Korea

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Country starter pack
Business practicalities in Korea
KAFTA Regulations
KAFTA regulations: KAFTA preferential rules of
origin (ROO) are agreed criteria used to ensure
that only goods originating in either Korea or
Australia enjoy duty preferences. Preferential ROO
are required to prevent transshipment, whereby
goods from a third party are redirected through
either Korea or Australia to avoid the payment
of import tariffs. For this reason, most goods
require a certificate of origin (COO) to receive
the benefits under KAFTA. According to DFAT,
a COO should be prepared by the Australian
exporter or the producer. This is known as selfcertification.
Australian exporters also have the
option of obtaining a COO from an authorised
body such as the Australian Chamber of Commerce
and Industry (ACCI) or the Australian Industry
Group, however, charges will apply. COOs remain
valid for at least two years and can apply to a single
shipment or multiple importations of goods of the
same description. For up to date information, a list
of applicable tariffs, COO requirements, and an
example of a COO, please see DFAT’s dedicated
KAFTA webpage:
http://dfat.gov.au/trade/agreements/kafta/factsheets/Pages/guide-to-using-kafta-to-export-andimport-goods.aspx.
Australian exporters may also seek formal
advice from the Korea Customs Service on the
tariff classification of the goods intended for
export. This advice can be obtained through an
‘advance ruling’, which is an official ruling on tariff
classification of a good that is binding on the
customs administration.
• A completed application form for an import permit
• Lading bill
• Invoice containing a description of goods, brand
name, quantity, specifications, type or model number,
unit price, freight, insurance and expenses, as well as
any amount of duty reduction or exemption of duties
• Origin verification requirements must be obtained at
the port of shipment.
• Packing list
• Price declaration
• Other import documents, such as those covering
applications for preferential treatment of goods.
Parallel imports: Parallel imports (often known as grey
product) are non-counterfeit products imported from
another country without the permission of the intellectual
property owner, but which may be allowed due to the
concept of exhaustion of rights. While there is no rule on
parallel imports of foreign brand goods, Korea has dealt
with such imports through a government notice on the
export/import clearance guidelines for the protection
of intellectual property since 1995. Exclusive licensors
or dealers of imported goods may request the customs
office to withhold the import customs clearance of
parallel import goods. In response to such a request,
parallel importers may request the customs office to
examine whether such a request may be repealed and the
customs office must notify the examination result in 15
days from the date the request is filed. The customs office
is empowered to prohibit imports or exports of goods
infringing intellectual property rights such as trademarks,
copyrights and geographical identification.
5.3 TAXATION
Korea’s taxation system includes a wide range of imposts
on businesses and individuals applied at both national
and local levels, including income taxes (corporate
income tax, local income tax and individual income tax),
turnover taxes (value added tax and excise tax, as well as
taxes such as surtax, and acquisition tax. This section will
provide an overview of the primary taxes that Australian
businesses need to consider when establishing in Korea.
Be aware, however, that taxation of foreign enterprises
can be complex, and that not all potentially applicable
taxes are covered in this guide. All businesses should seek
professional tax advice from firms such as PwC when
setting up in Korea.
Corporate income tax
Corporate income tax (CIT) in Korea is covered under
the Corporate Income Tax Law (CITL), the FIPA, the
Special Tax Treatment Control Law (STTCL) and the Law
for the Coordination of International Tax Affairs (LCITA).
Taxes are administered and collected by the National Tax
Service (NTS). Although CITL distinguishes between
foreign and domestic companies, most provisions apply
to both. Foreign entities, however, are eligible for tax
incentives thanks to FIPA and the STTCL. Foreign
businesses may also be eligible for further tax savings if
they establish a presence in foreign investment and free
trade zones.