The Supreme Court has ruled that when an officetel bought to be used as a rental home is actually used by a tenant for lodging purposes like "Airbnb," it is lawful for the local government to claw back the acquisition tax it had reduced for the landlord.
The Supreme Court's Second Division (presiding Justice Roh Tae-ak) said on Feb. 15 that it upheld the lower court ruling that dismissed the plaintiff's claim in the final appeal of a lawsuit filed by a person surnamed Kim against the head of the Suyeong District Office in Busan to cancel the imposition of acquisition tax and other levies, in a decision made on Jan. 29.
Kim purchased one officetel unit in Suyeong District, Busan, in Sept. 2019 for 323.42 million won. Kim was a rental business operator and was exempted from acquisition tax and other levies under the Act on Restriction on Special Cases Concerning Local Taxation.
From June 2020 to March 2023, Kim rented the officetel to a person surnamed A and a person surnamed B. But A and B did not file a move-in report for the unit. In 2021, without notifying the competent authority, A listed the officetel on an online lodging-sharing site like "Airbnb" and offered short-term rentals, and was caught. For this, A received a summary order of a 5 million won fine for violating the Public Health Control Act. B likewise ran an unreported lodging business and received a suspension of indictment from prosecutors.
Suyeong District in Busan determined that Kim had used the property for a "non-rental purpose" during the mandatory rental period (four years) and imposed a total of 18.84 million won, including 16.67 million won in acquisition tax, 1.44 million won in local education tax, and 7.22 million won in The Special Tax for Rural Development. Kim filed an administrative appeal, but the Tax Tribunal dismissed it.
The first trial ruled in favor of Kim. The first-instance court said, "Imposing a clawback of acquisition tax even when a tenant who rented a rental home from a rental business operator did not actually use it for residential purposes is an expansive interpretation of the Act on Restriction on Special Cases Concerning Local Taxation."
The appeals court dismissed Kim's claim. The appellate court noted that Kim, a licensed real estate agent, was booked in Nov. 2020 on suspicion of aiding and abetting a violation of the Public Health Control Act after brokering a lease of the officetel to an unreported lodging operator.
It added, "It is reasonable to view that Kim knew A and B were leasing the officetel for an unreported lodging business, not for residential purposes, and entered into the lease contracts," and "Before renting the officetel to A and B, Kim appears to have directly engaged in an unreported lodging business."
Kim appealed, but the Supreme Court dismissed the appeal. The court held, "Once a rental business operator recognizes and tolerates that a tenant will not use the rental home for residential purposes, the operator also bears responsibility." As a result, Kim must pay 18.84 million won, including acquisition tax, to Suyeong District.