Court: "Right to Receive Affiliate Trademark Royalties Limited if Industries Differ"

Seoul Administrative Court, Seocho-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Daehyun] A court ruling has found it unfair to impose corporate tax on an affiliate holding a group trademark for not receiving usage fees from an affiliate in a different business sector.

According to the court on the 20th, the Seoul Administrative Court Administrative Division 2 (Presiding Judge Shin Myunghui) recently ruled in favor of the plaintiff in the first trial of the corporate tax imposition cancellation lawsuit filed by DB Savings Bank against the Namdaemun Tax Office.

Previously, tax authorities imposed corporate tax including approximately 7.2 billion KRW as income inclusion on Dongbu Construction, which held the 'Dongbu' trademark (sold the following year due to group restructuring), for not receiving usage fees from affiliates without trademark rights between 2010 and 2014. They considered that by not receiving trademark usage fees, the tax burden on income was unfairly reduced.

In this process, DB Savings Bank was also imposed corporate tax of about 600 million KRW, roughly one-tenth of the trademark usage fee. This was because it was one of the 10 affiliates jointly registered as trademark rights holders of the trademark owned by Dongbu Construction. At that time, the 66 affiliates of the Dongbu Group were divided into six business sectors, and DB Savings Bank held the trademark rights in the 'Insurance, Securities, Banking, and Services' sector.

DB Savings Bank contested this in an administrative lawsuit, arguing, "During that period, the Dongbu Group had a negative image due to filing for rehabilitation procedures. Therefore, there was no effect of increased sales or profits from trademark usage." They also claimed that the calculation of the usage fee amount was made without considering the number of trademark rights held by the companies owning the trademark or the scope of designated trademark goods.

The first trial ruled in favor of DB Savings Bank. It held that unless the economic value was completely absent, receiving trademark usage fees was appropriate. However, it ruled that imposing fees on affiliates where the trademark rights did not apply was unfair.

Furthermore, it judged that the scope of the right to receive trademark usage fees should be limited to financial-related corporations in similar business sectors, and the usage fees should be evenly divided among the four related corporations jointly holding the trademark rights.

The court stated, "The portion exceeding the tax amount calculated from the legitimately calculated income inclusion in this case is illegal," and "Since the legitimate tax amount cannot be calculated based on the submitted materials alone, this entire imposition must be canceled."

Meanwhile, due to the tax authorities' appeal, this case will be re-examined in the second trial by the Seoul High Court Administrative Division 9-1 (Presiding Judge Kang Munkyung).

This content was produced with the assistance of AI translation services.