[Plaintiffs, Appellees] ○○○ Co., Ltd. and 1 other (Attorneys Jung Byung-mun and 3 others, Counsel for the plaintiffs)
[Defendants, Appellants] Director of Icheon Tax Office and 1 other
[Judgment Below] Suwon High Court Decision 2024Nu15585 rendered on September 3, 2025
[Order]
All appeals are dismissed. The costs of appeal shall be borne by the Defendants.
[Reasoning]
The grounds of appeal are examined.
1. Outline of the Case
According to the reasoning of the judgment below and the evidence duly adopted and examined by the court below, the following facts may be established.
A. Plaintiff ○○○ Co., Ltd. (hereinafter "Plaintiff 1 Company") filed returns and paid disability employment levies (장애인 고용부담금) for the fiscal years 2018 through 2020 to the Minister of Employment and Labor pursuant to Article 33 of the former Act on Employment Promotion and Vocational Rehabilitation for Disabled Persons (장애인고용촉진 및 직업재활법) (before amendment by Act No. 18308 of July 20, 2021; hereinafter "former Disabled Persons Employment Act").
B. Plaintiff △△△ Co., Ltd. (hereinafter "Plaintiff 2 Company") filed returns and paid disability employment levies for fiscal years 2018 and 2019 (hereinafter, together with the disability employment levies paid by Plaintiff 1 Company, collectively "the instant disability employment levies") to the Minister of Employment and Labor pursuant to Article 33 of the former Disabled Persons Employment Act.
C. When filing corporate tax returns for each fiscal year, the Plaintiffs filed and paid corporate tax without including the instant disability employment levies as deductible expenses.
D. On November 18, 2022, Plaintiff 1 Company filed a request for correction of corporate tax, asserting that the disability employment levy does not fall under a public levy imposed as a sanction for failure to perform an obligation or violation of a prohibition or restriction, etc. under laws and regulations as set forth in Article 21, Subparagraph 5 of the former Corporate Tax Act (법인세법) (before amendment by Act No. 20613 of December 31, 2024; hereinafter "former Corporate Tax Act"), and therefore should be included as a deductible expense. On January 30, 2023, the Defendant Director of Icheon Tax Office rejected this request.
E. On December 12, 2022, Plaintiff 2 Company filed a request for correction of corporate tax, asserting that the disability employment levy should be included as a deductible expense under the former Corporate Tax Act. On February 13, 2023, the Defendant Director of Gumi Tax Office rejected this request (hereinafter, together with the rejection disposition against Plaintiff 1 Company, collectively "the instant dispositions").
2. History of Amendments to the Relevant Provisions
A. Article 16, Subparagraph 5 of the former Corporate Tax Act (before amendment by Act No. 5033 of December 29, 1995) provided that "public levies other than those prescribed by Presidential Decree" were not to be included as deductible expenses, and each subparagraph of Article 25, Paragraph 1 of the former Enforcement Decree of the Corporate Tax Act (법인세법 시행령) (before amendment by Presidential Decree No. 14861 of December 30, 1995) enumerated the various public levies eligible for deduction as expenses, among which Subparagraph 32 designated the disability employment levy as one of the public levies to be treated as a deductible expense.
B. When the Corporate Tax Act was amended by Act No. 5033 of December 29, 1995, Article 16, Subparagraph 5 provided that "public levies prescribed by Presidential Decree" were not to be included as deductible expenses, thereby delegating to Presidential Decree the designation of public levies that would exceptionally be excluded from deductible expenses, while in principle allowing public levies to be included as deductible expenses. However, Article 25, Paragraph 1 of the Enforcement Decree of the Corporate Tax Act as amended by Presidential Decree No. 14861 of December 30, 1995 provided that "'public levies prescribed by Presidential Decree' under Article 16, Subparagraph 5 of the Act means public levies excluding those set forth in each of the following subparagraphs (excluding special membership fees)," thereby in practice adopting, as before, a method of enumerating the various public levies eligible for deduction as expenses, among which Subparagraph 32 designated the disability employment levy as one of the public levies to be treated as a deductible expense.
C. Meanwhile, the Constitutional Court held that, since public levies generally bear the character of business expenses and should in principle be included as deductible expenses under the Corporate Tax Act, and deduction should be denied only exceptionally, in cases prescribed by law, where the levy does not have the nature of an expense by its character or where it is undesirable to include it as a deductible expense for tax policy or technical reasons, Article 16, Subparagraph 5 of the former Corporate Tax Act (before amendment by Act No. 5033 of December 29, 1995), which provided that public levies other than those prescribed by Presidential Decree were not to be included as deductible expenses—thereby stipulating that public levies were in principle not to be deducted—violated, absent special circumstances justifying it otherwise, the substantive principle of no taxation without law by taxing income that did not in fact exist, and rendered a decision holding this provision unconstitutional (Constitutional Court en banc Decision 96Heonba36 through 49, decided July 16, 1997).
