Open Decision Ledger · Tax & international taxation
Royalties on foreign-registered but domestically unregistered patents as Korea-source income
Supreme Court, Dec. 11, 2025, 2022Du30744 (judgment)
No holding summary · checked against points at issue. The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Case name: 법인세부과처분취소등
Official text on the National Law Information Center
Question
Where royalty income falling within the Korean source rules is paid to an Irish resident who is the beneficial owner, may it be taxed in Korea, and is the consideration for a manufacturing method, technology or information covered by a patent registered abroad but not in Korea Korea-source income when it is used in Korea?
Holding
Royalties paid to an Irish resident beneficial owner are not taxable in Korea under Article 12(1) of the Korea-Ireland tax treaty, unless the mismatch between the nominal holder and the real controller arises from a purpose of avoiding tax, in which case the treaty's application may be denied under the substance-over-form principle of Article 14(1) of the Framework Act on National Taxes. Whether a party is the beneficial owner depends on the content and state of the business activities connected with the income and on how the income was in fact used and managed, weighed together. A royalty for the manufacturing method, technology or information covered by a patent registered abroad but not in Korea is Korea-source income when that patented technology was in fact used in domestic manufacture or sales, since 'use' here means use of the patented technology, not use of the patent itself.
Points at issue, verbatim
국외에 등록되었으나 국내에 등록되지 아니한 특허권의 대상이 되는 제조방법·기술·정보 등이 국내에서 사용된 경우, 그 대가인 사용료소득이 국내원천소득에 해당하는지 여부(적극)
Unofficial English translation
Where a manufacturing method, technology, information, etc., which is the subject matter of a patent right registered abroad but not registered in Korea, is used in Korea, whether the royalty income paid as consideration therefor constitutes domestic source income (affirmative)
Disposition
Partly reversed and remanded Stated in the decision
원심판결 중 피고 패소 부분을 파기하고, 이 부분 사건을 수원고등법원에 환송한다. 원고의 부대상고를 기각한다.
Unofficial English translation
The judgment of the court below is reversed as to the part in which the defendant lost, and that part of the case is remanded to the Suwon High Court. The plaintiff's incidental appeal is dismissed.
Form of the test
Circumstances weighed Stated in the decision
이러한 수익적 소유자에 해당하는지는 해당 소득에 관련된 사업활동의 내용과 현황, 그 소득의 실제 사용과 운용 내역 등 여러 사정을 종합하여 판단하여야 한다.
Unofficial English translation
Whether one falls within the category of such beneficial owner must be determined by comprehensively considering various circumstances, such as the content and status of the business activities related to the income in question and the details of the actual use and management of that income.
Factors
- 국세기본법상 실질과세의 원칙에 따라 조약 남용으로 인정되는 경우, 조세조약 적용을 부인할 수 있는지 여부(적극)
- 여기서 ‘수익적 소유자’의 의미 및 이에 해당하는지 판단하는 기준
- 국외에 등록되었으나 국내에 등록되지 아니한 특허권의 대상이 되는 제조방법·기술·정보 등이 국내에서 사용된 경우
- 여기서 ‘사용’은 독점적 효력을 가지는 특허권 자체를 사용하는 것이 아니라 그 특허권의 대상이 되는 제조방법·기술·정보 등을 사용한다는 의미로 보아야 하는지 여부(적극)
Unofficial English translation
• Whether the application of a tax treaty may be denied where the abuse of the tax treaty is recognized under the principle of substance over form under the Framework Act on National Taxes (affirmative)
• The meaning of ‘beneficial owner’ here and the criteria for determining whether one falls within that category
• Where a manufacturing method, technology, information, etc., which is the subject matter of a patent right registered abroad but not registered in Korea, is used in Korea
• Whether the ‘use’ here must be regarded as meaning not the use of the patent right itself, which has exclusive effect, but the use of the manufacturing method, technology, information, etc., which is the subject matter of that patent right (affirmative)
Relation to precedent
Follows earlier decisions Stated in the decision
대법원 2025. 9. 18. 선고 2021두59908 전원합의체 판결(공2025하, 1938)
Unofficial English translation
Supreme Court Decision 2021Du59908 decided September 18, 2025, en banc (Gong 2025 Ha, 1938)
Decisions referred to
[1] 대법원 2018. 11. 15. 선고 2017두33008 판결(공2019상, 68) / [2] 대법원 2025. 9. 18. 선고 2021두59908 전원합의체 판결(공2025하, 1938)
Burden of proof
Not addressed Not in the decision
Open question and revisit condition
What evidence can show that the patented technology was not in fact used in domestic manufacture or sales where the licence covers tens of thousands of patents at once?
