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| TITLE | 【Syllabus of Latest Opinion】 Supreme Court Decision 2023Du54761 Decided April 9, 2026 【Revocation of Disposition Refusing to Refund Withheld Corporate Tax】 [full Text] |
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| Summary | |
| 【Main Issues and Holdings】 [1] Method of treaty interpretation Ordinary meaning of “the amounts contingent on the productivity, use, or disposition” in Article 14(4)(b) of the Convention between the Republic of Korea and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and the Encouragement of International Trade and Investment (“ROK-U.S. Tax Convention”) [2] In cases where specific provisions including Article 16(1) of the ROK-U.S. Tax Convention apply, whether Article 6(9) of the Convention applies (negative) [3] Meaning of “capital assets” in Article 16(1) of the ROK-U.S. Tax Convention Whether the technology and know-how, etc. is subject to depreciation pursuant to the U.S. Internal Revenue Code at the time of the signing of the Convention in 1976 (affirmative) Whether business know-how is generally excluded from the scope of “capital assets” defined in Article 16(1) of the Convention (affirmative) [4] In a case where: (a) Company B, a stock company, paid royalties to Company A, a U.S. company, in consideration for the technology and know-how that was researched and developed by Company A, and paid withheld corporate tax on the said royalty payments to the commissioner of the competent tax office; (b) Company B filed an amended return to request refunds of withheld corporate taxes on the grounds that the royalty payments were not domestic source income under the ROK-U.S. Tax Convention; and (c) the amended return was denied by the commissioner of the competent tax office, the case holding that the know-how, etc. is property that Company A uses for its business, which is allowed a depreciation deduction, and, thus, it does not constitute capital assets under Article 16(1) of the Convention | |
