Cancellation of Corporate Income Taxation on Fees for Payment Guarantee

The National Tax Service imposed a substantial amount of corporate income taxes against the multinational enterprises, including LG Electronics, on the grounds that the fees for related party loan guarantees were lower than the arm’s length price which was based on the model developed by the NTS. Lee & Ko represented LG Electronics in seeking to cancel the corporate income taxes and successfully prevailed over all claims before the Seoul Administrative Court on October 21, 2015. The court decision was the first of its kind confirming the illegality of the tax assessment based on the NTS model with respect to fees for related party loan guarantee and is expected to have a substantial impact on the other cases currently underway.