10 % VAT To e-Commerce Transaction Between Nations

From the second half of next year, the value added tax (VAT) of 10 percent will be charged to the e-commerce transaction between nations which trades the `digital contents` such as game, education, movie via the internet.

The Ministry of Finance and Economy (MFE) told that the Organization for Economic Cooperation and Development (OECD) will establish the taxation standards among the member nations in the Committee on Fiscal Affairs which will be held on 26th and 27th in Paris, France. Hence, following the OECD`s decision, the MFE also decided to review the taxation plan.

If the domestic taxation standard will be set up, then the MFE will revise the consumption tax law and impose the VAT on the `digital contents` imported to Korea.

The payment method will follow the standards that the OECD is likely to set up.

For the business-to-business (B2B) transaction, the purchasing company of the digital contents receives the VAT from the supplying company and pays it on the behalf of it. For the business-to-consumer (B2C) transaction, the supplying company is obliged to register to the country where the consumers reside and to pay taxes there.

Park Yong-Man, the Director General for Internal Revenue and Tax Affairs, told that ``The government will not be able to impose the VAT on the e-transaction between nations until the second half the next year, because we should consider the lawmaking of the foreign countries as well as keep pace with the revision of the domestic consumption tax law``.

The OECD committee on Fiscal Affairs set up the tentative plan on last January to impose the VAT in the countries where the consumers reside, when the service and immaterial goods are traded via the internet, and recently revised the plan partially in the working-level meeting.

Most countries in the world currently have imposed the VAT and the customs on the e-commerce transaction goods which are imported through the customhouse. But they have not imposed the customs on the digital contents which are imported via the internet, following the decision of the WTO.

Kwon Soon-Hwal shkwon@donga.com