Supreme Court Rules KB Capital's Excess Brokerage Fees Are 'Contrary to Public Order'... Not Recognized as Corporate Tax Expenses

Payment of Loan Brokerage Fees Exceeding the Limit
First and Second Trials Rule "Contrary to Public Order"
Supreme Court Upholds Tax Authorities' Decision

Supreme Court, Seocho-gu, Seoul. Yonhap News Agency

The Supreme Court has issued a final ruling that loan financing institutions cannot receive tax deductions for corporate income tax on loan brokerage fees paid in excess of the statutory limit. The court explained that such illegal expenditures, which undermine the purpose of protecting financial consumers, constitute "expenses contrary to public order" and are therefore ineligible for tax benefits.

According to the legal community on July 6, the Supreme Court's Second Division (presiding justice: Oh Kyung-mi) upheld the original ruling that rejected the claims of KB Financial Group and KB Capital in their final appeal against the heads of Yeongdeungpo and Suwon tax offices, thereby confirming the plaintiffs' defeat in their lawsuit seeking to cancel the corporate tax imposition.

KB Capital and others had paid so-called "inventory financing fees" to loan brokerage companies, exceeding the maximum brokerage commission limits set by the former Loan Business Act. When the tax authorities refused to recognize these excess fees as ordinary business expenses and imposed corporate tax by not allowing them as deductible costs, the companies filed a lawsuit in protest.

The core issue in the trial was whether expenses paid in violation of the loan brokerage fee cap could be recognized as deductible costs under the Corporate Tax Act. Both the first and second trial courts ruled that "brokerage fees exceeding the statutory limit are expenses incurred in violation of public order and therefore cannot be included as deductible costs," recognizing the legitimacy of the tax authorities' disposition.

The Supreme Court also maintained the lower court's decision and dismissed the plaintiffs' appeal. The bench pointed out, "Paying fees in violation of the loan brokerage fee cap is an act that directly contravenes the purpose of the Loan Business Act, which aims to protect financial consumers by regulating illegal debt collection and similar practices."

The court further ruled, "Brokerage fees paid under such agreements constitute expenses incurred in violation of public order," and added, "It cannot be regarded as an 'ordinary and generally accepted expense or a cost directly related to revenue,' as defined by the Corporate Tax Act."

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