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Photo = National Tax Service |
[Alpha Biz= Kim Jisun] SEOUL, September 18, 2025 — National Tax Service (NTS) announced that the Korean Supreme Court en banc has ruled in favor of the state, confirming that royalties paid for the use of unregistered U.S. patents can be deemed Korean-source income and are therefore subject to withholding tax in Korea.
This marks the first victory for the tax authority in 33 years since it lost a similar case in 1992, securing Korea’s taxing rights over unregistered foreign patents.
The decision came in a case where SK hynix filed suit against the Icheon Tax Office, challenging the denial of its request for a refund of corporate taxes withheld on royalties paid to a U.S. patent holder. The U.S. company argued that, since the patents were not registered in Korea, the royalties should not be taxed in Korea.
However, the NTS maintained that Korean companies use such patents domestically in their production processes, and therefore the royalties constitute Korean-source income under both domestic tax law and the Korea–U.S. Tax Treaty.
The Supreme Court overturned the earlier ruling in favor of SK hynix and remanded the case, effectively siding with the NTS.
According to the NTS, the outcome of this ruling affects ongoing litigation amounting to approximately KRW 4 trillion, and is expected to generate tens of trillions of won in long-term tax revenue.
Commissioner Lim Kwang-hyun commented:
“Today’s ruling demonstrates the strength and determination of the NTS. It is a milestone achievement that secures Korea’s rightful taxing authority.”
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
