KT wins lawsuit over tax levied on mobile phone subsidies

A Seoul court has ruled that handset subsidies offered by a mobile phone operator are not subject to tax, officials said Wednesday.

The Seoul Administrative Court ruled in favor of KT Corp. in a tax-repeal lawsuit against 13 heads of district tax offices under the National Tax Service, saying that handset subsidies offered by the mobile phone operator are not subject to value-added tax.

If the ruling is upheld by higher courts, the country's second-largest mobile carrier will be able to collect 114.4 billion won ($102.27 million) from the tax authorities.

The landmark ruling comes amid an ongoing fierce conflict between the Korea Communications Commission and local mobile operators over whether to ban subsidies, as they have sometimes been blamed for overheating competition.

"The subsidies provided by KT are deemed 'discounts,' which are exempted under the Value-Added Tax Act," the court said in a ruling.

KT sold mobile phones to its dealers at a normal price and then ordered the dealers to offer discounts to its subscribers who purchased or replaced their mobile phones from 2006 through 2009. KT then collected the deducted amount of mobile phone subsidies from its dealers.

In 2009, KT asked tax authorities to deduct or refund the imposed value-added tax, arguing that the subsidies are "discounts."

However, tax authorities rejected KT's demand, saying that value-added tax was issued on supply contracts between KT and its dealers.

"There is no ground to judge that the ruling would result in favoring a specific mobile operator or hampering the rule of fair taxation," the court added.(Yonhap)