[THE INVESTOR] The National Tax Service is expected to reject an appeal by Microsoft for refund of withholding taxes of 634 billion won (US$575.70 million), according to sources Sept. 22.

Microsoft filed complaints last month against the national tax agency seeking a refund of the withholding taxes paid by Samsung Electronics to the NTS for using the software giant’s patents. 




Samsung is believed to have paid about 1 trillion won to Microsoft for using the U.S. company’s patents in manufacturing smartphones, personal computers and other products.

Under the Korean tax rules and a tax treaty between Korea and the United States, Samsung had paid as much as 15 percent of the annual patent fees to the tax authority in corporate taxes on revenues earned by using the patents, according to the sources.

Microsoft is said to claim that it is double taxation because the software giant is paying taxes to the US tax authorities. The American company cited a South Korean court ruling in 1992 that the tax authority has no right to require a company to pay a withholding tax on revenues earned by using patents that are not registered in Korea.

However, the NTS has claimed the withholding tax is fair because local firms pay patent royalties to Microsoft even though the patents are not registered in Korea.

(theinvestor@heraldcorp.com)