Netflix Korea 76 Billion Won Corporate Tax Lawsuit: Both Sides Appeal

First Trial Orders 68.7 Billion Won Canceled
Both Tax Authorities and Netflix Appeal

The legal battle over corporate tax amounting to approximately 76 billion won between Netflix Services Korea (Netflix Korea) and the tax authorities will move to the appellate court.

According to the legal community on the 19th, the tax authorities submitted an appeal to the Seoul Administrative Court the previous day, and Netflix Korea also filed its appeal with the same court on this day.

The 6th Administrative Division of the Seoul Administrative Court partially ruled in favor of Netflix Korea on April 28 in a lawsuit filed by the company against the chief of the Jongno Tax Office and others, seeking the cancellation of a corporate tax assessment. The court ordered the cancellation of 68.7 billion won out of a total 76.2 billion won in corporate taxes imposed.

The National Tax Service imposed taxes amounting to approximately 80 billion won on Netflix Korea in 2021 following a tax audit. The amount was later reduced through an appeal to the Tax Tribunal, but Netflix Korea filed a lawsuit in November 2023 demanding the cancellation of the remaining 76.2 billion won in full.

The core issue was the nature of the fees Netflix Korea paid to its Dutch affiliate. The tax authorities regarded these payments as “royalties for copyright” subject to withholding tax, on the grounds that Netflix Korea holds domestic transmission rights. Netflix Korea argued that the payments constituted “business income,” asserting that, under the Korea-Netherlands Tax Treaty, Korea does not have the right to tax this income.

The court sided with Netflix Korea, stating that “it is difficult to regard the payments as consideration for the use of video content copyrights.” However, the court ruled that the corporate tax imposed on its proprietary cache server, OCA (Open Connect Appliance), was legitimate.

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