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Starbucks Korea

Starbucks Korea is currently being audited by the National Tax Service (NTS) in connection with suspicions of offshore tax evasion, it has been discovered.

According to accounts from industry sources on June 3, the international transaction investigation bureau of the local NTS branch in Seoul launched a special tax audit of Starbucks Korea in mid-May. Investigators with the bureau have visited the Starbucks Korea headquarters several times to obtain accounting data, sources reported.

The NTS is focusing its investigation on questions of whether Starbucks Korea misrepresented transfer pricing. In particular, it is investigating whether it produced illicit gains for its headquarters by allocating excessively high costs in its tangible asset and service transactions with its US headquarters. A South Korean firm that deliberately lists lower profits pays that much less in taxes to South Korean authorities.

Misrepresentation of transfer prices is the most common form of tax evasion found among multinational companies. The NTS announced plans early this year to closely scrutinize multinational companies for potential tax evasion.

Commenting on the NTS audit, Starbucks Korea said, “As we understand it, this is a normal audit.”

Starbucks Korea is co-owned in equal 50% shares by the Starbucks headquarters in the US and the Shinsegae Group-affiliated retailer e-mart. It recorded 1.8696 trillion won in sales and 132.8 billion won in net profits at its roughly 1,400 stores last year.

By Lee Kyung-mi, staff reporter

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