Supreme Court bars tax deduction for illegal insurance commissions

The Supreme Court said Thursday that insurance firms cannot claim tax deductions for commissions paid to unregistered recruiters or agents belonging to other companies. The ruling, delivered April 30 in case 2025Du36013, establishes that such payments violate the fundamental order of the insurance market and therefore do not qualify as legitimate business expenses under corporate tax law.

The high court found that paying fees to individuals outside the legal recruitment framework runs counter to the Insurance Business Act, which strictly regulates who may solicit contracts. Because these expenditures breach social order, they cannot be recognized as ordinary costs directly related to revenue generation under Article 19 of the Corporate Tax Act.

Under current regulations, only registered designers, agencies, brokers, and company employees are permitted to mediate insurance contracts. The law prohibits companies from paying rewards to unauthorized third parties for such services or delegating solicitation duties to designers affiliated with other firms.

The court emphasized that allowing these payments as deductible losses would undermine efforts to maintain sound management practices within the industry. It noted that while civil validity of such payment agreements is a separate matter, the act of paying them constitutes a violation of social order sufficient to disqualify them from tax benefits.