South Korea, a modern and technologically proficient country, usually keeps an open trade policy. Bringing things into the country, however, means paying customs and taxes. The main import taxes introduced in South Korea are fully summarized on this page.
Import taxes
Often referred to as tariffs, import taxes are payments made on things as they arrive for usage. The goal of import taxes could change, including:
Tariffs on imports are an important source of money for the South Korean government
Tariffs help to protect the home industry from international competition, thereby driving foreign goods’ pricy nature.
Correcting trade imbalances
Tariffs on goods may be applied to correct trade imbalances to ensure fair business practices.
The harmonized system (HS) code
The HS code of the imported things sets the real rate of customs taxation, which changes between one another. The HS code is often used for the classification of business items.
Calculating customs duties
Usually, the amount of duty owed is set in line with the customs worth of the things. Generally relating to the transaction value—that is, the price paid or due for the goods sold for sale to the country of importation—this is what the customs value is often referred to as
Several things can affect the choice of import taxes, including:
Country of origin
Goods coming from countries with which South Korea has Free Trade Agreements (FTAs) may be subject to lower or even nil import costs.
Type of goods
Diverse kinds of commodities are exposed to varied amounts of import taxes. For example, goods that are important may, consequently, face smaller customs duties than a luxury item or anything that is pitted against home business.
Methods of valuation
The tax may apply numerous methods to determine the revenue value of foreign goods such as transaction value, deductive value, calculated value, and similar value.
Korea has continually backed liberalization in trade by signing and completing many Free Trade Agreements with nations around the world, such as the USA, the EU, and ASEAN. These FTAs give great benefits to buyers, such as:
Reduced or eliminated customs duties
Many things coming from FTA partner states are qualified for reduced or even duty-free entry into South Korea.
Streamlined customs procedures
Generally, FTAs result in streamlined customs procedures, thereby allowing for quicker handling of things and cutting related costs.
Increased market access
An FTA gives wider access to the markets of partner countries, giving new chances for South Korean exporters and importers.
By tapping the benefits of FTAs, importers can greatly cut their import costs and improve their performance in the South Korean market.
Value added tax (VAT)
In addition to customs fees, foreign goods in South Korea are subject to Value Added Tax (VAT). This is a spending tax applied at each step of creation and spread.
VAT rate
The average VAT rate in South Korea is 10 percent. This means that traders frequently have to pay VAT on the entire price of their products, including tariffs.
Input tax credit
Businesses classed for VAT can claim input tax credits for VAT paid on business purchases, including foreign items. This way tries to decrease the effect of VAT on commercial activities.
Excise duties
Excise duties are collected on specific goods, such as alcohol, tobacco products, oil and gas, and certain luxury goods. These tasks are often given to:
Discourage consumption
Excise fees are meant to discourage the use of things that may have negative health or social effects.
Generate income
Excise rates add greatly to government income.
The exact amount of excise duty changes based on the type of commodity.
Payment of import duties and taxes
Importers are responsible for paying all necessary import charges and taxes. These payments can generally be made through accepted banks or internet payment companies.
Customs clearance procedures
The act of receiving and Importing merchandise to South Korea includes different customs clearance methods:
Completing customs declaration
The importers should check that their customs declarations, including the sort and amount of the commodities, their place of origin, and the end use of the goods, are right.
Furnishing supporting documents
Importers should give the needed supporting material, such as bills, packing lists, certificates of origin, and so on, to customs officers.
Customs inspection
Customs officers may directly check the imported merchandise to show their type and amount.
Payment of charges and taxes
Importers must pay all related import charges and taxes after customs treatment is effective.
Importance of compliance
It is vital for importers to know and follow all applicable import tariff requirements. Non-compliance can lead to:
Penalties and fines
Non-compliance with customs rules can entail significant penalties along with fines and possibly criminal punishment.
Delay in clearance at customs
Any non-compliance will result in a delay in customs clearance, which breaks the supply chain and may damage the company’s operations.
Legal and reputational problems
Noncompliance could put the buy into legal troubles as well as social ones.
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