[비즈한국] Korean Air003490 has won a partial victory in an unjust enrichment lawsuit it filed against the national government and several local municipalities, arguing that property tax levies on its land were unfair. The court ruled that the property taxes and comprehensive real estate holding taxes had been imposed unlawfully, ordering six government entities, including the Republic of Korea and the Seoul Metropolitan Government, to refund a total of 269.45 million won.
On February 14, the Seoul Central District Court acknowledged that some of the taxes imposed were illegal in the lawsuit filed by Korean Air. Regarding the claim for return of unjust enrichment filed by Korean Air in July 2021, the court partially upheld the request, stating, "It is reasonable to conclude that the tax imposition orders in question contain serious and clear defects, rendering them invalid."
Korean Air filed the lawsuit, claiming that from 2016 to 2018, the government and local municipalities subjected its land to double taxation—by failing to apply "separate taxation" for land eligible for tax exemptions under the Restriction of Special Local Taxation Act—and instead classifying it as subject to "comprehensive aggregate" or "separate aggregate" taxation. The core issue was whether the government could impose taxes on exempt land by calculating it through a method that aggregates the land and then applies a fixed reduction, rather than separating it for taxation purposes.
The six parties sued by Korean Air include the Republic of Korea, Seoul Metropolitan Government, Jongno-gu (Seoul), Gangseo-gu (Seoul), Giheung-gu (Yongin), and Yuseong-gu (Daejeon).
At the time, the Local Tax Act classified land into "comprehensive aggregate," "separate aggregate," and "separate taxation," and defined land used for corporate research institutes and public facilities as "subject to separate taxation." Conversely, the Restriction of Special Local Taxation Act provided for tax reductions on certain lands but did not explicitly specify the method for tax classification.
Korean Air argued, "The authorities calculated property tax, local education tax, comprehensive real estate tax, and special rural development tax after classifying the reduced portions as taxable. Therefore, they are obligated to refund the amounts related to these errors along with interest for delay."
The defendants, including the Republic of Korea and the Seoul Metropolitan Government, argued, "Considering the intent behind the introduction of the Restriction of Special Local Taxation Act and the Comprehensive Real Estate Holding Tax Act, land corresponding to the property tax reduction rate cannot be viewed as subject to separate taxation. This would result in double tax benefits for parts already receiving tax exemptions."
However, the court ruled in favor of Korean Air. The Seoul Central District Court judged, "The reduced portion should be classified as subject to separate taxation, and when calculating the comprehensive real estate holding tax, the reduced portion should be excluded from the tax base."
The court explained, "The heads of Jongno-gu, Gangseo-gu, Giheung-gu, and Yuseong-gu calculated property taxes by classifying the reduced portions as subject to comprehensive aggregate or separate aggregate taxation rather than separate taxation. The head of the Gangseo District Tax Office included the reduced portion in the comprehensive real estate tax base before calculating the tax."
Ultimately, the court ruled that "the subsequent property tax and comprehensive real estate tax imposition orders are illegal." The total refund calculated by the court, including delay interest, is 269.45 million won. The breakdown is as follows: 227,412,400 won from the Republic of Korea, 20,083,929 won from Seoul, 6,152,222 won from Jongno-gu, 8,193,447 won from Gangseo-gu, 2,781,332 won from Giheung-gu, and 4,828,596 won from Yuseong-gu.
Giheung-gu (Yongin) and Yuseong-gu (Daejeon) chose not to appeal, making the ruling final for those entities. A Yongin official explained, "We judged that there was no practical benefit to continuing the litigation as the amount is not significant, so we decided not to appeal." An official from Yuseong-gu also stated, "Since the amount is not large, we have complied with the ruling."
On the other hand, the Republic of Korea, Seoul, Jongno-gu, and Gangseo-gu filed appeals between March and April, and appellate proceedings are currently underway.
Seoul maintains that while the appeal is ongoing, the ruling will not affect other tax assessments. A Seoul official explained, "The relevant law applies up to 2018. It was revised in 2019, so there is no possibility of further confusion in the future. For this reason, the outcome of this lawsuit is not expected to impact future taxation practices. Seoul's stance is that since there were no clear regulations defining how to precisely separate tax targets for land with reduced property taxes, the previous tax assessments cannot be viewed as having clear defects. However, there are numerous similar cases, and since there have been losses at the Supreme Court level, we must carefully consider how to respond while this lawsuit proceeds."
An official from the Ministry of Justice, representing the Republic of Korea, stated, "It is difficult to disclose specific details as this is a matter concerning ongoing litigation."