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1. The instant lawsuit shall be dismissed.
2. The costs of the lawsuit are assessed against the defendant.
Reasons
1. Details of the disposition;
A. The Plaintiff is a corporation that is established on February 14, 2007 and runs the business of providing pesttotos (PV) and BOD (VD) services.
B. On November 2010, the Plaintiff entered into a license agreement with Hungary-based B (hereinafter “B”) on the right to distribute motion pictures produced by C via the Plaintiff’s order-based video service, and paid approximately KRW 3.288 billion to B from 2012 to 2015, and did not withhold corporate tax pursuant to Article 12(1) of the Convention between the Government of the Republic of Korea and the Government of the People’s Republic of Hungary for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (hereinafter “Korea-Hungary Tax Treaty”).
C. In accordance with Article 12(2)(a) of the Convention between the Government of the Republic of Korea and the Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the Defendant: (a) should collect corporate tax (15%) from the Government of the Republic of Korea on the royalty income that the Plaintiff paid without withholding from B, deeming that “B is merely a conduit company performing only the role of the formal transaction party; and (b) substantial beneficial owner is the Netherlands corporation D, the parent company of the B; and (c) should apply the withholding tax rate (15%) to the Plaintiff according to the determination that
(hereinafter “instant disposition”) D.
In response to the instant disposition, the Plaintiff filed an appeal with the Tax Tribunal as indicated in the following table, but the Tax Tribunal dismissed the appeal on May 2, 2017 on the date of the adjudication on the date of the request for a separate inquiry (the date of notification).
E. Meanwhile, the Supreme Court held on November 15, 2018 that “E” corporation paid to B, with respect to the royalty of approximately KRW 13.5 billion, B is the beneficial owner of royalty income under Article 12(1) of the Korea-Hungary Tax Treaty.