[1] The meaning of Article 93 subparagraph 9 (a) and (b) of the former Corporate Tax Act concerning the domestic source income of a foreign corporation and Articles 6 (3) and 14 (4) of the Korea-U.S. Tax Convention concerning the domestic source income of the foreign corporation

[2] The case holding that the amount equivalent to patent license fees paid by a domestic corporation to a U.S. corporation shall not be deemed as the domestic source royalty income of the U.S. corporation in order to resolve disputes arising from infringement of the patent license of the U.S. corporation registered in the U.S. corporation

[1] Article 93 subparag. 9 of the former Corporate Tax Act (amended by Act No. 7005 of Dec. 30, 2003); Articles 6(3) and 14(4) of the Convention between the Republic of Korea and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Encouragement of International Trade and Investment / [2] Article 93 subparag. 9 of the former Corporate Tax Act (amended by Act No. 7005 of Dec. 30, 2003); Articles 6(3) and 14(4) of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income between the Republic of Korea and the United States of America

[1] Supreme Court Decision 91Nu6887 delivered on May 12, 1992 (Gong1992, 1905) Supreme Court Decision 97Nu11065 delivered on January 21, 200 (Gong200Sang, 514)

Suwon Electronic Co., Ltd. (Law Firm Squa, Attorneys Park Jong-chul et al., Counsel for the plaintiff-appellant)

Head of Mapo Tax Office

Seoul High Court Decision 2004Nu16418 delivered on June 16, 2005

The appeal is dismissed. The costs of appeal are assessed against the defendant.

We examine the grounds of appeal.

Article 93 subparag. 9 of the former Corporate Tax Act (amended by Act No. 7005 of Dec. 30, 2003) and Article 55(1)9 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 1998) (hereinafter collectively referred to as “Article 93 subparag. 9 of the former Corporate Tax Act”) provide for “where any of the following assets, information or rights is used in the Republic of Korea or is paid in the Republic of Korea for the payment of corporate tax by a foreign corporation” as one of the domestic source income under subparagraph (a) provides for “the copyright, patent right, design, model or drawings of works on science or art, or confidential information or other similar rights derived from the use of the radio or scientific knowledge or information under Article 95(1)9 of the former Corporate Tax Act (amended by Act No. 5581 of Dec. 28, 199), and provide for “the right to use or information under Article 93 subparag. 4 of the Convention and the right to use and information or information under Article 4”

On the other hand, in principle, a patent holder's right to exclusively produce, use, transfer, lease, import, or display patent goods only within the territory of the country where the patent right is registered. Thus, Article 93 subparagraph 9 (a) of the former Corporate Tax Act provides that "where a patent is used in Korea, the relevant consideration shall be given, or where a patent is paid with respect to the right to use or use the patent property within a Contracting State" under Articles 6 (3) and 14 (4) of the Korea-U.S. Tax Convention, the term "only where a patent right is used in Korea, the royalty for the patent right shall be treated as income derived from the source in that Contracting State only if a foreign corporation or U.S. corporation has a patent license in the Republic of Korea after registering the patent right, the royalty for the patent license shall be considered as income paid for the use of the patent license (see Supreme Court Decision 91Nu687, May 12, 199); Article 93 subparagraph 9 (b) of the former Corporate Tax Act shall be considered as "no information or non-disclosure information" under Article 1010 (2).

In light of the aforementioned legal principles and records, the court below held that DES 3, a U.S. subsidiary of the plaintiff as the plaintiff's self-employed company, imported television, VTR and computer monitors produced by the plaintiff from the plaintiff and sold them in the U.S., and that some of the technologies used by the plaintiff in the manufacturing process of the above products were infringed upon the U.S. corporation I.P. Glbal Ld (hereinafter "I.P. Glbal")'s patent right's license within the U.S.C. 9, and that DEC did not constitute an infringement of the patent license's license's patent right's license's license's patent right's license's license's license's patent right's license's license's license's patent right's license's license's license's patent license's license's patent license's license's patent license's license's patent license's license's patent license's license's patent license's license's patent license's license's patent license's license's license's patent license's license's patent license's license's license.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Nung-hwan (Presiding Justice)