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Lawmaker claims Netflix Korea may have been evading tax

Oct. 25, 2022 - 15:46 By Lee Yoon-seo

Netflix Korea, a Korean subsidiary of the global streaming platform Netflix, saw over 1.2 trillion won ($836 million) in sales for last three years but paid only 0.5 percent of its revenue in tax, a ruling party lawmaker said on Tuesday, raising suspicion that the US company may have been evading local taxes.

According to an audit report of Netflix Korea released by Rep. Kim Seung-su of the People Power Party, from 2019 to 2021, Netflix Korea gained 1.23 trillion won and transferred 959.1 billion won, or 77.8 percent of the total sales as commission fees to its headquarter in California.

The lawmaker claimed that the money transferred to its headquarters as commission fees contributed to lowering Netflix Korea's net income, consequently lowering its corporate tax.

Netflix headquarter takes certain percentage of its subsidiaries’ sales as commission fees for their distribution of its contents.

While the amount of paid commission fees increased each year, the lawmaker said Netflix Korea appears to have paid an average 0.3 to 0.5 percent of its sales as taxes for the last three years.

"If it was not transferring Netflix Korea's income overseas (in form of commission fees), Netflix Korea would have had to pay a total of 50 billion won over the last three years," said Rep. Kim.

“Netflix's corporate value is soaring with the success of K-content, but it continues to ignore its responsibilities in Korea. We need to prepare policies to stop the outflow of national wealth and prevent foreign tech industries from avoiding taxes in the country,” he added.

Regarding the matter, Jung Kyo-hwa, an executive director from Netflix Korea said during its parliamentary audit on Monday that Netflix paid taxes in accordance with the nation's tax laws and tax treaties, and is seeking judgment from the Tax Tribunal due to differences in interpretation of the taxation laws.