Tax agency ordered to return W11.3b to Samsung following tax lawsuit

The Supreme Court of South Korea in southern Seoul. (Yonhap)

Supreme Court ordered tax authorities to repay Samsung Electronics Co. 11.3 billion won ($9.3 million) in undue corporate taxes stemming from a former patent deal with the U.S. software giant Microsoft Corp., court officials said Sunday.

Samsung has filed suit against local tax authorities, who claimed the South Korean tech company avoided paying corporate taxes for the use of Microsoft patents in its smartphones following a July 2011 settlement. Two lower courts also ruled in favor of Samsung.

In accordance with Korean tax rules and a treaty between Seoul and Washington, Samsung paid 15% of the annual patent royalty to the South Korean tax authorities on Microsoft’s behalf as corporate tax. The fees were paid from the royalty due to Microsoft.

In 2016, tax authorities collected 113 billion won in undue taxes from Samsung after learning through an investigation that the South Korean company had paid some 69 billion won less in patent royalties to Microsoft.

Samsung later objected to levying the tax, arguing that the use of Microsoft patents not registered in South Korea should not be subject to domestic withholding tax. (Yonhap)

Esther L. Steinbach