Seoul High Court 2009Nu19160 (27 April 2010)

Cho High Court Decision 2008Do1075 (Law No. 23, 2008)

If a bank imposes an education tax on its profits related to credit card business on the grounds that it concurrently operates credit card business, it shall reflect on the tax balance.

The amount of revenue of credit card companies, other than banks, is not subject to education tax, but is contrary to the tax equity if education tax is imposed on the profits related to credit card business of banks on the ground that banks concurrently run the credit card business. The proceeds from the sale of credit in this case constitute the "internal profits" which are the revenue amount not included in the education tax base.

Article 3 of the Education Tax Act

2010Du10013 Revocation of revocation of revocation of education tax correction

AA Bank, Inc.

The director of the tax office

Seoul High Court Decision 2009Nu19160 Decided April 27, 2010

November 29, 2012

The appeal is dismissed.

The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the ground of appeal as to profits from credit cards

A. The court below, based on its employed evidence, found that the Plaintiff, an insurance business entity, under the Banking Act, reported and paid the credit card income accrued from the credit card business portion in 4 to 2006, including the tax base of education tax, within the statutory reporting period, deemed that the credit card income of this case was not included in the tax base of education tax, and that the Defendant denied the reduction of the amount on the ground that the credit card income of this case constitutes "amount of revenue of financial and insurance business entities" serving as the education tax base of this case. The court below determined that the Plaintiff's disposition of this case did not constitute the education tax base of education tax in light of Article 3 subparagraph 1 of the former Education Tax Act (amended by Act No. 9262, Dec. 26, 2008; hereinafter the same) and its attached Table, and thus, the amount of revenue accrued from the credit card business cannot be included in the education tax base of education tax. The Plaintiff's credit card business revenue of this case cannot be viewed as the education tax base of education tax.

① In light of the purport of Articles 3 and 5(1) of the former Education Tax Act and Article 4(1) and (2) of the former Enforcement Decree of the Education Tax Act (amended by Presidential Decree No. 19898, Feb. 28, 2007; hereinafter the same), it is reasonable to deem that the obligation to pay education tax is determined on the basis of whether the taxpayer has obtained the revenue through any business rather than on the basis of the fact that the taxpayer has a legal status.

② It is reasonable to view that the Plaintiff is in a position as a credit card company engaged in banking business, separate from his position as a bank. The instant credit card earnings shall not be deemed profits accruing from the Plaintiff’s credit card business as a credit card company and operated by the Plaintiff, which are profits accruing from the banking business or the business incidental thereto operated by the financial institution.

(3) The amount of revenue of a credit card company which is not a bank shall not be subject to education tax, and if a bank imposes education tax on profits related to credit card business on the grounds that the bank concurrently operates the credit card business, it shall be contrary to the official

B. In light of relevant statutes and records, the above determination by the court below is just and acceptable, and there is no illegality that affected the conclusion of the judgment by violating the principle of no taxation without the law and misunderstanding the legal principles on the principle of no taxation without the law or the principle of tax equality, as alleged in the

2. As to the ground of appeal as to the proceeds from sale of loan claims

A. Article 5(1)1 of the former Education Tax Act provides that the tax base of education tax for a financial or insurance business entity shall be the revenue amount thereof. Article 5(3) of the same Act provides that "The revenue amount which serves as the tax base of education tax" refers to interest, dividend, commission, guarantee fee, securities sales profit and redemption profit, insurance premium (the amount accumulated as liability reserve and contingency reserve fund and the amount of reinsurance premium shall be deducted), and the calculation thereof shall be determined by Presidential Decree. Article 4(2)1 of the former Enforcement Decree of the Education Tax Act provides that "The revenue amount shall not be included in the tax base of education tax in the case of financial or insurance business entities' revenue amount included in the education tax base under each subparagraph of paragraph (1)." Article 4 of the former Enforcement Decree of the Education Tax Act provides that "the revenue amount shall not be included in the tax base of education tax (Article 1), truster fees and profit distribution (Article 2(3)3), lease fee (Article 4), revenue (Article 6), other profit from fixed assets (Article 7), and other profit from insurance business (Article 8).2).4).

B. The court below determined that the proceeds from the sale of the loan loan in this case is "internal profits under Article 4 (2) 2 of the former Enforcement Decree of the Education Tax Act, which is the revenue excluded from the tax base of education tax, on the ground that the bank established the bad debts reserve for bad debts in accordance with the corporate accounting standards and adjusted the amount reduced by the amount equivalent to the bad debts reserve in the principal of the loan in question at the book value of the bad debts loan in question, but the sales price exceeds the book value when selling bad debts in the subsequent taxable period, and it is nothing more than that of the bad debts reserve than that of the bad debts loan in establishing the bad debts reserve in accordance with the corporate accounting standards, and in this case, the sales price of the bad debts loan in this case is less than the book value but less than that of the original bonds

C. The court below's determination that this case's loan sales profit constitutes an internal profit, which is the revenue amount not included in the education tax base as stated in the above holding, is justifiable in light of the above legal principles. The court below did not err by violating the principle of no taxation or by misapprehending the legal principles as to the education tax tax base, etc.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.