The South Korean tax authority is expected to reject an appeal by U.S. software giant Microsoft Corp. to refund 634 billion won ($575.7 million) in a withholding tax, according to the tax authority and industry sources Thursday.
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)
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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