Apple has to pay taxes of up to $46M in undeclared benefits in Korea, says lawmaker

Apple has to pay taxes of up to $46M in South Korea on benefits it failed to declare, says a lawmaker – citing figures based on data from the Korea Fair Trade Commission.

The controversy relates to an investigation that found Apple guilty of antitrust behaviors in respect of local mobile carriers …

Background

The antitrust case dates back to 2016, with Apple found guilty in 2018.

Apple was accused in 2016 of anti-competitive practices in South Korea. Because the popularity of iPhones meant carriers had to sell them, Apple was able to dictate terms. In particular, it was accused of imposing three onerous conditions on local carriers:

  • Carriers had to buy minimum quantities of each model, dictated by Apple
  • Carriers had to share the cost of warranty repairs or replacements
  • Carriers had to pay to run Apple’s own TV ads for the iPhone

Apple settled the antitrust case by proposing a series of measures for the public good, but the third of those bullets has now come back to haunt the company.

Apple has to pay taxes on undeclared benefits, says lawmaker

The issue relates to those TV ads:

Although carriers had to pay the full cost of running iPhone ads on TV, they were only allowed to use Apple’s own ads, and the only thing they were permitted to change was adding their own logo to the final frame.

That effectively gave Apple free advertising, with a dollar value to the company, and that amounts to a taxable benefit that the company failed to declare.

The Korea Times reports.

According to Rep. Jang Hye-young of the social democratic minor opposition Justice Party, Tuesday, Apple is estimated to be required to pay 36.6 to 55 billion won in corporate taxes for advertising costs it made telecom service providers pay for. The figures were calculated by accounting experts based on data from the Korea Fair Trade Commission.

The industry estimates that the costs Apple Korea made local mobile carriers pay amount to 20 to 30 billion won, for which Apple needs to pay 28.8 billion to 43.2 billion won in corporate taxes. But the total amount of corporate taxes the company should pay comes to 36.6 billion to 55 billion won when including additional taxes that have been imposed for failing to report the corporate taxes that it is required to pay.

According to local regulations, when a company receives funds for an advertisement, it needs to record them under “gains from assets contributed” and pay corporate taxes on these gains.

At this stage, the claim is from a minority party, so it’s unclear whether anything will come of it – but it does come at a time when Apple is under increasing antitrust pressure in the country. A recent law will require both Apple and Google to allow developers to use third-party payment platforms in their respective app stores.

Photo: Brett Jordan/Unsplash

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