In calculating the contribution points of locally provided policyholders under the National Health Insurance Act and the monthly health insurance fees, whether the amount of losses carried forward from the total amount of income generated from the business should be deducted (negative)

Articles 69(5) and 72(1) and (3) of the former National Health Insurance Act (Amended by Act No. 14766, Apr. 18, 2017); Articles 41(1)3 and 42(1) and (2) of the former Enforcement Decree of the National Health Insurance Act (Amended by Presidential Decree No. 28693, Mar. 6, 2018); Articles 19(1) and (2), and 45(1) and (3)1 of the former Income Tax Act (Amended by Act No. 11611, Jan. 1, 2013);

Plaintiff (Law Firm Woo, Attorneys Kim Dong-dong et al., Counsel for the plaintiff-appellant)

National Health Insurance Corporation (Attorney Song-young, Counsel for defendant-appellant)

Seoul High Court Decision 2015Nu31765 decided August 27, 2015

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The lower court determined that the amendment of the purport of the claim constitutes correction of the purport of the claim on the ground that the Plaintiff sought revocation of the disposition of imposition of health insurance premiums (hereinafter “instant disposition”) on September 23, 2013, seeking revocation of the disposition of imposition of health insurance premiums (hereinafter “instant disposition”) on July 22, 2013, but the Plaintiff was an intention to dispute the instant disposition from the beginning, and that the Plaintiff was merely a mistake in specifying the date of disposition due to mistake.

The lower court did not err by misapprehending the legal doctrine on the modification of the purport of the claim, contrary to what is alleged in the grounds of appeal.

2. Regarding ground of appeal No. 2

A. Case summary and key issue

1) Summary

According to the reasoning of the lower judgment, the following facts are revealed.

A) The Plaintiff obtained business income of KRW 1,807,953,175 (hereinafter “instant business income”) from January 1, 2012 to December 31, 2012 as a personal entrepreneur engaged in real estate development business.

B) The Defendant set the Plaintiff’s health insurance premiums in 2012 and long-term care insurance premiums based on KRW 150,662,764 of the monthly wage in 2012, which was divided by 12 months of the instant business income.

C) On July 22, 2013, the Defendant notified the Plaintiff of KRW 56,989,460 (the health insurance premium, the remaining KRW 3,503,420, which is the long-term care insurance premium) plus the regular insurance premium on July 2, 2013 (hereinafter “instant disposition”).

D) When calculating the Plaintiff’s business income for year 2012, included in the calculation of the Plaintiff’s insurance premium imposition points at the time of the above disposition, the Defendant did not deduct the Plaintiff’s loss brought forward before 2012 (see the Income Tax Act and subordinate statutes, where the necessary expenses of the pertinent taxable institution exceed the total amount of income, such excess amount shall be deemed as losses, and it may be deducted from the business income by

2) Issues

The lower court determined that the instant disposition was unlawful on the ground that the Defendant did not deduct the loss carried forward incurred during the previous year’s expense disbursement on the ground that the Defendant calculated the Plaintiff’s business income for the year 2012, which was included in the calculation of the premium imposition score, based on the insurance premium imposition score and the monthly health insurance premium calculation.

In response, the defendant asserts that since the amount of business income based on the calculation of the health insurance fee is the total amount of income, it should not be deducted from the carried-over losses, and that the judgment below erred by misapprehending the legal principles, which affected the conclusion of

The key issue of the instant case is whether the loss carried forward should be deducted from the total amount of income generated by the project when calculating the imposition score of the insurance premium and the monthly health insurance premium.

(b) Whether the deficit brought forward should be deducted;

1) Provisions of the statute

Article 69(5) of the former National Health Insurance Act (amended by Act No. 14766, Apr. 18, 2017; hereinafter the same) provides that the amount of monthly insurance premiums for the households to which an individually insured person belongs shall be calculated by multiplying the amount per given contribution point by the contribution point calculated under Article 72. Article 72 of the same Act provides that the contribution point shall be determined by taking into account the income, property, living standard, participation rate in economic activities of the locally insured person (Article 72) and matters necessary for calculation thereof shall be prescribed by Presidential Decree (Article 3). Article 42(1) and (2) of the former Enforcement Decree of the National Health Insurance Act (amended by Presidential Decree No. 28693, Mar. 6, 2018; hereinafter the same shall apply) upon delegation, lists business income as one of the incomes included in the calculation of contribution point as “income under Article 19 of the Income Tax Act”.

Meanwhile, Article 19 of the former Income Tax Act (amended by Act No. 11611, Jan. 1, 2013; hereinafter the same) provides that “The amount of business income shall be calculated by deducting necessary expenses incurred therefrom from the total amount of income in the relevant taxable period” under Article 19(1) of the same Act.

2) Determination

A) In light of the language and purport of the above provisions, business income listed in the income included in the calculation of contribution points under Article 41(1)3 of the former Enforcement Decree of the National Health Insurance Act shall be calculated as business income under Article 19(2) of the former Income Tax Act, and otherwise, it is difficult to view that the said business income should be deducted additionally from the above business income to the loss brought forward before the pertinent taxable period. The reasons are as follows.

