The National Tax Service of South Korea has initiated a special tax investigation into Coupang. (Image courtesy of Yonhap)
SEOUL, May 13 (Korea Bizwire) – The National Tax Service of South Korea has initiated a special tax investigation into Coupang, the nation’s top e-commerce company. Authorities are examining the flow of funds between Coupang’s Korean entity, wholly owned by the U.S.-based Coupang Inc. in Delaware, and its overseas affiliates.
This probe coincides with looming scrutiny from the Fair Trade Commission over allegations that Coupang manipulated algorithms to prominently display its own private-label products in search results. The company faces an FTC full committee review by month’s end, compounding potential troubles.
According to industry sources on May 12, the Seoul Regional Tax Office deployed investigators from its international transactions division to Coupang’s Korean headquarters in Sincheon-dong, Seoul, in mid-April. This is a non-regular special tax probe, distinct from the regular audits conducted every four to five years.
The Seoul tax office’s audit divisions include Investigation Bureaus 1 through 4 and the International Transactions Investigation Bureau. Typically, Bureaus 1-3 handle regular audits, while Bureau 4 and the International Transactions team conduct special probes, often scrutinizing foreign companies or businesses with significant overseas dealings when overseas tax evasion is suspected.
The tax agency declined to disclose details behind this investigation. However, some in the tax industry speculate it could be part of the crackdown on intelligent offshore tax evasion targeting certain multinationals this year.
Coupang’s structure involves Chairman Kim Beom-seok effectively controlling the Delaware-based Coupang Inc., listed on the New York Stock Exchange, through a dual-class share structure. Coupang Inc. wholly owns the Korean subsidiary.
This year, the National Tax Service has been examining multinationals headquartered in tax havens like Ireland and Delaware but operating in South Korea, investigating potential tax evasion.
The retail industry is closely watching this non-regular audit, as the tax authority typically spends months gathering and analyzing relevant data before launching such probes. According to sources, last month’s initial investigation did not involve seizing computers, USB drives, accounting books, or other materials – an action known as a “disbursement investigation.”
A former high-ranking tax official commented, “Not conducting a disbursement investigation despite this being a special probe suggests authorities may have already secured considerable evidence against specific allegations.”
Coupang has flatly denied any wrongdoing. A retail industry official stated, “While the International Transactions Bureau is involved, we understand this is a routine tax audit.” The company also firmly refuted any suspicions of offshore tax evasion.
The official explained, “Typical offshore tax evasion occurs when funds flow from a domestic entity to an overseas affiliate. But for Coupang, the U.S. entity Coupang Inc. raised funds through its listing and then injected that capital into Korea.”
With the FTC’s full committee deliberation on preferential treatment of Coupang’s private-label brands looming, the retail sector is raising questions about the timing of the tax probe, as it is highly unusual for both antitrust and tax authorities to simultaneously target a specific company.
Ashley Song (ashley@koreabizwire.com)
