Plaintiff

National Health Insurance Corporation

March 6, 2015

Suwon District Court Decision 2014Guhap51730 Decided August 21, 2014

1. Revocation of the first instance judgment.

2. The Defendant’s disposition of imposition of KRW 18,468,500 on the settlement insurance premium against the Plaintiff on October 21, 2013 is revoked.

3. All costs of the lawsuit shall be borne by the defendant.

The same shall apply to the order.

1. Details of the disposition;

The following facts are not disputed between the parties, or may be recognized by comprehensively considering the purpose of the entire pleadings in each entry in Gap evidence of 1 to 4 (including a branch number, if any) and Eul evidence of 1 to 4:

A. The plaintiff's status

From July 1, 200, the Plaintiff’s tax business, from October 1, 2003, from November 26, 2009, each real estate rental business, and from January 18, 2007, each commenced real estate sales business from January 18, 2007, maintains the eligibility of the self-employed insured after changing from the National Health Insurance Act to the self-employed insured under the National Health Insurance Act.

B. Imposition of the Defendant’s insurance premium in 2012 against the Plaintiff

The Defendant imposed KRW 295,250,00 on the Plaintiff’s global income for the year 2010 (=Plaintiff 4,020,000 + KRW 2,510,000 on the Plaintiff’s spouse + KRW 409), total property of KRW 790,550,00 (Insurance premium imposition score 937), and KRW 964,620 (annual tax amount) on the Plaintiff from January 201 to October 201 of the same year, based on the premise that the amount of insurance premium imposed on the Plaintiff each month according to the following formula:

Table 295,250 won each month included in the main sentence = 277,100 won of health insurance premium = 1,630 points (=409 points + 937 points + 284 points) + 170 won for long-term care insurance premium + 18,150 won for long-term care insurance premium (6.55% of health insurance premium)

C. Imposition of settled insurance premiums against the plaintiff

Around October 2013, the Defendant notified the Plaintiff of the global income amount of 4,020,000 to 472,030,000 won (i.e., business income of 468,010,000 + lease income of 4,020,000). On October 21, 2013, based on the Defendant’s Articles of incorporation 45(5), etc., increased amount of monthly premiums of 468,010 to global income amount of 2010 (10,196 points subject to insurance premium imposition) pursuant to the following formula, the Defendant adjusted the amount of monthly premiums of 1,846,850 to 4,00 won, and adjusted the amount of insurance premiums of 1,50,000 to 10,50,000 won (i.e., business income amount of 468,020,000 won) x 1084,08486 won.

1,846,850 won each month included in the main sentence = 1,733,320 won of health insurance premium (i.e., 10,196 points of insurance premium imposition x 170 won) + 113,530 won of long-term care insurance premium (6.55% of health insurance premium)

D. The plaintiff's objection

The Plaintiff filed an objection against the Defendant on November 5, 2013, but the Defendant dismissed the Plaintiff’s objection on December 12 of the same year.

2. Whether the instant disposition is lawful

A. The parties' assertion

1) The plaintiff's assertion

According to the relevant Acts and subordinate statutes, the amount of losses carried forward should be deducted from the total amount of business income when calculating insurance premiums. However, the defendant calculated the amount of business income accrued in the year 2010 and imposed the amount of 18,468,50 won as an insurance premium for settlement, since the disposition of this case is unlawful since the defendant calculated the amount of business income accrued in the year 2010 and imposed the amount of 18,468,50 won as an insurance premium for settlement, without deducting the amount of business income accrued in the year 2007 from January 1, 2007 to December 31, 2009 (=26,308,724 won + the amount of 304,929,751 won accrued in the year 2008.

2) The defendant's assertion

In light of the following points, since the Defendant cannot deduct the losses carried forward as alleged by the Plaintiff when imposing the insurance premium to the Plaintiff, the instant disposition that calculated the Plaintiff’s insurance premium based on the business income that did not deduct the losses carried forward is lawful.

(1) "Necessary expenses to be deducted" under Article 19 of the Income Tax Act shall be limited to those stipulated in Articles 27 through 32 of the same Act, and any loss carried forward shall be careful in expanding the scope of application in calculating the tax base of global income in calculating the tax base of global income under Section 3 of Chapter II of the same Act, which is not necessary expenses in Section 2 of the same Act.

(2) In calculating the monthly insurance premiums of locally provided policyholders, the application of income under the Income Tax Act to the income tax shall be numerically added and shall not be made according to the calculation method of the comprehensive tax base under the Income Tax Act.

③ In order to promote the stabilization of the insurance finance in the year, most of the revenues of the insurance premiums in the year, health insurance is imposed on the health insurance premium as “short-term insurance” in the structure that most of the revenues of the insurance premiums in the year concerned are disbursed as the insurance benefit cost for the year concerned. On the other hand, the deficit brought forward system under the Income Tax Act may be deducted from the income of the year concerned until the deficit is appropriated for the period of ten years after the taxable period in which the deficit occurred, and thus, the short-term ability to bear the burden is changed into the long-term ability to bear the

B. Relevant statutes

Attached Form "Related Acts and subordinate statutes" shall be as stated.

C. Determination

In light of the following circumstances revealed by comprehensively taking account of the provisions of related Acts and subordinate statutes and the legislative intent, in calculating the contribution point, the necessary expenses, including losses carried forward, shall be deducted from the gross income accruing from the previous year’s business in calculating the contribution point. Therefore, in calculating the Plaintiff’s business income for the year 2010, it is reasonable to deduct the Plaintiff’s losses carried forward during the period from January 1, 2007 to December 31, 2009. Therefore, in calculating the Plaintiff’s business income for the year 2010, the instant disposition should be revoked on the premise that the Defendant cannot deduct the Plaintiff’s losses carried forward between January 1, 207 and December 31, 2009.

