Import Tax, VAT, GST & Sales Tax on Imported Goods in South Korea

When importing goods into South Korea, it's essential to understand the difference between duty and tax. Duty refers to the customs duty imposed on imported goods, which varies by product. On the other hand, tax, specifically VAT (Value-Added Tax) at a rate of 10%, is levied on the value of the imported goods. This distinction is crucial for importers to accurately calculate the total cost of importing goods into South Korea. The duty is calculated based on the type of product being imported, while VAT is calculated based on the total value of the goods, including the duty.

VAT on imports in South Korea is levied at a rate of 10% of the total value of the goods. This includes the cost of the goods, insurance, and freight, plus any applicable duty. The VAT is collected by the Korea Customs Service at the time of importation. Importers must declare the value of the goods and pay the applicable VAT and duty to clear the goods through customs. The VAT paid on imports can be claimed as an input tax credit, which can be used to offset the VAT payable on domestic sales.

The tax base for VAT on imports in South Korea is the CIF (Cost, Insurance, and Freight) value of the goods, plus any applicable duty. The CIF value includes the cost of the goods, insurance, and freight to the port of entry in South Korea. The duty is added to the CIF value to determine the total value of the goods, and then the 10% VAT is applied to this total value. For example, if the CIF value of the goods is 100,000 KRW and the duty is 10,000 KRW, the total value would be 110,000 KRW, and the VAT would be 11,000 KRW (10% of 110,000 KRW).

VAT applies to most imported goods in South Korea, but there are some exemptions. For example, certain goods such as agricultural products, fishery products, and livestock products are exempt from VAT. Additionally, goods imported for diplomatic or military purposes may also be exempt. Importers should check with the Korea Customs Service to determine if their goods are eligible for exemption. In general, VAT is payable on all imported goods at the time of importation, unless a specific exemption applies. The VAT is payable in KRW, and importers must ensure they have sufficient funds to pay the VAT and duty to clear their goods through customs.