Local Tax Act

If, on or before the statutory payment due date, etc. of local government levies, a provisional registration or provisional entry in a register based on a provisional registration security contract prescribed in Article 1 of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration (hereinafter in this Article referred to as a "provisional registration for security") has been made on the property of a taxpayer or special collection agent, with that person as the registration obligor (including an obligor for entry in a register), those local government levies are collected from the proceeds of realization after the claim secured by that provisional registration for security.

If a statutory lien listed in the items of Article 14-13, paragraph (1) exists on the property of a taxpayer or special collection agent for which a provisional registration for security has been made, if a statutory lien listed in the items of Article 14-14, paragraph (1) has existed since on or before the statutory payment due date, etc. of local government levies, or if a pledge or mortgage has been created, or a provisional registration for security has been made, on or before the statutory payment due date, etc. of local government levies, those local government levies are collected, from the proceeds of realization relating to the settlement money prescribed in Article 3, paragraph (1) of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration (including as applied mutatis mutandis in Article 20 of that Act), after the claims secured by those statutory liens, pledges and mortgages whose rights were exercised under Article 4, paragraph (1) of that Act (including as applied mutatis mutandis in Article 20 of that Act), and by the subordinate provisional registration for security prescribed in Article 4, paragraph (2) of that Act whose right was exercised under Article 4, paragraph (1) of that Act as applied mutatis mutandis in Article 4, paragraph (2) of that Act (including as applied mutatis mutandis in Article 20 of that Act).

The provisions of Article 14-11, paragraph (1) apply mutatis mutandis to the case where a taxpayer or special collection agent has acquired property for which a provisional registration for security has been made, and the provisions of the preceding Article (excluding paragraph (3)) apply mutatis mutandis to the case where, if a taxpayer or special collection agent has no other sufficient property to be applied to local government levies, that person has transferred property for which it made a provisional registration for security after the statutory payment due date, etc. of the local government levies, respectively.

A provisional registration and a provisional entry in a register based on a provisional registration security contract prescribed in Article 1 of the Act on Contract for Establishment of Security Interests by Use of Provisional Registration, where the monetary obligation to be extinguished is not specified at the time of the contract, have no effect in the delinquent tax collection procedure for local government levies.

If a taxpayer or special collection agent is delinquent in local government levies and there is property that the person has transferred and that is the object of security by that transfer (hereinafter in this Chapter referred to as "property transferred as security"), the local government levies of the taxpayer or special collection agent may be collected from the property transferred as security only where it is found that the levies to be collected would still fall short even if a delinquent tax collection procedure were carried out against the person's property.

When the head of a local government intends to collect under the preceding paragraph, the head must give notice to the right holder of the property transferred as security (hereinafter in this Article referred to as the "holder of property transferred as security") by a document stating the amount to be collected and other necessary matters; in this case, the head must notify the taxpayer or special collection agent to that effect.

If the amount to be collected has not been paid in full by the day on which 10 days have elapsed from the day on which the notice referred to in the preceding paragraph was issued, a tax collection official may, deeming the holder of property transferred as security to be a secondary taxpayer, carry out a delinquent tax collection procedure against the property transferred as security.

The provisions of Article 11, paragraphs (3) through (5) and Article 13-2 apply mutatis mutandis to the case under the preceding paragraph.

A seizure made treating property transferred as security as property of the taxpayer or special collection agent referred to in paragraph (1) may, only where the requirements of that paragraph are met, be continued as a delinquent tax collection procedure as a seizure under paragraph (3); in this case, the head of a local government must give the notice and the notification referred to in paragraph (2) without delay.

When continuing a delinquent tax collection procedure under the preceding paragraph, if the property transferred as security is property listed in the following items, the head of a local government must notify the person specified in the relevant item to the effect that the delinquent tax collection procedure is being continued with the seizure made as property of the taxpayer or special collection agent treated as a seizure under paragraph (3).

Movable property in the possession of a third party (meaning movable property prescribed in Article 24, paragraph (5), item (i) of the National Tax Collection Act; the same applies hereinafter in this item) or securities: The third party in possession of the movable property or securities;

Property subject to the application of Article 62 or Article 73 of the National Tax Collection Act (excluding property for which registration is required for the transfer of rights): A third-party debtor or a person equivalent thereto (referred to as "third-party debtor, etc." in Article 15-2-3, paragraph (3) and Article 16-4, paragraph (10)).

