By Yoon Sung-won
The National Tax Service (NTS) imposition of 300 billion won ($293 million) in back taxes on Oracle Korea for allegedly dodging corporate taxes has been upheld, according to industry sources, Monday.
The NTS slapped the punitive tax in January last year, after discovering that the company transferred some 2 trillion won of gains it earned in Korea between 2008 and 2014 to a tax haven abroad.
Oracle Korea protested the decision and filed a complaint with the Tax Tribunal in April last year. But the tribunal dismissed the request in November.
Oracle Korea filed a suit with the Seoul Administrative Court this February, calling for the cancellation of the measure.
"We have paid taxes in accordance with the law here. But the NTS disagreed with us," an Oracle Korea spokeswoman said.
"We filed the lawsuit because we cannot agree with what the NTS claims. What the NTS argues includes things that we don't see as true. So we decided to leave the case to the court's judgment."
The Oracle Korea spokeswoman declined to comment about the details.
Oracle Korea is working with Kim & Chang, Korea's top law firm, to handle the case. Expectations are that the company and the tax authority will wage a long legal war.
Through an audit of Oracle Korea, the NTS said it found that the company dodged about 17.4 billion won of tax in 2008, 25.2 billion won in 2009 and 20.4 billion won in 2010, according to the sources.
Oracle has allegedly avoided tax by sending most of its profits from Korea to its subsidiary in Ireland. The company had its affiliates in the Asia and the Pacific region, including Oracle Korea, establish contracts with its Irish unit in 2008 to transfer all the profits they have generated in the region to it.
Since 2008, Oracle Korea has not sent its profits to its headquarters in the United States, but to the Irish entity.
In this way, Oracle Korea saved 109.8 billion won of tax in 2012, 70.9 billion won in 2013 and 71.2 billion won in 2014, sources said.
The NTS, however, determined that the ultimate beneficiary of the profits was Oracle's headquarters, not the Irish subsidiary.
The tax authority cooperated with its Irish counterpart to find that the subsidiary there was not an Irish resident under that country's tax law.