ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

How to Revise Tax Laws to Reasonably Calculate the Education Tax Base of Long-term Non-life Insurance Contracts Based on the Critical Review on a Recent Supreme Court Case

  • Byung Wook Jun University of Seoul Graduate School of Taxation

Asian Tax Journal Vol. 27 No. 2 (2026), pp. 181-205

Abstract

This study analyzes proposals for amending tax laws to address issues in calculating the education tax base, based on a review of tax statutes and judicial precedents. Specifically, a recent Supreme Court ruling determined that the insurance premium revenue, which serves as the tax base for education tax, does not include the payment reserve extinguished due to the payment of contractual insurance claims for long-term non-life insurance caused by injuries, unlike the liability reserve extinguished upon maturity. However, an analysis of the underlying legislation suggests that the intent to deduct the accumulated liability reserve—the source for future insurance payments—from the revenue applies to all types of non-life insurance contracts, rendering the tax logic and the Supreme Court's ruling questionable. Furthermore, the ruling is inconsistent with the historical rationale for legislative amendments and exacerbates inequities in the tax burden due to discriminatory treatment of general non-life insurance. To reflect the introduction of IFRS17, the current legislation should be improved by allowing the deduction of all insurance payments (extinguished amounts due to incurred claims) from insurance premium revenue based on a rational interpretation. This includes removing the proviso that explicitly excludes amounts extinguished due to injuries, as per the Supreme Court ruling, and eliminating the restriction that limits deductible insurance payments to general non-life insurance. By analyzing the rational interpretation of the Education Tax Act based on judicial precedents, this study provides practical contributions and expected effects by offering implications useful for future legislative amendments.

Keywords

  • Education Tax
  • Insurance Premium Revenue
  • Supreme Court Precedent
  • Long-term Non-life Insurance
  • Payment Reserve
  • K-IFRS 17

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