South Korean financial holding companies are reportedly confounded by a fresh regulatory audit from the antitrust agency on the royalties they collect from units for use of trademark. The new audit came after banks were bombarded with taxes for royalty revenue that was later cancelled.
Holding entities charges royalties for the corporate trademark insurance, credit card and finance subsidiaries share with sister banks to keep up common identity.
According to sources on Thursday, Shinhan, Kookmin and other financial holding firms earned from 4 billion won ($3.53 million) to 400 billion won per year in royalty revenue, which is similar to or exceeding that of non-banking big enterprises such as CJ and GS as of 2014. Some banks have been under fire for their excessive royalty levy. Overall income of holding companies could be hurt if the Fair Trade Commission interferes to regulate on the royalty rates.
Shinhan was the country’s first financial holding company that charge fees for use of the Shinhan brand from its subsidiaries in 2008 at the recommendation by the Financial Supervisory Service, which said any free use of branding by its subsidiaries would constitute unfair business support. The National Tax Service slapped 135 billion won on Shinhan Bank in 2013 for royalty revenue suspecting the payment to be a vehicle to pay lower income tax. The tax authority withdrew the levy upon the bank’s lodge of complaint.
By Kim Tae-sung and Minu Kim
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