Gwangju City Achieves Success in Collecting Long-Term Overdue Taxes

[Asia Economy Honam Reporting Headquarters Reporter Park Seon-gang] Gwangju Metropolitan City has set a precedent for collecting long-term overdue taxes by winning a lawsuit regarding unpaid taxes from a closed corporation.

Gwangju City recently won a lawsuit after five years of litigation to collect overdue local taxes amounting to approximately 240 million KRW from Company A, a small construction firm in Seo-gu that failed to pay local taxes since October 1999.

Company A was a closed corporation that received a dissolution notice from the court in December 2011. In May 2000, Gwangju City seized three real estate properties registered under Company A’s name. However, these properties were already subject to three prior-ranking claims: a mortgage by K Financial, a provisional injunction by Company B, and a seizure claim by the previous owner, all of which had priority over Gwangju City’s claim.

Gwangju City confirmed that K Financial, the prior-ranking mortgage holder, had not applied for auction of the mortgaged properties under Company A’s name, which had been closed since 2011, for over five years. Additionally, the holders of the prior-ranking provisional injunction and seizure rights had not filed main lawsuits to recover their claims for a long time. Consequently, Gwangju City pursued a lawsuit to cancel K Financial’s mortgage rights and ultimately won.

Using the same approach, Gwangju City applied to the court to cancel Company B’s prior-ranking provisional injunction and seizure rights and won the case. As a result, Gwangju City, as the prior-ranking right holder, commissioned the sale of the real estate under Company A’s name, creating an opportunity to collect long-term overdue taxes that had been outstanding for 20 years.

Jung In-sik, head of the city’s Taxation Division, stated, “Although the defaulters were not effectively the owners, they had been burdened with various public charges such as health insurance premiums. With the auction sale of the long-unexecuted seized real estate, the burden of property tax and health insurance premiums will be reduced. By selling the real estate under the name of the closed corporation, we can resolve the annual property tax arrears and enable the properties to be used for normal purposes. We will continue to actively strive to collect overdue taxes to ensure fair local tax collection.”