[1] In a case where a real estate acquisitor for a high-class recreation center uses the real estate for any purpose other than that of a high-class recreation center immediately after its acquisition, but failed to commence a change of use within 30 days after its acquisition due to a disability not attributable to him/her, and it is obvious that he/she intends to commence a change of use immediately after the completion of a disability,

[2] The case holding that the judgment below erred in the misapprehension of legal principles in a case where Gap imposed heavy taxation rate on the above building on the ground that Gap did not use the above real estate for any purpose other than a high-class recreation center or did not start any construction work for change of purpose of use within 30 days from the date of acquisition of the above real estate, and used it as a high-class recreation center until the property tax assessment basis date, in a case where Gap imposed heavy taxation rate on Gap on the above real estate for the purpose of using it as a high-class recreation center (sports center) and reported and paid acquisition tax, etc. for the purpose of using it as a second-class neighborhood living facility (sports center) and for the purpose of using it, after applying the general tax rate to the above real estate, but the change of purpose of use after obtaining approval for change of use by applying the general tax rate to the acquisition tax, etc., but the competent authority refused to transfer the above real estate as a high-class recreation center

[1] In full view of the legislative intent of Article 13(5)4, Article 111(1)1(c)2 and Article 111(1)2(a) of the former Local Tax Act (amended by Act No. 1475, Dec. 27, 2016; hereinafter “former Local Tax Act”) concerning heavy taxation, including acquisition tax on a high-class recreation center, and the structure of relevant provisions, including the proviso to Article 13(5)4 of the former Local Tax Act, where a purchaser used a high-class recreation center for any purpose other than that of a high-class recreation center after acquisition, but failed to start a construction work within 30 days after acquisition due to an unliability, and where it is evident that a person liable for duty payment and its immediate change of use is intended to start a construction work after the removal of such a disability, it shall be deemed that there is a justifiable reason not to apply the heavy acquisition tax rate to the person liable for tax payment, and that it does not conform to the legislative intent of the proviso to Article 13(5)4 of the former Local Tax Act.

[2] In a case where Gap acquired real estate used as an dancing entertainment drinking house for the purpose of using it as a Class II neighborhood living facility (sports center), reported and paid acquisition tax, etc. for the purpose of using it, and intended to start a construction work for the purpose of using it after obtaining approval for use by applying the general tax rate to the above real estate, but the competent authority refused to transfer the above real estate, which did not start the construction work for the purpose of using it for any purpose other than a high-class recreation center, and the competent authority did not use the above real estate for the purpose of using it as a high-class recreation center within 30 days from the date of acquiring it, or used it as a high-class recreation center until the property tax base date, and imposed acquisition tax and property tax, etc. applying the heavy taxation rate to Gap on the above building, the case holding that the court below erred by misapprehending the legal principles as to the acquisition of real estate for the purpose of acquiring it and the subsequent construction work for the purpose of using it could not apply to the acquisition of the above real estate at the tax base date as long as the acquisition of the above real estate was not applied.

[1] Articles 13(5)4, 111(1)1(c), and 111(1)2(a)2(a) of the former Local Tax Act (Amended by Act No. 1475, Dec. 27, 2016); / [2] Articles 13(5)4, 111(1)1(c), and 111(1)2(a) of the former Local Tax Act (Amended by Act No. 1475, Dec. 27, 2016)

[1] Supreme Court Decision 2009Du23938 decided Feb. 9, 2012 (Gong2012Sang, 464)

Korea Sports Center (Law Firm Cheongn Law, Attorneys Park Gi-soo et al., Counsel for the plaintiff-appellant)

The head of the Gu of Busan Metropolitan City (Law Firm Sejong, Attorneys Park Dong-ok, Counsel for the plaintiff-appellant)

Busan High Court Decision 2017Nu20873 decided July 19, 2017

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

The grounds of appeal are examined.

1. Article 13(5)4 of the former Local Tax Act (amended by Act No. 14475, Dec. 27, 2016; hereinafter “Act”) provides that “Where real estate constituting a high-class recreation center has been acquired, the amount of such tax shall be calculated by applying the acquisition tax rate plus 400/100 of the base rate for heavy taxation under Article 11 of the Act.” The proviso (hereinafter “instant proviso”) provides, “The use of a building for a high-class recreation center for any purpose other than the high-class recreation center or the construction for the purpose of using it for any purpose other than the high-class recreation center shall be excluded.” Meanwhile, Article 111(1)1(c) and 2(a) of the Act provides that “The property tax rate for land and buildings used for a high-class recreation center shall be 40/1,00 of each tax base.”

The legislative intent of the heavy taxation system on acquisition tax, etc. for such high-class recreation centers is to restrain the speculative and waste winding and to induce investment in any more productive sector as a whole of the State, and to settle the healthy consumption of the people at the same time by imposing heavy taxes on the basis of high-class capacity which is realized by the acquisition of so-called “private property”. Accordingly, even if the current status at the time of acquisition was a high-class recreation center, if it is intended to use it for other purposes immediately after acquisition in light of objective circumstances, it becomes two the proviso of this case by reflecting the fact that acquisition tax, etc. need not be imposed as a high-class recreation center because it is not premised on the distribution of sacrific and exciative consumption facilities.