The remand judgment of the Suwon High Court on whether the patented technology was in fact used domestically will show how the domestic-use requirement is applied in practice. Any amendment to Article 93(viii) of the Corporate Tax Act or to the source rules of the relevant tax treaty, or a later decision altering the meaning of 'use', would require this entry to be read again.
Cross-family AI independent reading & axis check
6 of 8 axes matched GPT-6 Astra (OpenAI, codex CLI) · 2026-10-24
A reader from another model family (GPT-6 Astra), given the official text but not the primary reading, agreed on 6 of the 8 axes; the readings differed on axis 4 (form of the test), axis 8 (open question and revisit condition).
Axis 4 (Form of the test): Primary “Circumstances weighed” vs Independent “Elements stated”
Both readings record the burden of proof as not addressed, so the flagged divergence likely comes from the standard-form axis (comprehensive weighing versus requirement listing) rather than from burden.
여기서 ‘사용’은 독점적 효력을 가지는 특허권 자체를 사용하는 것이 아니라 그 특허권의 대상이 되는 제조방법·기술·정보 등을 사용한다는 의미로 보아야 하는지 여부(적극)Axis 8 (Open question and revisit condition): Primary “What evidence can show that the patented technology was not in fact used in domestic manufacture or sales where the licence covers tens of thousands of patents at once?” vs Independent “What portion of the royalties was consideration for actual use of the patented technology in domestic manufacturing or sales?”
The primary asks what evidence could show the technology was not actually used domestically where the licence covers many patents, while the independent asks what portion of the royalty was consideration for actual use; the two are related but distinct.
국외에 등록되었으나 국내에 등록되지 아니한 특허권의 대상이 되는 제조방법·기술·정보 등이 국내에서 사용된 경우, 그 대가인 사용료소득이 국내원천소득에 해당하는지 여부(적극)Raw responses and comparison record: Protocol · Blind readings (JSONL) · Axis comparison (JSONL) · SHA-256 (JSON)
Lower-court contrast & scope of application
Lower-court reading vs. Supreme Court holding
Lower-court context: The Suwon High Court, in its judgment of 3 December 2021 (2021Nu10282), held that the beneficial owner of the royalties was Company 1, a US company, not Company 3, an Irish company set up a short time before the licence to resolve patent litigation, whose shares were held through Cyprus-based Company 4 and which merely acted as the formal counterparty. It therefore applied the Korea-United States tax treaty rather than the Korea-Ireland treaty, found no justifiable reason for the plaintiff's failure to withhold and pay the corporate tax, and held that the royalties were not Korea-source income because only 2,612 of the 45,941 patents were registered in Korea and the rest were registered only abroad.
Supreme Court standard: The Supreme Court found no error in the finding that the mismatch between the formal contracting party and the real controller of the royalty income arose from a purpose of avoiding tax, so that the Korea-United States tax treaty applied, nor in the finding that there was no justifiable reason for the failure to withhold. On the foreign-registered but domestically unregistered patents, it held that the court below had misread the law and failed to try the case by stopping at the absence of domestic registration without examining whether the patented technology was in fact used in domestic manufacture or sales. It reversed the portion of the judgment adverse to the defendant and remanded that part to the Suwon High Court, and dismissed the plaintiff's cross-appeal on the beneficial owner and the surtax.
Distinguishing conditions
- A payment made to an Irish resident beneficial owner with no mismatch between nominal holding and real control, so that Article 12(1) of the Korea-Ireland tax treaty bars domestic taxation.
- Consideration for patents registered in Korea, or for other rights that are not foreign-registered but domestically unregistered patents.
