Korean Supreme Court Changes 30-Year Precedent on Taxation of Royalties for Foreign-Registered Patents
2025.09.24.
On September 18, 2025, the Korean Supreme Court issued an en banc decision in Case No. 2021Du59908 (the “En Banc Decision”), changing its long-standing position on the taxation of royalties for patents not registered in Korea (“foreign-registered patents”).
In its prior decisions), the Supreme Court consistently held that the “use” of a patent right for purposes of Articles 6(3) and 14(4) of the Korea-U.S. tax treaty means “use within the country in which the patent right is effective”, and therefore, the use in Korea of a patent not registered in Korea cannot be recognized. However, in the En Banc Decision, the Supreme Court overturned this legal principle, holding that for foreign-registered patents, the determination of whether a patent is used in Korea should be based not on whether the patent rights are exercised in Korea under the “territoriality principle”, but on whether the “patented technology” is actually used in Korea for activities such as manufacturing and sales.
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