YouTube and its parent company, Google, have been imposing taxes on South Korean YouTubers, requiring them to pay millions of won annually to the United States. Even though Korean YouTube channels create content in Korea, if any revenue is generated from American viewers, the U.S. taxes 10% of that income.
But American YouTubers are not subject to Korean taxes on income earned from Korean viewers because Google, a foreign corporation without domestic operations in Korea, falls outside the reach of the current Korean tax laws. Critics argue that Google, well-known for avoiding corporate taxes by not maintaining servers or fixed business locations in Korea, is now exploiting another legal loophole to undermine the country’s tax revenues and equity.
Korean YouTubers paid a total of 961 million won ($720,000) to the U.S. in foreign tax credits from 2021 to 2022, according to data from the National Tax Service obtained by Rep. Park Soo-young of the People Power Party on Oct. 7. Korean YouTubers received a tax credit domestically for the amount they paid to the U.S. under the Korea-U.S. tax treaty.
“Google is causing a drain on our national tax revenue,” said Rep. Park, adding that “the National Tax Service has not even discussed this issue with U.S. tax authorities in the past three years.” With the rising global popularity of K-pop and other Korean content on YouTube, the taxes paid to the U.S. are expected to increase.
Korean YouTubers began paying U.S. taxes in June 2021. In March of that year, Google notified domestic content creators monetizing their YouTube channels to submit their U.S. tax information through their YouTube payout accounts, known as AdSense accounts.
Google explained, “Under Title 3 of the U.S. Internal Revenue Code, YouTubers, even non-U.S. residents, are responsible for withholding and reporting this tax to the U.S. Internal Revenue Service (IRS) when they earn income from U.S. viewers.” Google warned that failing to submit their tax information on time could result in up to a 24% deduction of the creator’s gross income.
Initially, Korean tax authorities said they would have to “review the Korea-U.S. tax treaty and the tax laws of both countries” and consult with the U.S. tax authorities to determine whether Google’s withholding of U.S. taxes on Korean YouTubers was legitimate.
However, the Ministry of Economy and Finance later issued an internal interpretation indicating that such withholding was possible, and the National Tax Service has since offered domestic tax credits for the taxes paid to the U.S. by Korean YouTubers.
If Google’s method were applied in reverse, Korean tax authorities could collect taxes from American YouTubers earning income from Korean viewers. Despite the considerable interest in American content—the most popular channel in Korea last year was MrBeast, run by American YouTuber Jimmy Donaldson—Korean authorities have not collected any taxes from these foreign creators. The current Korean income tax law lacks provisions for withholding taxes from foreign corporations without a domestic presence.
Google’s tax evasions have long been a point of contention. The tech giant has been accused of diverting most of its sales and profits to Singapore and other countries, where its servers are located, significantly reducing its corporate tax obligations in Korea. “Even if the withholding procedure were clearly defined, identifying domestic-source income remains a challenge for tax authorities, and there are no effective enforcement measures against non-compliance,” said a National Tax Service official.
The Korean Finance Association estimates that Google generates 12 trillion won ($9 billion) in revenue from its operations in Korea, including YouTube, and should pay over 500 billion won ($370 million) in corporate taxes. But Google Korea’s reported revenue last year was 365.3 billion won, with corporate taxes paid amounting to a modest 15.5 billion won.
