Fees received by credit card companies through insurance agency operations are not subject to education tax, a Korean court has ruled.
The 8th Administrative Division of the Seoul Administrative Court, presided over by Chief Judge Yang Soon-joo, ruled in favor of the plaintiff in February this year in a lawsuit filed by Card Company A against the head of the Yeongdeungpo District Tax Office seeking to overturn a rejection of an education tax correction request, legal sources said Monday.
Company A operates credit card services as its primary business while also conducting insurance agency operations. Through these operations, the company received fees from insurance firms in exchange for soliciting insurance policies.
The case began when Company A included these fees in its tax base when filing education tax for fiscal year 2018. The company subsequently filed a correction request with the Yeongdeungpo District Tax Office, arguing that "insurance agency fees should be excluded from the education tax base." The tax office rejected the request, stating that "the fees constitute commissions or other operating revenue of a financial or insurance business operator." In response, Company A filed an administrative lawsuit seeking to overturn the rejection with respect to approximately 130 million won ($96,000) in fee-related taxes.
The court ruled in favor of Company A. The bench pointed out that under the Specialized Credit Financial Business Act, insurance agency operations do not constitute the inherent business of the credit card industry but rather a concurrent business. Article 46-3 of the Specialized Credit Financial Business Act stipulates that when credit card operators conduct concurrent businesses, they must account for them separately from their inherent operations.
"The fees in this case constitute operating revenue separate from the credit card business," the bench ruled. "Consideration received for insurance agency operations cannot be regarded as income generated from the credit card business or its incidental operations."