D. When the Enforcement Decree of the Corporate Tax Act was amended by Presidential Decree No. 15564 of December 31, 1997, the public levies excluded from deductible expenses under Article 25 were changed to "those not mandatorily paid pursuant to laws and regulations (Subparagraph 1)" and "those imposed as a sanction for failure to perform an obligation or violation of a prohibition or restriction, etc. under laws and regulations (Subparagraph 2)." This was intended to change the previous method of enumerating the scope of public levies recognized as deductible expenses, so that henceforth any public levy mandatorily paid pursuant to laws and regulations could be comprehensively recognized as a deductible expense.
E. Subsequently, when the Corporate Tax Act was wholly amended by Act No. 5581 of December 28, 1998, Article 21, Subparagraph 5 provided for "other public levies prescribed by Presidential Decree" as one type of tax and public levy not to be included as deductible expenses, and when the Enforcement Decree of the Corporate Tax Act was wholly amended by Presidential Decree No. 15970 of December 31, 1998, the provision on the "scope of public levies" previously set forth in Article 25 of the Enforcement Decree of the Corporate Tax Act was moved to Article 23 and provided in the same manner.
F. When the Corporate Tax Act was amended by Act No. 6293 of December 29, 2000, the legislation was elevated to directly provide, in the statute itself, for the public levies excluded from deductible expenses, and Article 21, Subparagraph 6 of the Corporate Tax Act provided that "public levies imposed as a sanction for failure to perform an obligation or violation of a prohibition or restriction, etc. under laws and regulations" were not to be included as deductible expenses. When the Corporate Tax Act was amended by Act No. 10423 of December 30, 2010, the location of this provision was changed to Subparagraph 5, as it remains today.
3. Issue in This Case
The instant dispositions concern corporate tax for fiscal years 2018 through 2021, and the issue in this case is whether the instant disability employment levies fall under "public levies imposed as a sanction for failure to perform an obligation or violation of a prohibition or restriction, etc. under laws and regulations" as prescribed in Article 21, Subparagraph 5 of the former Corporate Tax Act, such that they may not be included as deductible expenses.
4. Determination
A. The former Disabled Persons Employment Act has as its purpose the promotion of employment and vocational rehabilitation of disabled persons so that they may lead a life worthy of human dignity through occupational life suited to their abilities (Article 1).
The former Disabled Persons Employment Act requires business owners who regularly employ 50 or more workers to employ disabled persons in a proportion prescribed by Presidential Decree within the range of 5/100 of the total number of workers (hereinafter "mandatory employment rate") (Article 28, Paragraph 1), and provides that business owners who employ disabled persons at a rate below the mandatory employment rate (excluding business owners who regularly employ 50 or more but fewer than 100 workers) must pay a disability employment levy annually to the Minister of Employment and Labor as prescribed by Presidential Decree (Article 33, Paragraph 1).
The disability employment levy constitutes a "levy" (부담금) under the Framework Act on the Management of Levies (부담금관리 기본법), that is, a monetary payment obligation, other than tax, imposed by the head of a central administrative agency or other authority empowered to impose levies, in connection with a specific public interest project as prescribed by law, regardless of its name as a contribution, charge, contribution fee, or otherwise, and irrespective of the provision of goods or services (Articles 2 and 3 and Item 67 of the [Attached Table]).
Meanwhile, Article 2, Subparagraph 8 of the former Framework Act on National Taxes (국세기본법) (before amendment by Act No. 17650 of December 22, 2020) provides that "'public levy' means a claim that may be collected in accordance with the procedure for disposition on default under the National Tax Collection Act, excluding national taxes, customs duties, the temporary import surtax, local taxes, and expenses for disposition on default related thereto." In this connection, Article 37, Paragraph 1 of the former Disabled Persons Employment Act provides that "where a person liable for payment fails to pay a levy or other amount to be collected under this Act, the Minister of Employment and Labor shall issue a demand for payment, setting a deadline," and Paragraph 3 of the same Article provides that "where a person who has received a demand under Paragraph 1 fails to pay the levy or other amount to be collected under this Act by the payment deadline, the Minister of Employment and Labor may collect it in accordance with the procedure for disposition on default of national taxes."
