Philip Morris Korea Wins Trademark Fee Battle

Philip Morris Korea (PMK) has won a legal battle against South Korea’s tax authority over trademark usage fees, reports The Korea Herald, citing legal sources.

The Seoul Administrative Court on March 1 ruled in favor PMK, ordering Seoul Main Customs to cancel a KRW9.82 billion ($8.7 million) tax.

The ruling comes four years after the Korea Customs Service ordered the company to pay KRW3.4 billion in customs duties, KRW3.7 billion in value added tax and KRW2.6 billion in penalty tax over royalties paid to its headquarters.

PMK appealed the decision.

PMK has been producing tobacco products in Korea with raw materials exported from its headquarters since 2012. The tax authorities moved against the firm, believing the Korean unit had been paying royalties to use the company’s trade secrets.

According to Korea’s Customs Act, companies are subject to a levy when importers pay their business partners a low price and make the rest of the payment in royalties to evade taxation.

The March 1 ruling dismissed the argument by the tax authorities, saying that the royalties paid by PMK include trademark fees as well as tobacco leaves and business secrets and that the tax needs to be recalculated.