Lee & Ko’s Tax Group successfully persuaded the Seoul Administrative Court to order a cancellation of the entire corporate income tax assessment (KRW 13.6 billion) in favor of taxpayer on September 10, 2020.
The key issue of this case was whether an Irish subsidiary of a multinational digital display company should be treated as the beneficial owner of royalty received from L company in Korea for patent license. Lee & Ko successfully (i) verified that the Irish subsidiary engaged in business activities with employees and other physical substance; (ii) argued against transfer pricing issues raised by the Korean tax authority regarding intercompany payments; and (iii) defended against various challenges brought up by the tax authority with respect to tax and accounting treatments of the Irish subsidiary. As a result, the court ruled in favor of our client that the Irish subsidiary should be treated as the beneficial owner of the royalty income.
If this decision is affirmed by the Supreme Court, it would be the first case in which the Court acknowledges an Irish company as beneficial owner of Korean source income. The case would serve as a meaningful precedent for multinational companies which wish to ascertain tax treatments of domestic source income received from Korean companies.