Samsung SDS Wins Appeal in 149 Billion KRW Corporate Tax Cancellation Case

[Asia Economy Reporter Oh Ju-yeon] A ruling has been made that the corporate tax assessment of approximately 149 billion KRW imposed following the merger of Samsung SDS and Samsung Networks was unjust.

According to the court on the 20th, the Seoul High Court Administrative Division 1-1 (Presiding Judges Shim Jun-bo, Kim Jong-ho, Lee Seung-han) recently ruled in favor of the plaintiff, Samsung SDS, overturning the first trial's decision, in the lawsuit filed against the Jamsil Tax Office seeking cancellation of the corporate tax imposition.

Samsung SDS was assessed corporate tax amounting to 149.03 billion KRW by the Jamsil Tax Office during its 2010 merger with Samsung Networks. During the merger process, the goodwill of 417.4 billion KRW was not recognized as tax law goodwill, which includes the value of intangible assets, and its deduction was deferred. However, the tax authorities notified Samsung SDS in 2016 that the 417.4 billion KRW recorded as goodwill also constituted profit from the merger, imposing a total of 149 billion KRW in corporate tax and additional tax.

Samsung SDS filed an objection to the tax assessment, but after the Board of Audit and Inspection dismissed the appeal, it filed a lawsuit in 2019 against the tax office, arguing that "the goodwill recorded in the books according to accounting standards cannot be considered goodwill under tax law."

The first trial court ruled that it was "subject to taxation under tax law," rejecting Samsung SDS's claims. However, the appellate court judged that "the disposition calculating corporate tax by including the goodwill amount of 417.4 billion KRW as merger evaluation gains in taxable income was illegal."

The appellate court explained, "The merger of the two companies was intended to complement the mutual capabilities of the plaintiff and Samsung Networks, strengthen external competitiveness, enhance management efficiency, and maximize synergistic effects to increase corporate value." It further added, "The plaintiff selected and evaluated all intangible assets of Samsung Networks that have business value, and the remainder can be seen as accounted for as goodwill in the accounting records."

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