”). On March 28, 201, the Plaintiff obtained the construction permit from the Defendant on March 28, 201.

B. On June 30, 201, the Plaintiff entered into a contract for new construction of the instant building with a new building construction company, and on March 23, 2012, the Plaintiff submitted a report on the commencement of construction under the name of the Land Trust Co., Ltd., Ltd., the owner of the instant building, and received the certificate of completion of construction on April 2, 2012.

C. In relation to the instant building construction, the instant regular framework work (referring to the installation of a sloping beam for soil prevention work) was conducted by May 31, 2012, through installation of a provisional soundproof wall, arrangement of a site in a complex, and field survey, etc., and approximately KRW 97 million was incurred in the construction.

D. Since July 7, 2012, from around the underground level, it was approved on July 30, 2015 for the instant building through the ground-breaking and structural construction, etc., including excavation of the ground to install a wall that serves as a soil range outside the underground.

3. According to such factual basis, the construction of a shot frame, which serves as the essential premise for the work of soil removal, was commenced on or before June 1, 2012, which is the property tax assessment basis date, and the construction of the instant building was completed through the work of soil removal, ground destruction, and the construction of structures in accordance with the ordinary schedule. The shot frame is intended to indicate the location and height of the instant building, and the width and depth of the ground excavation at the construction site, and based on which soil removal works are carried out in order in a fair order. The shot beam beam installed by the instant regular mold work is different from the mere temporary installation because it cannot be easily moved or separated in light of the size and state of the materials, and the normal soil removal was conducted within approximately two months after the said work. The circumstances that the subsequent construction was delayed after that, therefore, it cannot be deemed that the construction of the instant building was completed at the time of construction or construction of the instant building without justifiable grounds as provided in Article 103(1) of the Enforcement Decree of the Local Tax Act.

Nevertheless, the lower court determined otherwise by holding that the instant land did not constitute the land annexed to a building under construction because it was merely a preparatory work required for the commencement of construction as of the property tax assessment basis date. In so doing, the lower court erred by misapprehending the legal doctrine on the scope of a building under construction, thereby adversely affecting the conclusion of the judgment.

4. The Plaintiff’s appeal is with merit, and the case is remanded to the court below 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 Park Poe-young (Presiding Justice)