2021년 국제조세 판례 회고

Abstract

This paper discuses four notable court decisions rendered in 2020 by the Supreme Court and Seoul High Court. The first decision considered various elements regarding the objective fact of living relationships to determine tax resident having domicile in Korea. It is noteworthy that the court converted proving responsibility to taxpayers regarding the loss from internal transactions and the net operating losses to calculate the “dividendable” income earned by controlled foreign companies. Affirmative intentions and acts to conceal are needed to recognize fraud and other illegal activities as requirements to impose fraudulent additional tax. They should render tax imposition and collection impossible or remarkably difficult. The issue in the second case was the interpretation of ‘the accounting period for which the distribution of profits takes place’ in the dividends provision of the Korea-Japan Tax Treaty. The Supreme Court interpreted the clause as ‘the accounting period subject to dividends’, which was in line with the general rules of interpretation in the 1969 Vienna Convention on the Law of Treaties. The third decision is legitimate in that gains from the sale of U.S. registered trademarks are not contingent payments; thus, they should not be considered as royalties under the Korea-U.S. Tax Treaty. There is, however, room for improvement in the decision as its main basis for interpretation came from memoranda and explanations, which are not considered as a supplementary means of interpretation. The decision can also be used to classify gains from the sale of U.S. registered trademarks as capital gains. However, the meaning of capital assets should be interpreted based on the U.S. International Revenue Code not according to Article 2(2) of the Korea-US Tax Treaty, rather than as a supplementary means of interpretation of the Vienna Convention. In the fourth case, the issue is whether royalties from a U.S. registered patent can be determined as being sourced in Korea. Royalties paid for patented technology used for manufacturing in Korea can be viewed as Korean source income under the Korea-U.S. Tax Treaty. It is regrettable that the court applied the precedent Supreme Court decisions related to royalties from patent licenses even though part of the royalties were paid for technology that was not yet patented, but was merely in the process of being patented.