Court Rules "Welfare Points Also Considered Salary, Subject to 'Earned Income Tax'"

Court: "All Welfare Benefits Income Included in Earned Income"

The court has ruled that welfare points provided by companies to their employees should be considered as salary and subject to 'earned income tax.'

The Administrative Division 2 of the Seoul Administrative Court (Chief Judge Shin Myung-hee) announced on the 21st that it ruled against Hanwha Claims Service in a lawsuit seeking to cancel the refusal of correction of earned income tax filed against the Mapo Tax Office.

Hanwha Claims Service has been providing welfare points to its employees every year at the beginning of the year, which can be used at welfare malls affiliated with the company or at stores related to self-development, health management, and cultural activities. Hanwha Claims Service regarded the welfare points as earned income and withheld and paid earned income tax for its employees in 2015.

Later, after the Supreme Court ruling in 2019 that welfare points paid to public officials cannot be considered wages under the Labor Standards Act, Hanwha Claims Service requested a refund of about 47 million won in earned income tax imposed on welfare points based on this ruling. However, when the Mapo Tax Office rejected the request, Hanwha Claims Service filed an appeal with the Tax Tribunal, which was dismissed, leading to an administrative lawsuit. The Supreme Court had ruled in 2019 that welfare points paid to public officials or employees of public enterprises are not ordinary wages.

The court sided with the tax authorities. Welfare points are subject to taxation as earned income under the Income Tax Act. The existing Supreme Court ruling states that welfare points allocated annually to public officials and public enterprise employees regardless of labor provision are not considered wages under the Labor Standards Act, but the court judged that earned income under the Income Tax Act is a broader concept.

The court stated, "Since welfare points are closely related to labor and constitute part of the working conditions, they should be regarded as earned income," and added, "Income of a welfare nature that is difficult to view as compensation for labor is also included in earned income."

This content was produced with the assistance of AI translation services.