The Seoul Administrative Court delivered a tax dispute ruling on Tuesday that cancels 68.7 billion won in taxes imposed on Netflix Services Korea. The global streaming giant’s local unit had filed a lawsuit in 2023 seeking to cancel about 76.2 billion won. The court accepted most of that claim, rejecting only a smaller portion.
The court found that Netflix Services Korea played the role of a service intermediary rather than a copyright user. Overseas entities handle the core functions of storing and transmitting content to Korean consumers. The local unit operates a platform that enables access to Netflix services in Korea. It also conducts auxiliary activities such as advertising. Consequently, the court determined that payments to overseas entities are not compensation for copyright use. Instead, they compensate for streaming services provided directly to Korean consumers.
Tax authorities had argued that Netflix was avoiding taxes. They cited that Netflix Services Korea posted about 415 billion won in sales in 2020. However, the company paid only about 2.1 billion won in corporate tax. Authorities conducted an audit in 2021 and imposed 80 billion won in additional taxes. The Tax Tribunal later granted a partial reduction, leaving 76.2 billion won contested. Therefore, Netflix filed an administrative suit leading to this tax dispute ruling.
The court rejected tax authorities’ claim that selling services through the local unit constitutes tax avoidance. It stated that this fact alone cannot be viewed as an act of tax avoidance in Korea. Nevertheless, the court upheld a smaller portion of the tax assessment. Server assets installed at domestic internet service providers fall under the local unit’s actual control. These assets are substantially used for advertising and other business activities. Hence, the tax dispute ruling partially affirmed that portion.
A Netflix official said the company complies with tax laws in every country it operates. The company continues making long term investments in Korea’s content ecosystem. It also cooperates with the authorities on all tax matters. Future cases involving similar business models may follow this reasoning. The ruling also may influence how other countries approach digital service taxation. For now, Netflix has secured a major victory in the Korean market. The company can focus on expanding its content library without this tax burden.
