Red Cross "Exempt Property Tax for Social Welfare Projects" Lawsuit... Court "Dismissed"

[Judgment Result]

The Korean Red Cross, although not a ‘social welfare corporation,’ filed a lawsuit requesting exemption from property tax on real estate as it partially conducts social welfare projects such as emergency welfare support, but lost the case.

The Seoul Administrative Court, Administrative Division 8 (Presiding Judge Lee Jeong-hee) ruled on November 26 last year that the Korean Red Cross lost the lawsuit (2023GuHap86041) filed against 42 local government heads including the Mayor of Jung-gu, Seoul, seeking cancellation of the property tax imposition.

The exterior view of the Seoul Central District Court and Seoul High Court building in Seocho-dong, Seoul. Photo by Yonhap News

[Facts and Issues]

The heads of local governments including the Mayor of Jung-gu, Seoul, imposed property tax and local education tax on real estate owned by the Korean Red Cross in 2022. Based on the former Local Tax Special Cases Restriction Act (LTSCRA), which states that ‘property tax is reduced by 25% for real estate directly used for businesses other than medical businesses,’ they imposed property tax with a 25% reduction.

The Korean Red Cross (represented by law firm Yulchon, lawyers Shin Gi-seon, Lee Gang-min, and Kim Jong-mok) filed a lawsuit to cancel the property tax imposition on approximately 1.36 billion KRW of the imposed property tax, arguing that “Article 22, Paragraph 2 of the LTSCRA, which states that property tax should be fully exempted for social welfare corporations, should apply to the Red Cross.”

The Red Cross side argued, “The Korean Red Cross was established to realize humanitarianism and contribute to world peace and human welfare, and its purpose includes relief projects and social welfare projects for people affected by major disasters such as floods, fires, famine, and infectious diseases,” and “since it operates social welfare projects under the Social Welfare Services Act, it falls under the scope of this provision.”

[Court’s Judgment]

The court did not accept the Red Cross’s claim based on the amended LTSCRA.

The LTSCRA was amended on January 15, 2020. Before the amendment, the target was defined as ‘a social welfare corporation established under the Social Welfare Services Act,’ but after the amendment, it was changed to ‘a corporation whose purpose is social welfare projects under Article 2, Paragraph 1 of the Social Welfare Services Act.’ Article 2, Paragraph 1 of the Social Welfare Services Act restrictively defines the types of social welfare projects. The court judged that the Korean Red Cross, as a nonprofit corporation established under the Korean Red Cross Organization Act, does not fall under Article 2, Paragraph 1 of the Social Welfare Services Act and therefore cannot be the target.

The court stated, “The plaintiff argues that the amended law intends to include corporations with the purpose of social welfare projects even if they are not social welfare corporations, but the purpose of the amended LTSCRA is to systematize the scope of social welfare corporations subject to exemption and clarify the scope of exempted projects.” It further explained, “If interpreted as the plaintiff claims, even nonprofit corporations operating social welfare projects that are not social welfare corporations established under the Social Welfare Services Act would be exempt from property tax on relevant real estate, which is contrary to the legislative intent.”

Reporter An Jae-myung, Legal Newspaper

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