Comprehensively taking account of the legislative intent of the provisions on heavy taxation, including acquisition tax, for such high-class recreation centers and the system of relevant provisions, including the instant proviso, in cases where: (a) a purchaser used such high-class recreation centers for any purpose other than that of the high-class recreation centers, but failed to commence construction work for the purpose of use within 30 days after the acquisition due to a cause not attributable to the purchaser; and (b) an intention to immediately commence construction work for the purpose of use to be removed from such a disability is apparent, it shall be deemed that there is a justifiable reason for not applying the heavy taxation rate. In other words, applying the heavy taxation rate uniformly to a case where the purchaser who is a taxpayer fails to meet the formal requirements prescribed in the instant proviso due to a cause not attributable to or not attributable to the purchaser is contrary to the original legislative intent of

2. Review of the reasoning of the lower judgment and the record reveals the following facts.

A. On March 25, 2016, the Plaintiff (Korea Construction Co., Ltd., changed from May 27, 2016 to the trade name as of May 27, 2016) reported and paid acquisition tax, etc. on the instant real estate on the trade name, “○○○○co clubs” in the auction procedure for real estate rent (Dual) around 2015, Busan District Court 2015, 2015, 14784, 2015, and 26985 (Dual) at around 2015, where the permission for sale of the instant real estate had been in existence, after receiving the decision to permit the sale of the instant real estate, the Plaintiff acquired the instant real estate by full payment of the sales price on April 19, 2016 and by applying the general tax rate on the instant

B. On April 27, 2016, the Plaintiff asserted a lien on the instant real estate and filed an application for an order to deliver real estate with the Busan District Court 2016No. 238 against Nonparty 1, who had continued to engage in an entertainment bar business at this place, and the said application was accepted on May 17, 2016.

C. On April 2, 2016, after the decision to permit sale of the instant real estate was made, the Plaintiff received an estimate of construction of changed use facilities to change the instant real estate from Nonparty 2 (trade name: △△△ Sports), etc., to the Sports Center. On May 7, 2016, the Plaintiff entered into a contract with Nonparty 2 for the installation of interior works and supply of equipment with Nonparty 2 for the contract amount of KRW 975,00,000 with Nonparty 2 and paid KRW 195,00,000 on May 10, 2016.

D. On May 24, 2016, the Plaintiff reported to the Defendant on May 24, 2016 the change of the purpose of the instant real estate to a Class II neighborhood living facility.

E. However, Nonparty 1 continuously asserted the right of retention by filing an appeal against the decision on the order to deliver real estate. On November 22, 2016, the Plaintiff completed the delivery execution following the decision on the order to deliver the real estate of this case, and at that time, the Plaintiff attempted to undertake construction work to change the purpose of use of the real estate of this case, but did not actually proceed with the construction work.

F. However, on July 27, 2016, the Defendant issued each of the instant dispositions imposing acquisition tax, property tax, etc. applying heavy taxation rates on the instant building on the ground that the Plaintiff used the instant real estate for any purpose other than a high-class recreation center or did not start construction work for the purpose of use thereof within 30 days from the date of its acquisition, which was a high-class recreation center, and that the instant building is used as a high-class recreation center by June 1, 2016.

3. According to these facts, the Plaintiff acquired the instant real estate used as an dancing entertainment drinking house for the purpose of using it as a Class 2 neighborhood living facility, and the Plaintiff concluded a contract for the alteration of the purpose of use of the instant real estate after acquisition and intended to start the construction work using the purpose of use after obtaining approval for alteration of the purpose of use to Class 2 neighborhood living facilities (sports center). However, Nonparty 1, who claimed a lien on the instant real estate, did not start the construction work using the wind to refuse its delivery, and the Plaintiff appears to have attempted to start the construction work using the purpose of acquiring the instant real estate as soon as the above disability was resolved. In light of the purpose of acquiring the instant real estate and the circumstances where the commencement of the construction for subsequent alteration of the purpose of use thereof was delayed, if the Plaintiff acquired the instant real estate and received it immediately, it would have been within 30 days from the date of acquisition, and it would have been sufficiently possible to start the construction work using the instant real estate from May 19,

Examining the above circumstances in light of the legal principles as seen earlier, even if the Plaintiff was unable to start the construction work for the purpose of use within 30 days from the date of acquisition of the instant real estate used as an dancing entertainment tavern, it is reasonable to deem that there was an obstacle that the Plaintiff could not be responsible for the failure to start the construction work for the purpose of use, and as long as the Plaintiff immediately tried to start the construction work for the purpose of use as soon as such failure was resolved, it is reasonable to deem that there was a justifiable reason for not applying the heavy acquisition tax rate for the acquisition of the instant real estate by acquiring a high-class recreation recreation center. In addition, as such, at the time of acquisition of a disability where the heavy acquisition tax rate for the acquisition of real estate for a high-class recreation center cannot be applied, the property tax assessment basis was continued at the time of acquisition, and there exist special circumstances where

Nevertheless, solely on the grounds indicated in its reasoning, the lower court determined that the Plaintiff’s acquisition and holding of the instant real estate constitutes subject to heavy taxation of acquisition tax and property tax. In so determining, the lower court erred by misapprehending the legal doctrine on the subject of heavy taxation of acquisition tax and property tax on high-class recreation centers, contrary

4. Therefore, the lower judgment is reversed, and 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 Park Jung-hwa (Presiding Justice)