The National Tax Service (NTS), South Korea's tax agency, has imposed 314.7 billion won in corporate taxes on Oracle Korea, the local unit of US tech giant Oracle Corp., for allegedly dodging corporate taxes.
According to NTS, Oracle Korea avoided paying corporate taxes between 2008 and 2014 by taking a detour to Oracle's unit in Ireland, a known tax haven.
Oracle Korea sends its profits to its headquarters in the US in the form of software licence fees. Under the Korea-US Tax Treaty, the NTS can impose a 15% tax on software licence fees a domestic company pays to an American company.
The NTS has noted that Oracle Korea has been paying software licence fees to the Irish entity since 2008.
Under the Korea-Ireland Tax Treaty, however, the NTS cannot levy taxes on Oracle Korea's payment of software licence fees to the Irish unit. The NTS concluded that the software licence fees Oracle Korea paid to the Irish unit eventually flowed into the US headquarters.
In response, Oracle Korea filed a complaint with South Korea's Tax Tribunal in April last year against NTS's earlier decision to impose taxes on the company. In November, the tribunal rejected Oracle Korea's complaint. Oracle Korea claimed that its Irish unit was not a ghost company but a going concern. However, the tribunal judged that the result of NTS's probe into the company was more convincing.