(image: Pixabay)
SEOUL, Oct. 6 (Korea Bizwire) — Netflix Services Korea Ltd., the local unit of global video streaming giant Netflix Inc., has been accused of evading taxation in South Korea by turning over most of the revenues generated in the country to overseas headquarters as ‘commission.’
Independent lawmaker Yang Jung-suk claimed that Netflix Services Korea has raised the cost of goods sold and lowered its operating profits by paying 320.4 billion won (US$268.9 million) or 77 percent of South Korean sales to its overseas headquarters as ‘commission.’
As a result, the company only paid some 2.1 billion won ($1.7 million) in corporate taxes last year.
Comparing the financial status of Netflix Inc. and Netflix Services Korea revealed that the cost of goods sold, in proportion to total sales in South Korea, stood at 61 percent for Netflix Inc. and 81 percent for the Korean branch, unveiling a whopping 20 percentage point difference.
The operating profit margin for Netflix Inc. stood at 18 percent compared to 2 percent at Netflix Services Korea, a significant discrepancy.
Netflix Services Korea has been capable of engineering its operating profits via an agreement with Netflix Inc. on setting the cost of goods sold.
In response, the National Tax Service opened up an eight-month investigation in August of last year to charge the company 80 billion won in taxes.
H. M. Kang (hmkang@koreabizwire.com)