A) According to Articles 42(2) and 41(1)3 of the Enforcement Decree of the National Health Insurance Act, business income that serves as the basis for calculating contribution points refers to income under Article 19 of the Income Tax Act. Article 19 of the Income Tax Act provides for “the type and amount of income” under Section 2 of Article 2 of the “Calculation of Tax Base and Amount of Tax on Global Income and Retirement Income of Residents” under Article 2 of the Income Tax Act. Article 19(2) of the Income Tax Act provides that business income shall be the amount calculated by deducting necessary expenses incurred therein from the total amount of income in the pertinent taxable period, and where the necessary expenses exceed the total amount of income, the amount in excess shall be deemed as “loss”. However, the content related to the calculation of specific business income is provided for in Section 3 of Chapter 2 of the Income Tax Act (Section 1). Article 2 of the Income Tax Act provides for “the total amount of income,” and Article 3 “necessary expenses”, and Article 4 of the “the reversion

Meanwhile, Article 45 (1) and (3) 1 of the Income Tax Act, which is prescribed in Section 3, Section 4 of Chapter II of the Income Tax Act, provides that when calculating the tax base of global income in the relevant taxable period on the basis of the books kept and recorded by the business operator, losses incurred when calculating the business income in the relevant taxable period shall be deducted in the order of the earned income amount, annuity income amount, other income amount, interest income amount, and dividend income amount, and such deduction shall be made in the order, and the losses carried forward remaining after deduction shall be deducted in the order, when calculating the income in the taxable period ending within ten years from the end of the taxable period in which the relevant losses carried forward occurred.

Comprehensively taking account of the contents of such provisions and the system of the provisions, business income under Article 19 of the Income Tax Act shall be interpreted to be calculated by deducting necessary expenses, including losses carried forward, from the total income generated by the business in the relevant taxable period

B) Article 40-2 of the former Enforcement Decree of the National Health Insurance Act (amended by Presidential Decree No. 22997, Jun. 30, 201) comprehensively provides for the calculation standard of contribution points as “global income under Article 4(1)1 of the Income Tax Act.” However, Article 4(1)1 of the Income Tax Act only lists the types of income (interest income, dividend income, business income, wage and salary income, pension income, and other income) added to “global income”. As such, the legislators comprehensively set the income under Article 40-2 of the former Enforcement Decree of the National Health Insurance Act and subsequently revised the specification by type of income, such as Article 41 of the Enforcement Decree of the National Health Insurance Act, to clarify the calculation standard of contribution points.

However, Article 42 (1) of the Enforcement Decree of the National Health Insurance Act provides that Article 41 (1) of the Enforcement Decree of the same Act shall apply mutatis mutandis to the detailed types and scope of income, which is the basis for calculating contribution points, and Article 41 (1) 3 of the same Decree stipulates business income as one of the types of income, and only stipulates the scope as "income under Article 19 of the Income Tax Act" and does not provide any criteria for calculating contribution points, so the amount of income to calculate contribution points shall be calculated as prescribed by the Income Tax Act. In addition, Article 41 (1) of the current Enforcement Decree of the National Health Insurance Act provides that Article 41 (4) of the Enforcement Decree of the National Health Insurance Act provides an explicit proviso excluding part of the "Calculation of Income Amount" under Section 3 of the Income Tax Act, while Article 45 of the Income Tax Act is not provided in the case of business income.

As above, in light of the language and text of the Enforcement Decree of the National Health Insurance Act and the reasons for amendment, Article 45 of the Income Tax Act applies even when calculating business income that is the basis for calculating contribution points.

C) Article 42(1) and attached Table 42(1)1 of the Enforcement Decree of the National Health Insurance Act provides that contribution points shall be “a point indicating the burden of insurance premium burden of the household to which an individually provided policyholder belongs”. This is interpreted as setting the principle of insurance premium imposition according to the burden of insurance premium burden, like applying the principle of tax imposition according to the tax-bearing capacity under the tax-related Acts. However, the Income Tax Act, when calculating the tax amount by dividing the taxable period on a yearly basis for convenience, in cases where a taxpayer is liable for tax payment with severe changes in the amount of income by dividing the taxable period on a daily basis, even if he/she does not have any income or less than the amount of income based on his/her actual life, thereby

Therefore, as alleged by the Defendant, if the National Health Insurance Act and the Enforcement Decree of the National Health Insurance Act apply the provisions on the deduction of losses carried forward when calculating monthly insurance premiums of the individually insured persons, such unfair practices are not resolved, and there are no other measures to resolve them, thereby violating the principle of imposition of insurance premiums according to the burden to bear the burden of insurance premiums. Although the health insurance is based on the “short-term insurance” of the structure that most of the revenues of the insurance premiums in the corresponding year are disbursed as insurance benefit costs for the corresponding year, or the health insurance is premised on the insurance benefits that are consideration for the corresponding year, such circumstance alone cannot be the basis to discriminate when reflecting losses carried forward when calculating the amount of business income under the National Health Insurance Act when calculating the contribution point.

3. Conclusion

Therefore, the plaintiff's claim is justified, and the judgment of the court of first instance is unfair with different conclusions. Thus, the plaintiff's appeal is accepted and the judgment of the court of first instance is revoked and the disposition of this case is revoked and it is so decided as per Disposition.

[Attachment]

Judges Kim Jong-soo (Presiding Judge)