South Korea court cancels Netflix tax bill

A Seoul court ordered South Korean tax authorities to cancel 68.7 billion won (US$46.6 million) in taxes imposed on Netflix, ruling the payments were business profits rather than taxable copyright royalties.

The Seoul Administrative Court partly sided with Netflix Services Korea in its suit against corporate tax and other levies imposed in November 2023.

The dispute followed a 2021 audit that led the National Tax Service to assess about 80 billion won (US$54.4 million) in taxes.

Netflix sought to cancel about 76.2 billion won (US$51.8 million) under a South Korea-Netherlands tax treaty meant to avoid double taxation.

🔗 Source: Yonhap

🧠 Food for thought

Implications, context, and why it matters.

The reversed tax case focused on how Netflix booked payments tied to its Korea business

South Korea’s National Tax Service said Netflix underpaid tax by treating payments from its Korean unit to a Dutch affiliate as business profits rather than royalties 1.
From 2019 to 2021, Netflix Korea sent 959.1 billion won (US$652 million) to Netflix headquarters in California as commission fees 2.
That structure kept its tax bill low. In 2020, Netflix paid 2.2 billion won (US$1.48 million) in corporate tax on 415.4 billion won (US$282 million) in revenue, for an effective rate of 0.5% 1.
Netflix was not alone. South Korean regulators also examined Google over Korean revenue booked through an Asia-Pacific entity in Singapore, where tax rates were lower 1.

That ruling landed during wider fights over Netflix’s Korea operations

Netflix later ended its Korea court fight with SK Broadband, a South Korean internet service provider, over network use fees and announced a business tie-up 3.
Earlier in the case, a Korean court rejected Netflix’s request to confirm it was not required to pay SK Broadband for network use, leaving the matter for both sides to negotiate 4.
The deal included bundled offers plus product integrations across SK Telecom and SK Broadband services. The releases did not clearly mention usage fees. Those payments were likely part of the settlement, said Strand Consult, a telecom research firm 3.
The outcome has been treated as a signpost in global “fair share” debates, including talks in the European Union (EU) and the US on whether large traffic generators should help cover network infrastructure costs 5.