When continuing a delinquent tax collection procedure under paragraph (5), if there is a known person among those listed in Article 55, item (i) or (iii) of the National Tax Collection Act, the head of a local government must notify them to the effect that the delinquent tax collection procedure is being continued with the seizure made as property of the taxpayer or special collection agent treated as a seizure under paragraph (3).

Even where, after the notice under paragraph (2) or a seizure subject to the application of paragraph (5) has been made, the claim secured by the transfer of property of the taxpayer or special collection agent has been extinguished for a reason other than performance, such as default (including where a repurchase, promise of resale or similar contract has been concluded with respect to the property transferred as security and that contract has lost its effect for a reason other than performance of the contract, such as the passage of a time limit), paragraph (3) applies as if the property continued to exist as property transferred as security.

The provisions of paragraph (1) do not apply where, on or before the statutory payment due date, etc. of the local government levies, there is a registration of transfer of rights relating to a transfer made for the purpose of security, or where the holder of property transferred as security proves, by the day before the decision to sell the property, the fact that the property had become property transferred as security on or before the statutory payment due date, etc. of the local government levies. In this case, the provisions of the second sentence of Article 14-9, paragraph (3) and paragraph (4) of that Article apply mutatis mutandis.

A holder of property transferred as security to whom the provisions of paragraph (1) apply is deemed to be a taxpayer or special collection agent for the purpose of applying the provisions of this Act concerning offenses relating to delinquent tax collection procedures and offenses of refusal of examination, etc. relating to delinquent tax collection procedures.

Where the holder of the right relating to a registration of sale with a special agreement of repurchase, a provisional registration (including a provisional entry) for the preservation of the claim under a reservation for resale, or any other similar registration (hereinafter in this Article referred to as "registration, etc. of the right of repurchase") that has been made with regard to property transferred as security is a person delinquent in payment, the seized right relating to the registration, etc. of the right of repurchase and the property transferred as security bearing that registration, etc. of the right of repurchase that has been seized under paragraph (3) of the preceding Article may be realized together.

In addition to what is provided for in the preceding Article and the preceding paragraph, matters necessary for the collection of the local government levies of a taxpayer or special collection agent from property transferred as security are specified by Cabinet Order.

Where, in compulsory liquidation procedure, local government levies compete with national taxes, levies of other local governments or public charges (hereinafter in this Article referred to as "national taxes, etc.") and other claims (hereinafter in this Article referred to as "private claims"), and, under the provisions of this Section, the National Tax Collection Act or other laws, local government levies take priority over national taxes, etc. and private claims are subordinate to those national taxes, etc. and take priority over those local government levies, or local government levies are subordinate to national taxes, etc. and private claims take priority over those national taxes, etc. and are subordinate to those local government levies, the distribution of the proceeds of realization is as follows:

where there are expenses prescribed in Article 14-2 or Article 14-3 or expenses for the delinquent tax collection procedure, local government levies prescribed in Article 14-4 (including national taxes prescribed in Article 11 of the National Tax Collection Act), claims to which Article 14-15 applies, claims to which Article 59, paragraph (3) or (4) of the National Tax Collection Act (including as applied mutatis mutandis pursuant to Article 71, paragraph (4) of that Act), which is to be applied correspondingly under this Act, applies, or claims to which Article 14-13 applies, the proceeds are to be allocated to each of these in that order;

with regard to local government levies, national taxes, etc., and private claims (excluding those to which the preceding item applies), the total amounts to be allocated to local government levies, national taxes, etc., and private claims, respectively, are determined by applying the provisions of this Section, the National Tax Collection Act and other laws in sequence, starting from the oldest statutory payment due date, etc. (including the corresponding due date for payment, etc. of national taxes or public charges) or the oldest time of establishment, registration, transfer or formation;

the total amount determined under the preceding item to be allocated to local government levies and national taxes, etc. is allocated in sequence to local government levies and national taxes, etc. under the provisions of Article 14 or Articles 14-6 through 14-8, or the corresponding provisions of the National Tax Collection Act or other laws;

the total amount determined under item (ii) to be allocated to private claims is allocated in sequence to private claims under the provisions of the Civil Code or other laws.