Tax authority may reject Microsoft's appeal for refund: Yonhap

By Park Sae-jin Posted : September 22, 2016, 10:53 Updated : September 22, 2016, 10:53

[Aju News DB]


South Korean tax authorities are expected to reject an appeal by US software giant Microsoft Corp. to refund 634 billion won (575.7 million US dollars) in a withholding tax.

Microsoft filed complaints last month against the National Tax Service (NTS), seeking a refund of the withholding taxes paid by Samsung Electronics Co. to the NTS for using the software giant's patents.

Samsung is believed to have paid about 1 trillion won to Microsoft for using the U.S. company's patents in manufacturing smartphones, personal computers and other products.

Under the Korean tax rules and a tax treaty between Korea and the United States, Samsung had paid as much as 15 percent of the annual patent fees to the tax authority in corporate taxes on revenues earned by using the patents, according to the sources.

Microsoft is said to claim that it is double taxation because the software giant is paying taxes to the U.S. tax authorities. The American company cited a South Korean court ruling in 1992 that the tax authority has no right to require a company to pay a withholding tax on revenues earned by using patents that are not registered in Korea.

However, the NTS has claimed the withholding tax is fair because local firms pay patent royalties to Microsoft even though the patents are not registered in Korea.

A 2008 revision of corporate tax law stipulates that foreign patents are valid in Korea when the patents are used to produce goods in the Korean market. As the NTS is expected to reject the appeal by Microsoft, the likelihood of Microsoft filing a lawsuit against the NTS is growing, according to the sources.

(Yonhap)
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