Whether a project implementer is liable to pay acquisition tax, etc. applying the tax base for acquiring by succession and the tax rate, etc. under Article 11 (1) 2 of the former Local Tax Act to real estate constituting the infrastructure for rearrangement where the infrastructure for rearrangement, which is disused pursuant to the latter part of Article 65 (2) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, has been acquired by transfer from

Article 6 Subparag. 1 of the former Local Tax Act (amended by Act No. 14475, Dec. 27, 2016; hereinafter the same) defines acquisition, which is subject to acquisition tax, as “original acquisition, acquisition by succession, or all other acquisitions with or without compensation, by means of sale, etc., or any other similar acquisition.” Article 11(1) of the same Act provides that the acquisition, other than acquisition by inheritance, shall be 35/1,000 for free acquisition by inheritance (Article 35(2)); the original acquisition by means of acquisition by reasons other than those of subparagraphs 1 through 6, shall be 28/1,00 for free acquisition by inheritance (Article 7(b)); and the acquisition by means of other than farmland (Article 7(b)) shall be 40/1,000 for acquisition by acquisition

Article 65(2) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (wholly amended by Act No. 14567, Feb. 8, 2017) provides that “The maintenance infrastructure newly installed by a project implementer, other than the head of a Si/Gun/Gu or a housing project implementer, by implementing a rearrangement project shall gratuitously revert to the State or a local government which will manage such infrastructure, and the maintenance infrastructure owned by the State or a local government, the use of which is ceased due to the implementation of a rearrangement project, shall be gratuitously transferred to the project implementer to the extent equivalent to the installation cost of the newly installed infrastructure (hereinafter referred to as “former provision”), and the latter part of the latter part

This, as a matter of course, means that the infrastructure newly installed by a private project operator is naturally reverted to the State or a local government without compensation in accordance with the former part of the former part, thereby uniformly reverted the ownership along with the management right to the State, etc. for securing public facilities and for the efficient maintenance and management thereof, and thereby compelling the project operator to gratuitously transfer the infrastructure for rearrangement, which is disused within the extent equivalent to the installation cost of the newly installed infrastructure in accordance with the latter part to compensate for the project operator's property

Therefore, inasmuch as a project implementer does not deem that the fundamental infrastructure that is disused under the latter part of the Act is acquired by transfer from the State, etc. without compensation, and that the project implementer has contributed to or acquired the ownership of the fundamental infrastructure, the project implementer is obligated to pay acquisition tax by applying the tax base and the tax rate under Article 11(1)2 of the former Local Tax Act, as it constitutes acquisition by succession without compensation.

Article 6 subparag. 1, Article 11(1)2, 3, and 7(b) of the former Local Tax Act (Amended by Act No. 1475, Dec. 27, 2016); Article 65(2) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (Amended by Act No. 14567, Feb. 8, 2017; see current Article 97(2))

Supreme Court Decision 2007Du663 Decided July 12, 2007 (Gong2007Ha, 1284), Supreme Court Decision 2012Da82466 Decided February 21, 2014 (Gong2014Sang, 673), Supreme Court Decision 2015Da221569 Decided July 26, 2018 (Gong2018Ha, 1823)

Busan District Housing Reconstruction and Improvement Project Association (Law Firm LLC et al., Counsel for the plaintiff-appellant)

The head of Gangseo-gu Seoul Metropolitan Government

Seoul Special Metropolitan City Mayor (Law Firm Gongdo, Attorneys Lee Du-soo, Counsel for defendant-appellant)

Seoul High Court Decision 2017Nu48354 decided September 5, 2017

The appeal is dismissed. The costs of appeal are assessed against the Defendant’s Intervenor. The costs of appeal are assessed against the Defendant’s Intervenor.

The grounds of appeal are examined.

1. Article 6 Subparag. 1 of the former Local Tax Act (amended by Act No. 14475, Dec. 27, 2016; hereinafter the same) defines acquisition subject to taxation of acquisition tax as “original acquisition, acquisition by succession, or all other acquisitions with or without compensation, by means of sale, etc., or any other similar acquisition.” Article 11(1) provides that acquisition without compensation, other than acquisition by inheritance, shall be 35/1,000 (No. 2), 28/1,000 for original acquisition by means of acquisition by inheritance, and 40/1,00 for acquisition by reasons other than those of subparagraphs 1 through 6 (No. 7(b)) of the same Article.

