Standing 134 Regional Housing Association (Law Firm Han-chul, Attorney Park Gyeong-il, Counsel for the plaintiff-appellant)

head of Dongjak-gu Tax Office

December 2, 2011

1. The Defendant’s imposition disposition of KRW 851,420,860 of comprehensive real estate holding tax for the year 2005 and KRW 170,284,170 of special rural development tax for the Plaintiff on May 3, 2010 shall be revoked.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Details of the disposition;

A. The Japanese-Japan District Housing Association, 134 and 2, 134 and 3 regional housing associations, 134 and 4 regional housing associations, 134 and 5 regional housing associations, and 134 and 6 regional housing associations (hereinafter “instant six cooperatives”) were jointly organized in around 2002 for the purpose of constructing apartments on the ground of the Japanese-dong 134, Dongjak-gu, Seoul (hereinafter “instant project”). The members of each association entrusted money or real estate to the association.

B. The six association of this case acquired land from its members with money entrusted, and completed the registration of ownership transfer in the name of the representative association of the 134th regional housing association. The 134th regional housing association owned the following real estate on June 1, 2005, which was the tax base date of comprehensive real estate holding tax for 2005:

1) 304 38,660.6 square meters of land (hereinafter “instant land”) such as the Dongjak-gu Seoul Metropolitan Government 5-dong (number 1 omitted) (hereinafter “instant land”).

2) Two parcels: 75.4 square meters;

3) A single house with 235 m2,366.52 m2 on the ground (number 2 omitted) of the same Dong (hereinafter “instant house”).

C. On December 15, 2005, the 134th regional housing association classified the instant land and housing (hereinafter “instant real estate”) as “subject to the exclusion of cumulative real estate holding tax” under Articles 3 and 4 of the Enforcement Decree of the Comprehensive Real Estate Holding Tax Act (amended by Presidential Decree No. 19253, Dec. 31, 2005) and reported it to the Defendant on December 15, 2005 by classifying the instant land and housing (hereinafter “instant real estate”).

D. The six cooperatives of this case were virtually unable to normally carry out the project of this case due to continuous internal disputes, etc. and were dissolved around September 2006 and around October 2006, and 1,242, including the existing union members, form the Plaintiff association to succeed to the project of this case, and obtained the authorization for the establishment of the housing association from the head of Dongjak-gu Office on February 22, 2007.

E. On May 3, 2010, the Defendant: (a) deemed the instant real estate as the subject of general aggregate taxation, and (b) deemed the Plaintiff’s association that succeeded to the instant business on May 3, 201 and was liable to pay comprehensive real estate tax in 2005; and (c) subsequently corrected and notified the Plaintiff’s association’s total real estate tax amounting to KRW 1,021,705,030 (=851,420,860 +170,284,170).

F. On August 2, 2010, the Plaintiff filed an appeal with the Tax Tribunal on the instant disposition, but the said claim was dismissed on December 31, 2010.

G. Meanwhile, on November 19, 2010, the Plaintiff completed the registration of the trust on the instant real estate.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 3, 4, 6, 7, 10, 11, Eul evidence Nos. 1 through 4, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

The Plaintiff is not only an organization separate from the 134th regional housing association, but also an actual acquisition entity of the instant real estate, even if its identity can be recognized, it accords with the substance over form principle to regard its members as the taxpayer of comprehensive real estate holding tax. Thus, the instant disposition is unlawful.

2) The defendant's assertion

In full view of the following: (a) the Plaintiff is an organization identical to the Japanese District Housing Association; (b) the trust property is not verified as it is not a trust deed prepared between the Plaintiff and its members; (c) the registration of ownership of the instant real estate is made in the name of the association; (d) the Dongjak-gu Office imposes property tax on the Plaintiff on the instant real estate; and (e) there is no provision that excludes comprehensive real estate holding tax on the reconstruction association from the Comprehensive Real Estate Holding Tax Act, the instant disposition imposing comprehensive real estate holding

B. Relevant statutes

It is as shown in the attached Form.

C. Determination

(i) the legal nature of the housing association;

Although a housing association established under the Housing Act has regulations that have the nature of an association for its own purpose only by using the name of association, and based on this, it has an organization such as a general meeting which is a decision-making institution, a steering committee, and a representative who is an executive body. In light of the fact that a resolution or execution method is carried out in accordance with the principle of majority majority and that the association itself remains in existence, etc. regardless of the change following the joining or withdrawal of association members, it constitutes a non-corporate group (see, e.g., Supreme Court Decision 96Da39721, Jan. 24, 1997). The plaintiff association and the 134th regional housing association also constitute a non-corporate group in light of the contents of the regulations (No. 2 and No. 6-5 of evidence No. 5) and the purport of the whole pleadings.

