Court orders partial cancellation of corporate taxes for Netflix Korea

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Court orders partial cancellation of corporate taxes for Netflix Korea

SEOUL, April 28 (Yonhap) -- A Seoul court on Tuesday ordered authorities to cancel 68.7 billion won (US$ 46.6 million) in taxes levied on the local unit of U.S. streaming giant Netflix.

The Seoul Administrative Court ruled partly in favor of Netflix Services Korea Ltd. after the company filed a lawsuit seeking to nullify corporate tax and other levies imposed by local tax authorities in November 2023.

In 2021, the National Tax Service slapped approximately 80 billion won in taxes on Netflix following an audit amid controversy that the company was paying relatively low corporate tax compared to the volume of its sales. The streaming service firm challenged the measure, seeking a cancellation of around 76.2 billion won of the levied taxes.

At the center of the controversy is whether the payments made by Netflix's Korean unit to a Dutch affiliate should be treated as "copyright royalties" or "business profits."

Tax authorities have argued that the money transferred to the Dutch affiliate should be regarded as copyright royalties, which are subject to taxation.

The local unit of Netflix, however, claimed that payments under such arrangements constitute business profits, which are not taxable under a tax treaty between South Korea and the Netherlands designed to prevent double taxation.

The court ruled that the payments made by the plaintiff cannot be considered copyright royalties for video content and should be regarded as profits from providing streaming services to Korean consumers.

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