Kim Young-gwon, 36, a former national team defender now playing for Ulsan HD, has lost his final appeal against a tax assessment of about 830 million won ($600,000). The Supreme Court ruled that taxes paid in China that went uncredited in South Korea cannot be deducted from taxes owed on income earned in Japan.
The Supreme Court's third division, with Justice Oh Seok-jun as presiding judge, on Sept. 23 upheld a lower court ruling against Kim in his suit seeking to overturn the comprehensive income tax assessment imposed by the head of the Ulsan tax office, according to legal sources on the 18th.
Kim played for Guangzhou Evergrande in China from 2012 to 2018 and for Gamba Osaka in Japan from 2019 to 2021. He has played for Ulsan HD since 2022.
At issue was whether taxes paid in China, which could not be credited in South Korea, could be deducted from taxes owed on income earned in Japan.
Under the income tax law, residents of South Korea may credit taxes paid abroad against their domestic income tax up to a set limit. Any remaining amount can be carried forward to later tax periods.
Of the taxes Kim paid in China in 2018, about 600 million won went uncredited because it exceeded the limit. He later claimed both the taxes paid in Japan and the uncredited Chinese amount when filing comprehensive income tax on his Japanese earnings.
Tax authorities rejected the claim, saying the credit limit must be calculated separately for each country, and imposed an additional assessment of about 830 million won.
Kim filed suit after his tax appeal was dismissed. He argued that he was not a resident of South Korea because he was playing in Japan, and that country-by-country credit limits apply only when income arises in multiple countries during the same tax period. The courts of first and second instance both found the tax authorities' action lawful. They noted that he sent most of his overseas earnings home and spent them there, and that he lived with his family in Seoul, concluding that the center of his personal and economic life was in South Korea. The courts also said that because he was taxed at rates of about 43.9% in China and 20.4% in Japan, allowing the uncredited Chinese taxes to be deducted from his Japanese income could result in an excessive tax credit.
The Supreme Court upheld that reasoning. A court official said the ruling means that amounts carried over from uncredited taxes paid in China cannot be deducted against the credit limit corresponding to Japanese income, and that taxes paid abroad must be credited separately for each country where they were paid.