"Withdrawing Corporate Funds by Selling Patent Rights? Doing It Recklessly Could Lead to a Tax Bomb"

While the method of a corporate representative transferring patent rights they hold to the corporation to recover funds is known as a tax-saving measure, warnings have emerged that transactions failing to meet necessary requirements could instead cause a massive tax burden. It is pointed out that the actual ownership of the patent rights, their job-relatedness, and the appropriateness of the transfer price must be closely reviewed in advance.

Why Patent Transfers are Called a Tax-Saving Tool and Their Risks

According to a video from the YouTube channel 'Segeum Aneunhyeong', the reason the method of a CEO selling patent rights held in their personal name to the corporation and receiving the proceeds is gaining attention is due to the classification of income. If the consideration for the patent transfer is classified as 'other income,' 60% of the received amount can be recognized as necessary expenses under tax law. For example, if 100 million won is received, taxes are calculated only on 40 million won after excluding 60 million won as expenses, creating a structure where the tax burden can be lower than typical earned income or dividend income. Additionally, if a representative has temporary payments (loans to the company) that they must repay to the company, this method is also used to settle debts by offsetting them with the patent proceeds.

However, tax accountant Song No-yong emphasizes that the mere fact of selling patent rights does not unconditionally reduce taxes. This is because cases where the National Tax Service disputes patent transactions and imposes taxes, leading companies to file lawsuits in opposition, are frequent. If a patent transaction is denied, the amount reported as other income may be reclassified as earned income (bonus), causing personal income tax to surge, and the corporation may also fail to have the expense recognized, risking an additional heavy tax burden consisting of corporate tax and penalty taxes.

According to the example presented in the video, if 100 million won worth of patent rights is reported as other income, the tax burden for the representative is approximately 4.97 million won. However, if the tax authorities treat this as a bonus (earned income), the tax amount increases to approximately 15.22 million won, meaning the representative may have to pay about 10.25 million won more than originally intended. From the corporation's perspective, if the 100 million won expense is denied, assuming a corporate tax rate of 20%, the tax burden could increase by approximately 22 million won including local income tax. If a non-compliance penalty (10%) and a late payment penalty (approximately 8% per year) are added, the combined tax burden for the individual and the corporation can grow to tens of millions of won.

Actual Ownership and 'Job Invention' Status Determine Tax Direction

The first thing tax authorities examine when reviewing patent transactions is 'actual ownership.' The video explains this through the case of an automobile parts manufacturer. Even if a patent is registered in the name of the representative, if it was developed using the company's research personnel and facilities and there is no objective data proving the representative conducted the research with personal expenses, the court may judge it to be the company's right. In that actual case, the court ruled that even if the representative participated in some of the development, it was difficult to view it as an independent individual right separate from the company, and treated the patent proceeds as a distribution of corporate profits to the representative, thereby issuing a bonus disposition to the representative.

On the other hand, there are cases where individual rights were recognized. In the case of an oriental medicine shampoo manufacturer, the representative had developed the technology and held the patent before the company was established, and after the company was founded, they used the technology and received royalties. In this instance, the court protected the representative's individual rights, recognizing that the patent was contributed as the representative's personal contribution rather than the company's contribution.

Furthermore, whether the invention itself was a 'job invention' made within the scope of the company's business is also a key variable. The presenter cited the case of an electrical equipment manufacturer, explaining that if a representative is in charge of the company's research and development and conducts experiments using the factory and employees, it is highly likely to be classified as a job invention and taxed as earned income rather than other income. In particular, in the case of a controlling shareholder CEO, caution is required as they may be excluded from the tax exemption benefits for job invention compensation. However, as seen in the case of a motor manufacturer, if it is proven that the representative was not in charge of the company's research institute work and the invented technology is used by a partner company rather than the company itself, indicating low company contribution, the disposition to tax as earned income can be canceled through the Tax Tribunal.

Importance of Appropriate Price Calculation and Prior Review

Even if the ownership of the patent rights and the classification of income are clear, the 'price' can become an issue. Since market prices for patent rights are not clearly defined, if a corporation pays an excessively high amount to a representative, the tax authorities may deny it. In the construction industry case mentioned in the video, even though formal compensation regulations were in place, there was a case where the Tax Tribunal did not recognize the entire amount as an expense because the paid amount exceeded the appropriate range. This suggests that even if regulations exist, if the actual amount paid is excessive, it may not be recognized as an expense under tax law.

In conclusion, if considering fund recovery through patent rights, one should not create a formal transaction solely for the purpose of settling temporary payments. Tax accountant Song No-yong advised, "One must clearly distinguish between a corporation acquiring a patent with actual value due to business necessity and a formal transaction intended to extract funds." To this end, it is recommended to conduct a prior review of ▲the circumstances of the invention and the relationship of rights, ▲the relevance to company business, ▲calculation of an appropriate price, and ▲a comparison of tax burdens between other income and earned income, and to seek advice from a tax expert if necessary.