Article 65(2) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (wholly amended by Act No. 14567, Feb. 8, 2017) provides that “The maintenance infrastructure newly installed by a project implementer, other than the head of a Si/Gun/Gu or a housing project implementer, by implementing a rearrangement project shall gratuitously revert to the State or a local government which will manage such infrastructure, and the maintenance infrastructure owned by the State or a local government, the use of which is ceased due to the implementation of a rearrangement project, shall be gratuitously transferred to the project implementer to the extent equivalent to the installation cost of the newly installed maintenance infrastructure (hereinafter referred to as “former provision” and “the latter provision of the latter part of this

This means that the fundamental infrastructure newly installed by a private project operator naturally reverts to the State or a local government without compensation pursuant to the former part of this case, thereby uniformly reverted to the State or a local government for securing public facilities and for the efficient maintenance and management thereof, while forcing the project operator to gratuitously transfer the fundamental infrastructure, which is disused within the extent equivalent to the installation cost of the fundamental infrastructure newly installed pursuant to the latter part of this case, to compensate for the project operator’s property losses within the reasonable scope (see, e.g., Supreme Court Decisions 2007Du6663, Jul. 12, 2007; 2012Da824666, Feb. 21, 2014).

Therefore, inasmuch as a project implementer is deemed to acquire an infrastructure for rearrangement, which is disused under the latter part of the instant case, from the State, etc., without any circumstance that he/she is deemed to have contributed to or acquired the ownership of the infrastructure, the project implementer is obligated to pay acquisition tax, etc. based on the tax base and tax rate under Article 11(1)2 of the former Local Tax Act, since the acquisition of real estate, which constitutes the infrastructure for rearrangement, constitutes acquisition by gratuitous succession.

2. The lower court acknowledged the following facts by citing the reasoning of the first instance judgment.

A. The Plaintiff is a reconstruction association established to implement a reconstruction project (hereinafter “instant rearrangement project”) with a size of 156,063 square meters in Gangseo-gu Seoul Metropolitan Government as an improvement zone, and obtained authorization for the implementation of the project on May 1, 2009 from the Defendant to newly build an apartment, etc. in the improvement zone, and obtained approval for the implementation plan on January 12, 201, and obtained authorization for the implementation plan on August 26, 2015. Meanwhile, the Defendant issued a public announcement for the completion of construction and the completion of construction on August 19, 2015 when the construction under the instant improvement project was completed, and on August 26, 2015, issued a public announcement for the transfer of ownership of the remainder of the site and the building except an apartment.

B. According to the implementation of the instant improvement project, the Plaintiff’s new improvement infrastructure, such as roads, parks, and public land, 19,033 square meters (hereinafter “instant new improvement infrastructure”) was reverted to Gangseo-gu Seoul Metropolitan Government, the competent management authority, pursuant to the former part of the instant improvement project, and 2,466.5 square meters of the existing improvement infrastructure, which is the 3,040 square meters of the 3,040 square meters of the road, which is an existing improvement infrastructure that is disused due to the implementation of the instant improvement project, was transferred to the Plaintiff free of charge pursuant to the latter part of

C. On October 23, 2015, the Plaintiff reported and paid KRW 339,094,410 in total, which is the tax base of acquisition tax, special rural development tax, and local education tax, based on the current base value of fundamental infrastructure whose disuse was abolished, by deeming that the acquisition of fundamental infrastructure for the improvement of use of this case was a gratuitous succession and acquisition by succession.

D. Since acquisition tax, etc. following the acquisition of fundamental infrastructure for the abolition of the use of this case is due to exchange with the newly built fundamental infrastructure of this case, the tax base of acquisition tax, etc. following the acquisition of fundamental infrastructure for the abolition of use of this case is KRW 109,302,314,285, which can be seen as the price for the acquisition thereof, and on August 10, 2016, the Plaintiff issued a notice of increase and correction of acquisition tax of KRW 4,836,259,320 (including additional tax of KRW 760,874,360), local education tax of KRW 447,478,250 (including additional tax of KRW 35,701,080), special rural development tax of KRW 219,132,940 (including additional tax of KRW 17,483,040).

3. Next, the lower court determined that it is difficult to regard the acquisition of the fundamental infrastructure for the abolition of use under the latter part of the instant case as a acquisition similar to the acquisition or exchange through the exchange, and that such acquisition is difficult to regard as having the substance of acquisition at a cost due to the reversion, redemption, or quid pro quo of the newly constructed fundamental infrastructure. Then, the Plaintiff’s acquisition of the fundamental infrastructure for the abolition of use of the instant case ought to be determined by applying Articles 10(2) and 11(1)2 of the former Local Tax Act as the acquisition without compensation, and thus, the instant disposition based on a different premise was unlawful.

4. Examining the above provisions and legal principles in light of the above, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the calculation method

5. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the defendant, and the costs of appeal are assessed against the defendant, respectively. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kwon Soon-il (Presiding Justice)