Coupang Challenges NTS’s 300 Billion Won Tax Notice... Incheon Fire Losses to Be Reflected in Q3

NTS Issues Additional $208 Million Tax Assessment Over Transfer Pricing and Expense Deductions
Coupang Inc. to Actively Respond Through Administrative and Judicial Procedures

Coupang Inc., the parent company of Coupang, announced that it will actively respond through administrative and judicial procedures to the National Tax Service's recent preliminary notice of additional taxation totaling approximately 300 billion won. The company also stated that it is currently assessing the losses caused by the fire that broke out at the Incheon logistics center last month, and plans to reflect these losses in its performance starting from the third quarter of this year.

On August 5 (Korea Standard Time), Coupang Inc. disclosed through its second-quarter consolidated earnings report filed with the U.S. Securities and Exchange Commission (SEC) that "in June, the National Tax Service (NTS) concluded a tax audit of the corporate and value-added tax filings for Korean subsidiaries for the 2021 to 2025 tax years, and has officially notified the company of the audit results."

According to Coupang Inc., the National Tax Service has notified the company of additional tax liabilities totaling $208 million (approximately 300 billion won), including penalties and interest. The audit primarily focused on transfer pricing and transactions between the Korean subsidiary Coupang Corp. and Coupang Fulfillment Services (CFS). Coupang explained that the NTS did not recognize the deduction of corporate tax for the services CFS provided to Coupang Corp., as well as indicating other potential tax adjustments.

Coupang Inc. stated, "We do not agree with the tax assessment notice from the National Tax Service. We plan to pursue all possible administrative remedies, and if necessary, actively assert the company's position through judicial proceedings."

The company added, "Based on our technical and legal review, we believe there is a greater likelihood that our tax position will ultimately be upheld through the dispute process. This conclusion was reached after reviewing relevant laws and case precedents with external experts."

Coupang Inc. also indicated that, in accordance with accounting standard ASC 740, it has already established sufficient provisions related to the outcome of the tax audit. "We have reflected an appropriate level of provisions to prepare for potential corporate tax expenses and other tax adjustments," the company said. "With the information currently available, we do not expect contingent corporate tax liabilities to rise or decrease significantly within the next 12 months."

Additionally, Coupang Inc. commented that it is evaluating the scale of losses related to the Incheon logistics center fire that occurred in July, and intends to recognize these losses in its financial performance starting from the third quarter of this year.

Coupang Inc. explained, "The fire at a leased logistics center in Incheon caused significant damage to facilities, leased property, equipment, and inventory assets. At present, it is difficult to reasonably estimate the financial impact."

Before the fire, the combined value of in-house inventory, the book value of fixed assets at the site, and the obligations to pay for inventory belonging to third-party sellers was estimated at approximately $246 million (about 350 billion won).

The company stated that it maintains property and liability insurance to cover incidents such as fires, and plans to proceed with insurance claims. However, it also noted the potential for additional costs that are currently difficult to estimate, including expenses for restoring the facility, losses from discontinuation of facility use, regulatory sanctions, and litigation.

This content was produced with the assistance of AI translation services.