Lawmaker accuses Netflix Services Korea of evading taxes by sending profits to HQ

A lawmaker accused Netflix Services Korea Ltd. of evading taxation in South Korea by turning over most of its revenues to overseas headquarters as a "commission."

According to independent lawmaker Yang Jung-suk, the South Korean unit of global video streaming giant Netflix Inc. has raised the cost of goods sold and lowered its operating profits by paying 320.4 billion won or 77 percent of South Korean sales to its overseas headquarters.

Consequently, the managed to reduce the corporate taxes it paid to some 2.1 billion won last year.

The percentage of goods sold in South Korea was 61 percent for Netflix Inc. and 81 percent for Netflix Services Korea, revealing a 20 percentage point difference.

Meanwhile, Netflix Inc. posted an operating profit margin of 18 percent compared to Netflix Services Korea's 2 percent.

Netflix Services Korea is capable of "engineering" its operating profits by setting the cost of goods sold via an agreement with Netflix Inc.

The National Tax Service began an eight-month investigation of Netflix Services Korea in August of last year, which ended up taxing the company 80 billion won.