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FAQ

  • Title
    Is it possible to go through customs clearance for the car a foreign investor used in the home country as moving cargo when entering Korea, and what are the customs duty rates?
  • Content
    - In order to enable a used car imported by a foreign investor to be recognized as moving cargo, the period when the car has been used or possessed under the name of the person who moves or his/her accompanying family members should be more than three months before the date of entry (the shipping date, if shipping is made earlier) (which including the first date of operation under such name confirmed by the temporary registration certificate).
     
    - In this case, a car per household of the person w ho moves (including the accompanying family members) can be exempted from the duty if the car was made in Korea and exported, while a car per household of which is recognized as moving cargo is subject to duties payable regardless of the used period if the car was made in a foreign country.
     
    - The car which can be cleared as moving cargo is a passenger car with a capacity of 9 people at most including the driver such as a sedan, a jeep or a station wagon. And documents should be submitted to prove its registration such as a vehicle registration, a certificate of title and an insurance policy issued by government of the residing country. However, a van, a caravan, a truck and other vehicles, and a car for the purpose of business cannot be cleared as moving cargo.
     
    - Customs duties for clearing a vehicle are as follows. In case where the actual paid price cannot be determined, the taxation prices of the used car will be calculated by depreciating the decrease in value according to the used period from the price list of a new car on the Blue Book and adding the freight and insurance.
     
     
    Classification Duty Rate Individual Consumption Tax Rate Educational Tax Rate Value Added Tax Rate Total Tax Rate
    Over 2,000 CC 8% 6% 30% of Individual Consumption Tax 10% 28.06%
    Less than 2,000 CC 8% 5% 30% of Individual Consumption Tax 10% 26.52%
    Less than 1,000 CC (Less than 3.6m by 1.6m) 8%     10% 18.80%

     

  • Title
    If a foreign national resides in Korea with his/her family for more than one year, what customs clearance applies to?
  • Content
    - Duty is not imposed during import clearance on items that are recognized as moving goods because it is recognized as necessities to set a residence and live a life among items carried with or additionally entered when a foreign national enters Korea to reside more than one year.
     
    - However, customs duty, etc. should be paid for ships, airplanes and automobiles, and jewels, pearls, ivory valued at more than KRW two million per item, and brand-new items which are mandatory dutiable goods.
     
    - In addition, considering the number of person who moves to Korea and his/her accompanying family members, the designated goods under Subparagraph 1 are recognized as moving goods within the quantity under Subparagraph 2. 
     
    1. Designated Goods
    A. TVs with a monitor of less than a 160 centimeter diagonal, refrigerators and freezers of over 600 liters, dish washers, gas ovens, air conditioners, movie cameras, and projectors
    B. Carpets, lighting equipment and electronic audio devices with a value of more than KRW two million per item or per set
    C. Luxury furniture with a value of more than KRW five million per item or KRW eight million per set
    2.The quantity of moving goods recognized according to the number of family members
     
    가족 수에 따른 이사물품 인정수량
    The number of family members The quantity of recognized moving goods
    1~2 1
    3~4 2
    5~8
    9 or more
     
    Provided, TVs are recognized within the number of accompanying family members.
  • Title
    Is it possible to receive duty exemption for the raw material for a test run?
  • Content

    The duty exemption is possible. It is necessary to submit ① Foreign investment notification (stating it is the raw material for a test run as capital goods in kind/issued by a foreign exchange bank or KOTRA), ② Confirmation of the duty exemption industry (issued by the Ministry of Strategy and Finance/stating it is the raw material for a test run), and ③ Application to verify the capital goods statement for introducing capital goods (issued by a foreign exchange bank or KOTRA/stating it is the raw material for a test run) as well as the application for duty exemption.

  • Title
    What should be done if the machine which was introduced as capital goods is needed to be exported for the purpose of repairing, etc.?
  • Content

    In order to export the machine, the approval from the head of jurisdictional customs house (post management) is necessary (Application form for export approval to goods subject to post management/Form number 7). The post management is suspended during the exportation, and it is resumed if the machine is re-imported after repairing.

