[Apha Biz=(Chicago) Reporter Paul Lee] On the 6th, the Seoul High Court's Administrative Affairs Department 11 (Presiding Judge Choi Soo-hwan) ruled in favor of the plaintiff as in the first trial in an appellate court of a lawsuit filed by LG Electronics against the Yeongdeungpo tax office to "cancel the disposition of corporate tax withholding."

In December 2010, LG Electronics signed a semiconductor and software license agreement with B company in Hungary, a subsidiary of US corporation A, and paid about 78.5 billion won for five years from 2012.

LG Electronics did not pay corporate tax, judging that the expenses paid to company B under the Korea-Hungary tax treaty were exempt from corporate tax withholding.

However, the National Tax Service judged in a tax investigation in 2017 that the actual revenue owner of the transaction was Company A, and classified user fees paid by LG Electronics as income in accordance with the Korea-U.S. Tax Treaty and insisted on withholding corporate tax. Since then, the tax authorities have corrected and notified LG Electronics about 12.8 billion won in corporate taxes for withholding taxes.

LG Electronics filed a judgment with the Tax Tribunal and received a refund of about 7.4 billion won. However, when the rest of the claims were rejected, they filed a lawsuit with the Seoul Administrative Court to cancel the disposition of corporate tax withholding of some 5.4 billion won.

The cost of the lawsuit was about 1.8 billion won, and according to the recognition rules, such as a civil suit, the cost of the administrative suit is calculated as one-third of the money the plaintiff will be exempted from the obligation to pay as the claim is cited.

However, the National Tax Service ruled that the withholding of corporate taxes worth 5.4 billion won imposed on LG Electronics was unfair.

The taxation authorities appealed against the judgment of the first trial, but the appeals court also rejected the tax authorities' appeal, believing that the judgment of the first trial was justified.

If LG Electronics' victory is confirmed, LG Electronics is expected to be able to avoid all corporate taxes worth about 12.8 billion won imposed by the taxation authoritie authorities.

 

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