Seoul court rules for Netflix in partial tax cancellation

A South Korean court has ordered the partial cancellation of corporate taxes imposed on the local unit of U.S. streaming giant Netflix, ruling that 68.7 billion won (about $46.6 million) in levies should be revoked.

The decision was issued on Tuesday by the Seoul Administrative Court, which partly sided with Netflix Services Korea after the company filed a lawsuit seeking to overturn corporate tax assessments and other charges imposed by local tax authorities in November 2023, News.Az reports, citing The Korea Times.

The dispute dates back to 2021, when South Korea’s National Tax Service (South Korea) conducted an audit and imposed roughly 80 billion won in taxes on Netflix. Authorities argued that the company had paid relatively low corporate taxes compared to its sales volume.

Netflix challenged the assessment, seeking to cancel around 76.2 billion won of the total tax bill.

At the heart of the dispute was whether payments made by Netflix’s Korean subsidiary to a Dutch affiliate should be classified as “copyright royalties” or “business profits.”

Tax authorities maintained that the payments to the Dutch entity should be treated as copyright royalties, which are subject to taxation in South Korea.

However, Netflix argued that these payments represented business profits under its service structure and therefore should not be taxed under the Korea–Netherlands tax treaty designed to prevent double taxation.

The court ultimately ruled that the payments in question could not be considered copyright royalties for video content. Instead, it determined they should be treated as profits derived from providing streaming services to consumers in South Korea, leading to the partial cancellation of the tax assessment.

News.Az 

By Nijat Babayev