Even If You Take Over an Internet Broadcasting Server and Open a New Site, You Cannot Receive Corporate Tax Reduction

Published 21 Oct.2024 14:34(KST)

The operator of the internet broadcasting platform ‘Panda TV’ filed an administrative lawsuit challenging a corporate tax assessment of 3 billion won but lost the case. The court ruled that it is difficult to consider the operator’s establishment of the Panda TV site?after effectively acquiring member information, videos, servers, and other assets from other internet broadcasting platforms?as a ‘startup,’ and therefore the operator is not eligible for the tax reduction benefits granted to startup venture companies.

The Seoul Administrative Court’s Administrative Division 8 (Presiding Judge Lee Jeong-hee) ruled on August 13 that Double Media, the operator of Panda TV, lost the corporate tax assessment cancellation lawsuit (2023GuHap65907) filed against the Gangnam Tax Office.

[Image source=Beomryul Newspaper]

Double Media, established in September 2019, launched the Panda TV service in October of the same year, providing internet broadcasting services. Double Media filed its corporate tax for the 2020 fiscal year applying the ‘Startup Venture Small and Medium Enterprise Tax Reduction Regulation’ under the Restriction of Special Taxation Act.

The Seoul Regional Tax Office notified the Gangnam Tax Office of the audit results stating that Double Media was not eligible for the tax reduction. It was determined that since Double Media started Panda TV by acquiring the operating rights from Planet Pang, the operator of ‘Can TV,’ and Global Monster, the operator of ‘Pool TV,’ it should not be considered a ‘startup company.’ Following this notification, the Gangnam Tax Office instructed Double Media to pay 3.0735 billion won in corporate tax for the 2020 fiscal year. Double Media filed a lawsuit in objection.

Double Media argued, “Can TV, Pool TV, and Panda TV differ in broadcasting transmission methods, and as a result, Panda TV’s sales have increased, indicating that the core of the business operation method is different, thus qualifying as a ‘startup’ under the tax reduction requirements.”

However, the court did not accept Double Media’s argument. The court stated, “The corporate tax reduction regulation under the Restriction of Special Taxation Act does not apply when it cannot be considered a case of ‘startup,’ meaning the initial commencement of a new business that produces a primitive business creation effect,” and “Since Panda TV, Can TV, and Pool TV all operate in the same manner?BJs affiliated with each platform conduct internet broadcasts such as gaming or adult broadcasts, induce viewer sponsorships, and generate revenue by selling items to viewers for a fee?it is difficult to see this as having the effect of primitive business creation.”

The court also noted that since Double Media signed contracts to lease member information, videos, servers, and other assets of Can TV and Pool TV from Planet Pang and Global Monster for 10 years respectively, this falls under the category of ‘acquiring or purchasing assets used in a previous business to operate the same type of business’ rather than a ‘startup’ under the Restriction of Special Taxation Act.

The court explained, “Considering △the lease period is 10 years △it is unusual to lease an internet broadcasting platform, which is not real estate such as land, for a long term of 10 years △the site lease fee was set at a large amount of 1.1 to 1.6 billion won, and the entire 10-year lease fee was agreed to be paid within four months after the contract, which cannot be regarded as a typical lease contract, the substance of this contract should be seen as Double Media acquiring and purchasing all member information, copyrighted videos, servers, and related information of Can TV and Pool TV.”