Foreign tourists to be able to buy up to KRW200,000 worth of commodities VAT-free in downtown shops
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Foreign tourists to be able to buy up to KRW200,000 worth of commodities VAT-free in downtown shops
  • 김재영
  • 승인 2015.08.21 10:37
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To overcome the MERS crisis and reinvigorate domestic tourism, it needs to be implemented sooner.
Japan as well as European countries implemented it, which helped reinvigorate tourism.

 

Starting next year foreign tourists will be able to purchase up to KRW200,000 worth of commodities in downtown shops at prices without the VAT. On August 10, a Ministry of Strategy and Finance official said, “The detax limit for foreign tourists, scheduled to be enforced in the first half of 2016 is likely to become KRW200,000 per day or per shop (purchases made in one shop).” It is a follow-up measure after an official from the International Tax Division of the Ministry of Strategy and Finance said on August 3 that the existing tax refund system for foreigners would be changed next year.

 

It seems that the amount was specifically set for about KRW200,000, and more detailed plans will be announced down the line. In Europe, detax is more popular than tax refund, and Japan introduced a more active concept of the tax refund system to the hordes of tourists visiting the country because of the cheap Yen, and generated a lot of revenues from tourism in 2015. As many point out the inconvenience of the existing tax refund system, the Korean government is also adopting this policy with the aim of actively seeking the effect of discounting VAT.

 

Looking at the tax refund or detax status in individual countries, in France, the VAT for purchased commodities is 20%, and the minimum purchase eligible for detax is €175. In Italy, the VAT is also 20%, and the minimum purchase is €155. In the UK, the VAT is 20%, and the minimum purchase is ₤30. In Germany, the VAT is 19%, but the VAT will be refunded for purchases exceeding €25.

 

japan Photograph: Commodities and amounts eligible for the 8% consumption tax exemption for foreigners as announced by the Japan National Tourism Organization

 

 

Taking a closer look at Japan, it has been enforcing a more active consumption tax exemption policy since October 1, 2014. Consumption tax exemption in Japan distinguishes general commodities and consumables. For starters, general commodities include ‘consumer electronics,’ ‘bags,’ ‘shoes,’ ‘watches,’ ‘jewelry,’ ‘clothing’ and ‘handicrafts,’ and if these items are purchased and the amount excluding tax exceeds ¥10,001, the 8% consumption tax, which Japanese citizens must pay, is discounted on the spot. However, this amount is separate from the amount paid for consumables, and if the amount exceeds ¥1 million, the passport will be copied. Consumables include ‘cosmetics,’ ‘food,’ ‘beverages,’ ‘liquor,’ ‘tobacco’ and ‘drugs,’ and if the total purchase amount is between ¥5,001 and ¥500,000, the 8% consumption tax will be discounted on condition that the purchased commodities will not be consumed in Japan.

 

The government is planning to actively enforce the tax refund system for commodities purchased by foreign tourists in Korea to promote tourism, and considering a cap of KRW200,000 per day or per shop. This situation seems reasonable considering the cases of other countries examined above. Thinking of the difficulties the tourism industry have overcoming the MERS crisis, it seems that efforts to enforce this system need to be made through more aggressive and speedier policy-making.


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