Last Year 400 Billion Won Korean Netflix, 80 Billion Won Tax Reassessment "Will Be Reconsidered"

Fines Amounting to Hundreds of Millions... Reasons for Non-Cooperation in Investigation

[Asia Economy Reporter Cha Min-young] It has been reported that the Korean branch of Netflix, the world's largest online video streaming service (OTT) provider, was fined taxes amounting to 80 billion KRW.

According to industry sources on the 16th, the National Tax Service recently concluded a tax audit on Netflix Services Korea and imposed a tax surcharge of 80 billion KRW.

In addition, Netflix Services Korea was also fined several hundred million KRW in penalties for uncooperative behavior during the tax audit process, such as refusing to submit documents. Based on the level of the penalties, it is estimated that the company refused to submit documents at least 30 times.

The International Transaction Investigation Bureau of the Seoul Regional Tax Office deployed investigators to the headquarters located in Jongno-gu, Seoul, in August last year to collect necessary documents for the tax audit. The investigation was converted into a tax evasion investigation in December last year and continued until April this year.

Regarding this, the company stated, "Netflix has sincerely cooperated with the tax audit and plans to seek further judgment through additional legal procedures regarding factual and legal disagreements." It is expected that they will proceed with a tax appeal process in the future.

Meanwhile, Netflix recorded sales exceeding 400 billion KRW domestically last year. According to the audit report released by Netflix Services Korea on the 12th, last year's sales amounted to 415.45 billion KRW, and operating profit was 8.82 billion KRW. This represents an increase of 123.5% and 295.5%, respectively, compared to the previous year's sales and operating profit.

Netflix is suspected of tax avoidance. Despite high profits, the corporate tax expense paid by Netflix Services Korea last year was only 2.18 billion KRW. Compared to a domestic IT company with similar sales of 400 billion KRW last year that paid 15.8 billion KRW in corporate tax, this is about one-eighth. In South Korea, where the corporate tax rate is relatively high at 22%, it is believed that the branch deliberately lowered its profits and transferred earnings to overseas branches with lower tax rates through management consulting fees and other methods.

However, Netflix has stated that, separate from its legal response to tax authorities, it plans to continue investing in Korean content. Netflix said, "We will continue to strive for co-growth with the Korean creative ecosystem by investing approximately 550 billion KRW in Korean content this year."

This content was produced with the assistance of AI translation services.