B. Considering the language and content of the former Disabled Persons Employment Act and other relevant provisions, together with the purpose and character of the disability employment levy, the disability employment levy constitutes a public levy imposed on the ground that a business owner failed to fulfill the obligation to employ disabled persons under Article 28, Paragraph 1 of the former Disabled Persons Employment Act; however, it cannot further be regarded as a "public levy imposed as a sanction," and consequently cannot be regarded as a "public levy imposed as a sanction for failure to perform an obligation under laws and regulations" as prescribed as a non-deductible item under Article 21, Subparagraph 5 of the former Corporate Tax Act. The specific reasons are as follows.
1) Article 19, Paragraph 1 of the former Corporate Tax Act provides that "deductible expenses shall be the amount of losses or expenses (hereinafter 'deductible expenses') arising from transactions that decrease the net assets of the relevant corporation, excluding the return of capital or investment, the disposition of surplus, and matters otherwise provided for in this Act," and Paragraph 4 provides that "matters necessary for the scope and classification of deductible expenses shall be prescribed by Presidential Decree." Accordingly, Article 19 of the Enforcement Decree of the Corporate Tax Act provides that "deductible expenses under Article 19, Paragraph 1 of the Act shall include the following, except as otherwise provided in the Act and this Decree," and lists "taxes and public levies" in Subparagraph 10.
Under the Corporate Tax Act, a public levy is "any public burden compulsorily imposed by the State or a public entity on the nation or members of a public entity," and since it is compulsorily imposed in connection with a corporation's certain business, the existence of assets, transactions, or other acts, it bears the character of business expenses and is, in principle, to be included as a deductible expense. However, exceptionally, deduction may be denied only in cases prescribed by law, where the levy does not have the nature of an expense by its character or where it is undesirable to include it as a deductible expense for tax policy or technical reasons (see Supreme Court en banc Decision 2001Du1949, decided March 18, 2004). In this context, the provision in Article 21, Subparagraph 5 of the former Corporate Tax Act designating "public levies imposed as a sanction for failure to perform an obligation or violation of a prohibition or restriction, etc. under laws and regulations" as non-deductible can be viewed as reflecting a policy consideration that it would be improper to allow deduction of public levies imposed as sanctions for failure to perform an obligation or violation of a prohibition or restriction, etc., since doing so would effectively result in the State subsidizing that amount or mitigating the effect of the sanction. However, given that a public levy fundamentally bears the character of a business expense and should, in principle, be included as a deductible expense, and considering that, following the Constitutional Court's decision holding unconstitutional the previous method under the Enforcement Decree of the Corporate Tax Act of restrictively enumerating public levies eligible for deduction as violative of the substantive principle of no taxation without law, the method was changed to one in which the Corporate Tax Act and its Enforcement Decree separately designate non-deductible public levies, resulting in an expansion of the scope of deductible public levies to the present day, it must be concluded that whether a given public levy satisfies the requirements for non-deductibility under Article 21, Subparagraph 5 of the former Corporate Tax Act must be strictly construed in accordance with the principle of no taxation without law.
2) Because of their physical or mental conditions, disabled persons are prone to tangible and intangible social prejudice and indifference, making it extremely difficult in reality for them to obtain employment suited to their abilities; accordingly, measures at the societal and national level are necessary to guarantee disabled persons' right to work. Reflecting this purpose, the former Disabled Persons Employment Act introduced the mandatory employment system for disabled persons in order to promote the employment of disabled persons, the ultimate goal of which is to realize disabled persons' right to achieve self-reliance.
However, employing disabled persons realistically requires improvements to work facilities and equipment, adjustments to the workplace environment, and special employment management, entailing economic burdens compared to the employment of non-disabled persons. This can create an imbalance in economic burden between business owners who faithfully fulfill their obligation to employ disabled persons and those who do not. Taking this into account, the disability employment levy system is a system whereby, in accordance with the principle of social solidarity based on the social-state principle imposing on the State the duty to guarantee citizens a minimum standard of living worthy of human dignity, members of society jointly bear risks arising in society, thereby equitably adjusting, between business owners who employ disabled persons and those who do not, the economic burden accompanying the employment of disabled persons; the system is also designed to establish a pooled fund to reduce and support the burden borne by business owners newly employing disabled persons due to improvements to work facilities, etc., in order to promote the employment of unemployed disabled persons, and can further be regarded as an effective means of securing the practical effectiveness of the mandatory employment system for disabled persons.
