Yonhap reported May 4 that the Seoul Administrative Court’s Administrative Division 5 ruled April 23 that Meta’s Ireland entity partly won its lawsuit seeking to cancel a corporate tax assessment imposed by the head of the Yeoksam tax office and others. The amounts assessed, challenged and canceled were not disclosed.
Meta’s Ireland entity, part of Meta Group, sells platform advertising space to advertisers worldwide outside North America. In South Korea, a Meta affiliate has operated by buying ad space from the Ireland entity and reselling it to local customers.
The dispute began after the Seoul Regional Tax Office issued a corporate tax assessment against Meta’s Ireland entity in 2021. Tax authorities argued the Korean affiliate effectively constituted a domestic permanent establishment for the Ireland entity and was used to sell ad space to Korean advertisers, making the related income taxable in South Korea.
Meta countered that the Korean office was simply a place where the Korean affiliate conducted its own business, and that work performed in South Korea amounted only to preliminary and auxiliary activities such as promotion and information gathering.
The court sided with Meta, saying the Ireland entity did not have the right to dispose of or use the Korean business site and that it was difficult to conclude the Ireland entity actually carried out business there.
“The fact that the service activities provided by the Korean corporation to the Ireland corporation offer economic benefits to the Ireland corporation does not, by itself, provide grounds to evaluate them as part of the plaintiff’s own business activities,” the court said.
The court also said it was hard to view the Korean affiliate as performing essential business activities because Meta owns and manages the key intellectual property and servers needed to establish and operate the platform.
“The platform’s appeal — the development and operation that draws users — is important, but the Korean corporation was not involved at all in such development and operation,” the court said, adding that promotion and marketing are generally auxiliary rather than essential business activities absent special circumstances.
The ruling follows a similar case involving Netflix. In a lawsuit seeking to cancel corporate tax and other assessments, a court ruled that 68.7 billion won of 76.2 billion won should be canceled, effectively handing Netflix a win.
Industry officials said the Meta decision underscores how the digital economy can clash with existing tax systems, as global big tech companies use structures that shift costs overseas — such as technology royalties or service fees — to minimize profits booked in South Korea.
Domestic platform companies such as Naver, which paid 601.4 billion won, and Kakao, which paid 94.7 billion won, pay corporate taxes in the hundreds of billions of won in line with sales and profits. Critics say the sharply different tax burdens in the same market amount to reverse discrimination.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.