(1) Article 41(1)3 of the former Enforcement Decree of the National Health Insurance Act specifies “business income” which is included in the calculation of contribution points as “income under Article 19 of the Income Tax Act” and does not separately provide for the method of calculating such business income. However, Article 19(2) of the former Income Tax Act provides that the amount of business income shall be calculated as “the amount obtained by deducting necessary expenses incurred from the total amount of income generated during the pertinent taxable period from the total amount of business income generated during the pertinent taxable period,” barring any special provision, deeming that the amount of “income under Article 19 of the Income Tax Act” under the National Health Insurance Act refers to the amount of business income calculated under Article 19(2) of the former Income Tax Act.

In the case of wage and salary income (Article 41 (1) of the former Enforcement Decree of the National Health Insurance Act) and pension income (Article 41 (1) 4) listed in the type of income (Article 41 (4) and (5) of the former Enforcement Decree of the National Health Insurance Act, the proviso explicitly provides that the application of the provisions on income deduction (Articles 47, 20-3 (2) and 47-2 of the Income Tax Act) shall be excluded when calculating the amount of income corresponding to each type of income, but there is no proviso in the purport that the application of the provisions on income deduction (Article 47, 20-3 (2) and 47-2 of the Income Tax Act) shall be excluded in the case of business income (Article 3). Therefore, there is a question that it does not indicate that the application of the provisions on income deduction under Article 19 (3) of the former Income Tax Act should not be excluded in calculating the amount of income "income under the above Article 45 (3) of the Income Tax Act."

(2) The amount of business income deficit refers to the excess amount when the necessary expenses for the pertinent taxable period exceed the total amount of income (the latter part of Article 19(2) of the former Income Tax Act). A business operator other than a real estate rental business may, when calculating the global income tax base for the relevant taxable period, deduct the deficit in the order of wage and salary income, annuity income amount, other income amount, interest income amount, and dividend income amount (Article 45(1) of the former Income Tax Act). Any deficit carried forward remaining after such deduction shall be deducted in order from the amount of business income, wage and salary income, pension income amount, other income amount, interest income and dividend income when calculating the amount of income in the taxable period ending within 10 years from the end

As such, the amount of carried-over losses is not simply deducted from the amount of business income, but also included in the statutory order of other amount of income constituting global income. Article 14(2) of the former Income Tax Act, which provides for the calculation of the tax base, also stipulates that Article 45(2) of the Income Tax Act as well as the type of business income, the form of return or decision on business income, and whether the withholding tax rate is applicable to the dividend income or interest income. Furthermore, the amount of losses incurred from the real estate rental business of a business operator differs depending on the type of business income, the form of return or decision on business income, and whether the amount of the withholding tax is subject to the application of the withholding tax rate. In other words, the amount of losses incurred from the real estate rental business of a business operator is not deducted from the amount of income of the real estate rental business when calculating the global income tax base (Article 45(3)2 of the former Income Tax Act only). In addition, where a tax return on the amount of income in the relevant taxable period or a tax assessment by estimation is not allowed (Article 45(4).

Ultimately, Article 19(2) of the former Income Tax Act provides for the meaning of business income in Article 19(2), and Article 45(3) provides for the deduction of losses carried forward, which is not the basis for calculating global income itself, with regard to the deduction of losses carried forward, not the business income itself. In light of the system, etc. of the Income Tax Act, it cannot be deemed that the “income pursuant to Article 19 of the Income Tax Act” under the National Health Insurance Act should be necessarily reflected in the “income pursuant to Article

(3) The system of deduction of carried-over losses is established in the Income Tax Act for the purpose of relaxing the side effects arising under the taxation principle that calculates the tax base and the amount of tax for a period artificially defined on the basis of convenience in taxation or technical needs and promoting the equity in tax burden. On the other hand, health insurance premiums collected for the purpose of appropriating the expenses incurred in health insurance programs are clearly different from the income tax in terms of their legislative purpose, legal character, payment obligor, and existence of consideration, and thus, the content and degree

In light of such differences between health insurance premiums and income tax, and the scope of legislative formation authority of the legislators on the health insurance system, the National Health Insurance Act does not explicitly stipulate that the provisions of the Income Tax Act apply to the deduction of carried-over losses under the Income Tax Act. However, as a matter of course, the deductible losses deduction system based on unique needs under the Income Tax Act should be reflected in determining the degree of bearing health insurance premiums, and the income under Article 19 of the Income Tax Act should be determined differently from the business income under Article 19(2) of the former Income Tax Act.

B) Nevertheless, under the erroneous premise that business income under Article 41(1)3 of the former Enforcement Decree of the National Health Insurance Act is calculated by additionally deducting losses carried forward from business income under Article 19(2) of the former Income Tax Act, the lower court determined that the instant disposition was unlawful. In so determining, the lower court erred by misapprehending the legal doctrine on business income included in the calculation of imposition points of national health insurance premiums, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal

3. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa (Presiding Justice)