SEUM and SEUM Tax successfully represented two foreign professional baseball players of the KBO League in securing the full cancellation of income tax notices from the National Tax Service. 

The players played an active role as professional baseball players for their respective baseball clubs for the Korean professional baseball season (about 8 months), during which time they stayed in accommodations provided by their clubs. They received their annual salary after applying the 20% withholding tax pursuant to the Korean Income Tax Act.

The Korean Income Tax Act considers a person who has resided in Korea for at least 183 days as a tax-paying resident and requires such person to file a general income tax report. Accordingly, the National Tax Service determined that the two players were residents of Korea and notified each player of their intent to levy taxes of in excess of KRW 100 million, including penalty taxes.

SEUM Tax, noting that both players reside in the United States and have filed tax returns in the United States, analyzed whether the two players were construed as U.S. residents for federal income tax purposes, was able to prove that the players are dual residents under for the purposes of both Korean and U.S. tax laws.

SEUM Tax analyzed and proved that, based on the tie-breaker rules of the U.S.-Korea tax treaty applying to cases of dual residency, the players were not residents of the Republic of Korea, which played a pivotal role in the full cancellation of the taxes in excess of KRW 100 million.

This case was significant in that SEUM Tax was able to overturn the National Tax Service’s claims based on its analysis of not only Korean tax law, but also the U.S. tax laws, U.S.-Korea tax treaty, and the OECD Model Tax Convention.

This case was handled by SEUM Tax CTA Jeeho Kim and SEUM foreign attorney Daniel Chong.