In this way, the disability employment levy system was introduced to distribute, among business owners, the economic burden accompanying the employment of disabled persons, by collecting funds from business owners falling below the mandatory employment rate for disabled persons and paying employment incentives to business owners who employ disabled persons in excess of the mandatory employment rate. Given that it would still be ideal, in an ideal state, for the obligation to employ disabled persons to be perfectly observed such that no levy need be collected at all, the disability employment levy may be regarded as bearing strongly the character of an "inductive/adjustive (special) levy" whose primary purpose is to promote the employment of disabled persons who face difficulty in employment, rather than to serve fiscal purposes (see Constitutional Court en banc Decision 2001Heonba96, decided July 24, 2003). Viewed in this way, the disability employment levy cannot but be regarded as inherently bearing the character of a business expense arising in connection with a business owner's business, the existence of assets, transactions, or other such acts.
3) Fines and administrative fines, which are representative examples of sanctions imposed for failure to perform an obligation, fundamentally require, as a requirement for their imposition, the existence of a fault requirement of intent or negligence (Articles 13 and 14 of the Criminal Act (형법); Article 7 of the Act on the Regulation of Violations of Public Order (질서위반행위규제법)). By contrast, the disability employment levy arises uniformly, without consideration of a fault requirement such as intent or negligence, merely upon satisfaction of the requirements prescribed in Article 33 of the former Disabled Persons Employment Act, and there is no separate provision imposing punishment on a business owner even where the business owner fails to perform the obligation to employ disabled persons in violation of Article 28, Paragraph 1 of the former Disabled Persons Employment Act.
Moreover, even where a business owner employs disabled persons at a rate below the mandatory employment rate prescribed in Article 28, Paragraph 1 of the former Disabled Persons Employment Act, giving rise to the question of a disability employment levy under Article 33 of the same Act, it is not the case that all business owners are uniformly required to pay the disability employment levy. That is, while Article 28, Paragraph 1 of the former Disabled Persons Employment Act imposes the obligation to employ disabled persons on "business owners who regularly employ 50 or more workers," Article 33, Paragraph 1 of the same Act separately designates the subjects liable to pay the disability employment levy as "business owners who regularly employ 100 or more workers." As a result, business owners who regularly employ 50 or more but fewer than 100 workers do not pay the disability employment levy even if they employ disabled persons at a rate below the mandatory employment rate. This shows that, while the disability employment levy itself arises as a consequence of the failure to perform the obligation to employ disabled persons under laws and regulations, it does not bear the character of a "sanction" premised on legal blameworthiness, but is merely a monetary payment obligation independently imposed to achieve the policy purpose concerning the employment of disabled persons in accordance with the requirements prescribed in Article 33 of the former Disabled Persons Employment Act.
4) Even according to the history of amendments to the relevant provisions set forth above, until the amendment of December 31, 1997, the Enforcement Decree of the Corporate Tax Act expressly provided for the disability employment levy to be included as a deductible expense. Following the aforementioned Constitutional Court decision, when the non-deductible public levies came to be provided in the form of a comprehensive definitional provision in the parent statute, the provision of the Enforcement Decree of the Corporate Tax Act allowing the disability employment levy to be deducted as an expense was simply deleted; it is difficult to find that, before the enactment of the former Corporate Tax Act and its Enforcement Decree applicable to this case, there arose a need to exclude the disability employment levy from deductible expenses due to social changes or a shift in policy, or that there was any discussion to that effect during the legislative process.
C. The court below determined, for the reasons stated in its judgment, that the instant disability employment levies could not be regarded as "public levies imposed as a sanction for failure to perform an obligation under laws and regulations" as prescribed in Article 21, Subparagraph 5 of the former Corporate Tax Act, and accordingly that the instant dispositions, which were premised on a different view, were unlawful.
Examining the reasoning of the judgment below in light of the aforementioned relevant provisions and legal principles, the determination of the court below is justified, and there is no error therein, as alleged in the grounds of appeal, involving a misapprehension of the legal principles concerning the meaning of "sanction" under Article 21, Subparagraph 5 of the former Corporate Tax Act, the legal character of the disability employment levy, or the principle of no taxation without law, or a violation of precedent, that affected the conclusion of the judgment.
5. Conclusion
Accordingly, all appeals are dismissed, and the costs of appeal are to be borne by the losing party. This judgment is rendered as set forth in the Order, by the unanimous opinion of the Justices participating in the decision.
Justice Kwon Yeong-jun (Presiding Justice), Cheon Dae-yeop (Justice in charge), Oh Kyung-mi, Eom Sang-pil