Sam­sung de­nied full ex­emp­tion from tax bill through dis­puted patent-licensing deal

The Phnom Penh Post - - BUSINESS - Bae Hyun­jung

SAM­SUNG Elec­tron­ics must pay 1.5 bil­lion won ($1.34 mil­lion) in cor­po­rate tax, ac­cord­ing to South Korea’s top court, which de­cided that the com­pany’s patent-licensing deal with an Ire­land-based con­duit com­pany was a tax-dodg­ing at­tempt to ex­ploit the spe­cial ex­emp­tion clause in the South Korea-Ire­land tax treaty.

The Supreme Court of South Korea on Wednesday ruled against plain­tiff Sam­sung Elec­tron­ics, ending the fiveyear lit­i­ga­tion filed by the tech giant in 2013 chal­leng­ing tax au­thor­i­ties’ de­ci­sion to hold it re­spon­si­ble for 70.6 bil­lion won in cor­po­rate tax.

“Of the to­tal amount, [the com­pany] should pay 1.5 bil­lion won in cor­po­rate tax,” the court said in its ruling, only partly up­hold­ing the de­ci­sion of an ap­peals court that said Sam­sung Elec­tron­ics was li­able for the full 70.6 bil­lion won.

But taxes on over­seas patents should be ex­cluded, the Supreme Court ruled.

When the reg­is­tered name and ac­tual own­er­ship of a given com­pany re­main at odds for rea­sons that give rise to sus­pi­cions of tax eva­sion, the in­comes should be seen as be­long­ing to the prac­ti­cal man­ager of the cor­re­spond­ing as­sets, who should be viewed as the tax­payer, ac­cord­ing to the lat­est ruling.

Sam­sung Elec­tron­ics in 2010 paid $370 mil­lion to global IP man­age­ment com­pany In­tel­lec­tual Ven­tures in a pack­age patent-licensing con­tract.

The US-based com­pany claimed that its Ir­ish sub­sidiary, IV IL, was the con­tract­ing party and that the deal was sub­ject to the cor­po­rate tax ex­emp­tion clause in the Korea-Ire­land tax treaty. Un­der the Korea-US tax sys­tem, a li­censee must pay 15 per cent of the li­cence fees as cor­po­rate tax.

Korea’s tax of­fi­cials, how­ever, ar­gued that the Ir­ish com­pany was but a con­duit com­pany es­tab­lished for the pur­pose of tax eva­sion and im­posed a 70.6 bil­lion won tax bill on Sam­sung Elec­tron­ics. While the lower court ac­cepted Sam­sung’s ar­gu­ments to the con­trary, the ap­peals court re­versed that judg­ment, hold­ing the com­pany re­spon­si­ble for the full amount.

JUSTIN SULLIVAN/GETTY IM­AGES/AFP

At­ten­dees watch a pre­sen­ta­tion at the Sam­sung booth dur­ing Con­sumer Elec­tron­ics Show 2019 at the Las Ve­gas Con­ven­tion Cen­ter on Wednesday in Las Ve­gas, USA.

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