Suwon District Court-2017-Gu Partnership-71599 ( October 13, 2019)

Income from royalties for domestic unregistered patent rights;

If a U.S. corporation registers a patent in a foreign country and does not register the patent in Korea, the income paid by the U.S. corporation in connection with the registration cannot be the consideration for its use.

2019Nu1074. Revocation of revocation of revocation of corporate tax rectification

○○ ○○ ○○ ○○ ○○ ○ ○○ LC

○ Head of tax office

Suwon District Court Decision 2017Guhap71599 Decided February 13, 2019

July 3, 2019

July 17, 2019

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant's rejection disposition regarding the tax amount withheld at source in January 7, 2017 against the plaintiff on June 7, 2017 shall be revoked.

1. Quotation of judgment of the first instance;

The reasons for this court's decision are as follows, except for those parts which are dismissed or added:

Therefore, this is identical to Article 8(2) of the Administrative Litigation Act and the main text of Article 420 of the Civil Procedure Act.

2. Parts to be removed or added;

○ The Adjustment of International Taxes Act is amended by the former Adjustment of International Taxes Act (amended by Act No. 16099, Dec. 31, 2018).

○ The following shall be added to the 7th page 12 below:

c. Determination on the addition of the underlying statutes of the disposition

The Defendant asserts at the trial that the portion of the royalty in the instant case, which was registered in a foreign country and was not registered in the Republic of Korea, constitutes “other income under Article 93 subparag. 10 (j) of the former Corporate Tax Act.” However, in light of the content of the instant contract, it is clear that the instant royalty constitutes royalty income under subparagraph 8 of Article 93 of the former Corporate Tax Act since the Plaintiff granted Samsung pre-user the right to use the instant patent and received it as the price for such grant. However, as seen earlier, in the interpretation of the former Adjustment of International Taxes Act (amended by Act No. 16099, Dec. 31, 2018) and the Korea-U.S. Tax Convention, the royalty in the instant case, which was registered in a foreign country, cannot be considered as domestic source income. In addition, in order to fall under other income, it constitutes “the economic profit provided in relation to the business in the Republic of Korea, human resources service, or assets provided in the Republic of Korea.” There is no evidence to acknowledge that the instant royalty in this case meets the requirements.”

3. Conclusion

Therefore, the decision of the first instance court is justifiable, and the defendant's appeal is dismissed.