  • Title
    What documents are required for a foreign-invested company to apply for exemption on customs duties and others on capital goods that are subject to duty exemption?
  • Content
     When importing general dutiable goods, it is mandatory to submit an invoice, a bill of lading, a packing list, etc; however,
     when importing goods that are subject to duty exemption, it is additionally mandatory to prepare and submit the following documents: ① Application for duty exemption (customs duty, individual consumption taxes, value added taxes), ② Foreign investment notification (foreign exchange banks or KOTRA), ③ Written decision for duty exemption (Ministry of Strategy and Finance), and ④ capital goods statement for introducing capital goods (foreign exchange banks).
  • Title
    What are the cases where the amounts of reduced or exempted taxes, such as the corporate tax, are recollected?
  • Content

    The following is the summary of the related cases where the reduced or exempted taxes are recollected. For specific information, please refer to the Restriction of Special Taxation Act Article 121-5.

    - Where a registration is revoked or the relevant foreign-invested company closes down its business

    - Where the standards for tax deduction or exemption under the Restriction of Special Taxation Act are not satisfied

    - Where a person, who has received a corrective order as he/she failed to implement the contents of reports, fails to comply with it 

    - Where a foreign investor transfers the stocks, etc. which he/she owns under the Act to a national or a corporation of the Republic of Korea

    - Where the payment of investments, acquisition of long-term loans or employment of workers conducted by a foreign-capital invested enterprise engaged in a business other than that listed in the Restriction of Special Taxation Act within five years (three years for standards for tax deduction or exemption relating to employment) 

    - Where the subject matter of investment is used for other purpose than the reported ones or disposed of

    - Where the ratio of the stocks, etc., of foreign investors falls short of the ratio of the stocks, etc., at the time of deduction or exemption, after the taxes have been reduced or exempted 

  • Title
    Does the minimum tax rate apply to a company which is subject to the tax deduction or exemption for foreign investment?
  • Content

    The Restriction of Special Taxation Act Article 121-5 provides that such case is not subject to the minimum tax rate.

  • Title
    What are the required documents when registering a foreign-invested company, and how long does it take?
  • Content

    The following documents are required for foreign-invested company registration. The registration procedure normally takes three days.

    - A copy of report of incorporation and business registration application form

    - A certified copy of corporate register

    - A copy of office lease contract

    - A copy of shareholder statement or investor statement

    - A copy of business license and certificate of completion of report (a copy of permission and registration form or a business plan are required for the relevant company) 

    - A copy of cash investment statement (in case the applicant invests cash)

    - A copy of foreign investment notification form or a copy of certificate of purchase of foreign exchange

    - Foreigner registration card or a copy of passport (In case the representative of the company is a non-resident)

  • Title
    What are the methods of figuring the arm’s length standard that are recognized by the Korean tax authority?
  • Content

    The Adjustment of International Taxes Act allows companies to choose the most reasonable method from the below:  

    1. Comparable Uncontrolled Price Method

    1. Comparable Uncontrolled Price Method

    2. Resale Price Method

    2. Resale Price Method

    3. Cost Plus Method

    3. Cost Plus Method

    4. Profit Split Method

    4. Profit Split Method

    5. Transactional Net Margin Method

    5. Transactional Net Margin Method

    6. Other methods deemed reasonable as prescribed by Presidential Decree

    Other methods shall be applied only when computing arms’ length price is not possible under the methods mentioned above.

  • Title
    What is the transfer price taxation system?
  • Content

    In order to prevent international tax evasion of for example multinational companies, Korea has a system to protect its country’s tax rights. If a company has a special relationship with a company A and sells goods at a cheaper price or buys goods at a higher price (actual price) compared to other trading partners (arms-length price), the tax rate levied will correspond to the arms-length price and not the actual price.

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