- A case in which the patented technology was not in fact used in domestic manufacture or sales, so that no royalty for its domestic use arises.
Record verification notes
Check which treaty was in force for the payment date and which entity the payment was actually made to, then set the group structure and the timing of each company's incorporation against the anti-abuse test the Court applied. For each patent in the licence schedule, identify whether it was registered in Korea and gather evidence of actual use of the patented technology in domestic manufacture or sales, since registration alone decides nothing.
From the official text
Points at issue
[1] ‘대한민국과 아일랜드간의 소득 및 양도소득에 대한 조세의 이중과세회피와 탈세방지를 위한 협약’ 제12조 제1항에 따라 우리 법인세법상 국내원천소득에 해당하는 사용료소득이 아일랜드의 거주자인 수익적 소유자에게 지급되는 경우, 국내에서 과세될 수 있는지 여부(소극) / 여기서 ‘수익적 소유자’의 의미 및 이에 해당하는지 판단하는 기준 / 사용료소득의 수익적 소유자에 해당하더라도 국세기본법상 실질과세의 원칙에 따라 조약 남용으로 인정되는 경우, 조세조약 적용을 부인할 수 있는지 여부(적극) [2] 국외에 등록되었으나 국내에 등록되지 아니한 특허권의 대상이 되는 제조방법·기술·정보 등이 국내에서 사용된 경우, 그 대가인 사용료소득이 국내원천소득에 해당하는지 여부(적극) / 이때 적용되는 법규(=구 법인세법 제93조 제8호 단서 후문) 및 여기서 ‘사용’은 독점적 효력을 가지는 특허권 자체를 사용하는 것이 아니라 그 특허권의 대상이 되는 제조방법·기술·정보 등을 사용한다는 의미로 보아야 하는지 여부(적극)
Unofficial English translation
[1] Where royalty income that constitutes domestic source income under our Corporate Tax Act is paid to a beneficial owner who is a resident of Ireland pursuant to Article 12(1) of the ‘Convention between the Republic of Korea and Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains’, whether it may be taxed in Korea (negative) / The meaning of ‘beneficial owner’ here and the criteria for determining whether one falls within that category / Even where one falls within the category of beneficial owner of royalty income, whether the application of a tax treaty may be denied where the abuse of the tax treaty is recognized under the principle of substance over form under the Framework Act on National Taxes (affirmative) [2] Where a manufacturing method, technology, information, etc., which is the subject matter of a patent right registered abroad but not registered in Korea, is used in Korea, whether the royalty income paid as consideration therefor constitutes domestic source income (affirmative) / The applicable provision (= the latter part of the proviso to former Article 93, subparagraph 8 of the Corporate Tax Act) and whether the ‘use’ here must be regarded as meaning not the use of the patent right itself, which has exclusive effect, but the use of the manufacturing method, technology, information, etc., which is the subject matter of that patent right (affirmative)
Summary of the holding
The official text publishes no summary of the holding for this decision. The quotation and factors in this record are copied verbatim from the points at issue; the evidence for each axis is taken from the points at issue, the order and the reasons.
Order
원심판결 중 피고 패소 부분을 파기하고, 이 부분 사건을 수원고등법원에 환송한다. 원고의 부대상고를 기각한다.
Unofficial English translation
The judgment of the court below is reversed as to the part in which the defendant lost, and that part of the case is remanded to the Suwon High Court. The plaintiff's incidental appeal is dismissed.
Provisions referred to
[1] 대한민국과 아일랜드간의 소득 및 양도소득에 대한 조세의 이중과세회피와 탈세방지를 위한 협약 제12조 제1항, 국세기본법 제14조 제1항, 법인세법 제93조 제8호, 제98조 제1항 제2호 / [2] 대한민국과 미합중국간의 소득에 관한 조세의 이중과세 회피와 탈세방지 및 국제무역과 투자의 증진을 위한 협약 제2조 제2항, 제6조 제3항, 제14조 제4항 제a호, 구 법인세법(2015. 12. 15. 법률 제13555호로 개정되기 전의 것) 제93조 제8호
Read 2026-10-24 · Cross-read 2026-10-24. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.
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