A Korean subsidiary (“Semicon-sales”) of a foreign group was active in distribution and sales of semiconductors for the automotive and industrial industry. Following an audit, the tax authorities found that the subsidiary had purchased semiconductors from a foreign affiliated company at a higher price than the arm’s length price. An assessment was issued where the […]
In 2011 Samsung signed the contract with Microsoft for use of software-patent in Android-based smartphone and tablets, and for the years 2012-2015 Samsung paid royalties to a Microsoft subsidiary, MS Licensing GP, while saving 15 percent for withholding tax. The royalties paid by Samsung to Microsoft during these years amounted to 4.35 trillion won, of […]
K-GAS Corp had issued loans and performance guarantees to overseas subsidiaries but received no remuneration in return. The tax authorities issued an assessment where additional taxable income was determined by application of the arm’s length principle. An appeal was filed by K-GAS with the district court. Decision of the Court The court upheld the decision […]
A Korean subsidiary in the “Semiconductor-group” was active in distribution and sales services. At issue was which transfer pricing method was the most appropriate for determining the arm’s length remuneration for these activities in FY 2013. Judgement of the Court The Court dismissed the claims of the company and upheld the decision of the tax […]
Starbucks Korea is now being investigated for overpricing goods and services imported from abroad. Officials from the National Tax Service have seized accounting records and data held at Starbucks’ Korean head office in Seoul. Subject of the investigation is transfer pricing of coffee beans and others products for sale at its more than 1,370 local […]
In this case the Korean Supreme Court held that Luxembourg SICAV and SICAF are entitled to reduced withholding tax rate on interest and dividend income under the Korea–Luxembourg Tax Treaty. Meaning of “residents of Luxembourg,” which is subject to the “Convention between the Government of the Republic of Korea and the Government of the […]
The issue in this case was the meaning of and standard for determining what constitutes “beneficial owner” as prescribed by Article 10(2)(a) of the Convention between the Government of the Republic of Korea and the Government of the Hungarian People’s Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect […]
In 2011, a Korean company, CJ E&M Co., Ltd concluded a license agreement relating to the domestic distribution of Paramount films, etc. with Hungary-based entity Viacom International Hungary Kft (hereinafter “VIH”), which is affiliated with the global entertainment content group Viacom that owns the film producing company Paramount and music channel MTV. From around that […]
In cases where a domestic corporation that operates a financial business (including a domestic place of business of a foreign corporation) borrowed money from a foreign controlling shareholder and such borrowed amount exceeds six times the amount invested in shares or equity interests by the foreign controlling shareholder, a certain amount of the interest paid […]
TP case – Korea vs Semiconductor Corp, August 2017 Click here for English translation
Up until 2015 it had been the practice of the Korean tax authorities to issue tax assessments to Korean parent companies for providing guarantees to foreign subsidiaries without receiving appropriate arm’s-length guarantee fees. To that end, the Korean tax authorities had developed a credit assessment model. In this case the court ruled on the appropriatenes […]
At issue in this case is the determination of arm’s length interest rates. Click here for translation Click here for alternative translation
In this case a Korean subsidiary, Photo Corp, sold photo paper, film, and other imports from overseas related parties to local stores. The Korean Tax Authority had applied the transactional net margin method (TNMM) to derive the arm’s length price. Six comparable companies had been selected and a tax assessment was issued based on the […]
The Korean company was active as a domestic wholesaler of hospitals and pharmaceutical equipment imported acquired from foreign related parties. The taxation authorities have calculated the normal price by applying the TNM method for controlled transactions between the Korean company and it’s foreign related parties. In years where profits in the company was below the […]
A Korean pharma corporation produced and sold finished pharmaceuticals. Active ingredients were imported from foreign related parties in the United States and Ireland. The Korean pharma corporation produced and sold the original finished products by importing the five original patented raw materials that had expired from the patent period in each business period from December […]
Korea vs Levi’s – Supreme Court case No. 2004두7955 Management support services Click here for translation
In this case the Korean Supreme Court concluded that the tax authorities had used transactions with different terms and conditions to price the controlled transactions. According to Article 5 (1) of the National Development and Reform Act in Korea, the TNM method can be applied only when the normal price can not be calculated by […]
The Korean company (hereinafter ‘MedImpo Corp’) imported medicines from foreign related parties and sold them locally. The tax authorities issued an assessment based on transfer prices between two unrelated comparable companies and then applied the resale price method to calculate the “normal price” on the imported medicines. MedImpo Corp argued that the selection of a […]
In this case a Korean company was providing services (sales agent, equipment installation and maintenance service) to a foreign related party and remunerated on a cost plus basis. The remuneration had been calculated as cost plus 5-8 % based on six comparable domestic service providers. The Judgement If there is a significant difference between the […]
In this case, the court states that “Even if the price is applied in transactions with foreign related parties, if the transaction is conducted at a price that is considered to be applied or applied in a normal transaction with a person who is not a related party, the price may be the normal price” […]
In Korea the tax authorities usually regarded domestic transactions as better comparables and there were only few cases where transfer pricing had been applied based on foreign transactions. In this case, the Korean Supreme Court confirms that international transactions can be used as comparables for the pricing of domestic transaktions. Click here for English Translation