2) Whether the Plaintiff Union can be a person liable for payment of comprehensive real estate holding tax

Article 13(1)1 of the former Framework Act on National Taxes (amended by Act No. 8830 of Dec. 31, 2007; hereinafter “former Framework Act on National Taxes”) provides that “any unincorporated association, foundation or other organization, which is incorporated with permission or authorization from the competent authority or which is registered with the competent authority under the statutes, shall be deemed a juristic person and shall be subject to this Act and other tax-related Acts.”

According to the statement in Gap evidence No. 1, it can be recognized that the plaintiff union obtained the authorization of establishment of a housing association from the head of Dongjak-gu on February 22, 2007 pursuant to Article 32 of the Housing Act. This constitutes the requirements for a legal fiction under Article 13 (1) 1 of the former Framework Act on National Taxes. Therefore, the plaintiff union shall be deemed a legal entity under tax law and shall be liable for the payment of comprehensive real estate holding tax.

3) Whether the identity of the Plaintiff Union and the 134th regional housing association is recognized

In full view of the purport of the arguments in the evidence Nos. 10 and Nos. 4 through 10, the 1344th regional housing association established on September 23, 2003 and applied for a report of establishment and registration of business around December 2005, and as seen earlier, the 134th regional housing association reported the comprehensive real estate holding tax on the real estate in this case on December 13, 2005. The 134th regional housing association changed the name of the juristic person to the Plaintiff association on April 5, 2007, and reported a correction of corporate registration under the Value-Added Tax Act on April 17, 2007. The Plaintiff association reported a correction of business registration following the change of the place of business on Oct. 1, 2008, a correction report of business registration following the change of the representative on August 28, 2009, but reported a closure of business registration on September 10, 2010.

In light of the following circumstances that can be recognized by comprehensively taking into account the evidence No. 6 and the purport of the entire pleadings, namely, (i) Plaintiff Union was established for the same business as the six cooperatives of this case and the composition of a majority of the union members is the same; (ii) Plaintiff Association did not report the closure of its business; and (iii) Plaintiff Union’s corporate registration correction report following the change of its name in the name of the Plaintiff Union; (iv) Plaintiff Union’s corporate registration was closed and was made before Plaintiff reported the closure of its business; and (iv) Plaintiff’s registration was made before Plaintiff’s report was made on October 7, 2007 in the copy of the register on the 76 square meters of the Dong-dong, Seoul Metropolitan Government (number 3 omitted); (v) Plaintiff Union’s ground for the change of ownership to the Plaintiff Union on September 23, 2003, which was the date of the establishment of the Korea Regional Housing Association on June 23, 2003.

4) Whether the Plaintiff Union should pay the comprehensive real estate holding tax on the instant real estate

Article 7 (1) of the Gross Real Estate Tax Act (amended by Act No. 7836 of Dec. 31, 2005) provides that "any person who is liable to pay property tax on housing as of the date of taxation and whose aggregate of the published prices of houses subject to property tax in Korea exceeds 450 million won as of the date of taxation shall be liable to pay the comprehensive real estate tax." Article 183 (1) of the Local Tax Act provides that "any person who actually owns property as of the date of assessment of property tax shall be liable to pay property tax." "any person who actually owns property as of the date of assessment" refers to any person who actually owns property regardless of whether he/she is registered as an owner on the public register (see Supreme Court Decision 2010Du10501, Oct. 14, 201).

In light of the above legal principles, it is reasonable to interpret that the Plaintiff’s property should be entrusted to the Plaintiff if the ownership of the instant real estate is ultimately attributed to the union members through the instant business. ③ Members of the instant six cooperatives entrusted money or real estate to each association. The instant six cooperatives entrusted the instant real estate under the name of the 134th Regional Housing Association for all real estate by acquiring the instant real estate with the money entrusted by the union members. ④ The Plaintiff’s 134th Regional Housing Association and the Plaintiff’s association having the same substance as the Plaintiff’s association completed the registration of ownership of the instant real estate, including the content and purpose of the Plaintiff association’s business, the Plaintiff association’s establishment purpose, the real estate acquired by the Plaintiff association, and the real estate ownership of the instant real estate should also be considered as the Plaintiff’s members, taking into account the following: (a) the Plaintiff’s comprehensive real estate holding tax should also be deemed as the Plaintiff’s real estate holding tax.

5) Sub-committee

Therefore, the disposition of this case on the premise that the Plaintiff, a local housing association, is liable to pay the comprehensive real estate holding tax on the instant real estate is unlawful.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified and it is so decided as per Disposition.

[Attachment Omission of Related Acts]

Judges Lee Jae-hee (Presiding Judge)

1) The phrase “not distributing profits to its members” was inserted with the amendment of the Framework Act on National Taxes on December 31, 2007, and thus, the revised Framework Act on National Taxes does not apply to June 1, 2005, which is the tax base date for the instant disposition, and to the approval date for the establishment of the housing association for the Plaintiff on February 22, 2007, which is the authorization date for the establishment of the housing association for the Plaintiff.