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Samsung to pay KRW 1.5 billion in corporate tax in South Korea

Friday 11 January 2019 | 14:42 CET | News
South Korea’s Supreme Court has decided that Samsung Electronics must pay KRW 1.5 billion (approximately USD 1.34 million) in corporate tax. The court said Samsung’s patent-licensing deal with an Ireland-based conduit company was a tax-dodging attempt to exploit the special exemption clause in the South Korea-Ireland tax treaty, The Phnom Penh Post reports. The Court has ruled against plaintiff Samsung, ending the 5-year litigation by the tech giant in 2013 challenging tax authorities’ decision to hold it responsible for KRW 70.6 billion in corporate tax.

“Of the total amount, Samsung should pay KRW 1.5 billion won in corporate tax”, the court said, only partly upholding the decision of an appeals court that said Samsung was liable for the full KRW 70.6 billion. Taxes on overseas patents should be excluded, the Supreme Court added.

According to the ruling, when the registered name and actual ownership of a given company remain at odds for reasons that give rise to suspicions of tax evasion, the incomes should be seen as belonging to the practical manager of the corresponding assets, who should be viewed as the taxpayer.

Back in 2010, Samsung Electronics paid KRW 370 million to global IP management company Intellectual Ventures in a package patent-licensing contract. Samsung claimed that its Irish subsidiary ‘IV IL’ was the contracting party and that the deal was subject to the corporate tax exemption clause in the Korea-Ireland tax treaty. Under the Korea-US tax system, a licensee must pay 15 percent of the licence fees as corporate tax.

Korea’s tax officials, however, argued that the Irish company was but a conduit company established for the purpose of tax evasion and imposed a KRW 70.6 billion tax bill on Samsung Electronics. While the lower court accepted Samsung’s arguments to the contrary, the appeals court reversed that judgment, holding the company responsible for the full amount.



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Categories: Mobile & Wireless
Companies: Samsung
Countries: Korea, Republic of
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