미국에 등록된 특허권을 ‘사용’하는 대가의 과세: 한·미 조세조약 하에서 이전가격과 소득 구분의 쟁점을 중심으로

One legal issue in the realm of international taxation that is well-known to, and fiercely disputed among, Korean commentators and practitioners alike, is the source of income derived by a U.S. patent-holder from either a licensed use effectuated, or infringement committed, jointly by a Korean production company and its related U.S. distributor. Whereas the Korean tax authorities show no sign of imminent retreat from their firmly held position that this income is sourced in Korea, the Supreme Court of Korea has with equal obstinacy maintained its long-standing case law that it is U.S.-sourced, a view, which may potentially cause revenue loss worth hundreds of millions of US dollars every year. This discrepancy in legal opinions culminated when the tax authorities managed to persuade the legislature to amend the Corporate Income Tax Act, so as to clearly provide that the aforesaid income is sourced in Korea. The Court however declined to apply the newly amended law on the grounds that its initial case law is based upon its interpretative view of the tax treaty between Korea and the U.S., which should not and cannot be altered by any change in domestic law. While the issue has enjoyed an unusual abundance of literature, where the opinions are also sharply divided, this article seeks new ways ahead in the sense that it takes the realistic view that there is little chance the Court will withdraw its case law in near future, and accordingly submits that it is now high time to focus on some other, mostly neglected issues that will arise once one adheres to the case law. The first of these issues relates to transfer pricing. In all of those cases that have been decided by the Court, the Korean production companies paid all of their royalties or damages to the U.S. patent-holders despite the fact that the respective U.S. distributors were also involved in the use or infringement of the U.S. patent. This article therefore points out that the liability of such royalties or damages should be apportioned pursuant to the well-known arm’s length principle. This may result in the Korean tax authorities’ recapture of some of its revenue loss although this is not the main focus of this article. The second issue exclusively concerns patent infringement, where this article raises the argument that the damages required to be paid to the U.S. patent holders are composed of a few different elements, each of which warrants a separate consideration when it comes to determination of the character of income. While the widely accepted understanding that damages should also be treated as royalty income has merits as far as the portion of so-called “reasonable royalty” is concerned, this article argues that the “punitive damage” portion, in particular, does not fall under the same category, but should be regarded as “other income.” As this type of income is not regulated by the Korea – U.S. Tax Treaty, with the result that the Korean tax authorities should be allowed to levy income tax thereon without being restricted by the said Treaty. In this respect, some legislative measures may be necessary in order to provide the tax authorities with some process by which they might ascertain the relevant amount of punitive damages in practice. To conclude, this article presents two points, both of which direct toward some new ways of proceeding with a type of legal dispute that has long been subject to discussion. Firstly, due regard should be had to aspects other than the source rule in terms of international allocation of taxable rights including, in particular, transfer pricing. Secondly, deeper knowledge and understanding of patent law are needed for us to have a better grasp of the underlying transactions, which is in fact a required step before applying any part of tax law.