Go to contents

Big Extension of Property Subject to Value-Added Tax

Posted September. 01, 2002 22:46,   


The system of value-added tax will entirely be reorganized for the first time after 25 years from its enforcement.

Profit-making business such as a wedding hall which a local government operates, and an adult’s school (dance school) and institutes such as a flower arrangement school will be newly included in the properties subject to the value-added tax. The property subject to tax exemption and zero rating will largely decrease. A driving school will be the property subject to taxation investigation.

Because consumers pay the value-added tax, the consumer price will increase by approx. 10% when it comes under the taxation property.

A high ranking official of the Ministry of Finance & Economy(MOFE) said on September 1, “We will draft the a revised bill of the law of value-added tax within the year, and will submit to a regular session of the National Assembly through a public hearing next year.”

However, considering that the revision of the value-added tax law affects all commercial transactions, it plans to execute the revised law from January 1, 2005 with a grace period of 1 year.

According to a provisional bill of MOFE, when a buyer declines to receive the tax invoice, the provisions of punishment such as the tax investigation will be newly made, but the additional tax will be abolished.

The additional tax on non-registration imposed when the business registration is delayed, and the additional tax on a faithless tax payment will increase double. However, the additional imposed when the tax invoice is wrongly written by mistake will decrease.

Enterprises which have introduced the ERP system don’t need to pay the value added tax by business, but their headquarters can do at once. Accordingly, the expenses of the tax return will decrease.

The official of the MOEF said “We will extend the existing 8 chapters and 43 articles to

the chapter 10, 5 paragraphs and 92 articles to contain the specific substances in a

legal document. The substances specified in the established rules will be included in the

legal document.”

The zero rating is the system which doesn’t impose the tax when the product is sold by applying 0% of the tax rate, and doesn’t imposed the value added tax by returning the full amounts of the tax. It is mainly applied to the exported products. The tax exemption is the system which doesn’t return the tax paid when the product is brought, but the tax is not imposed when the product is sold.

Kwang-Hyun Kim Kwang-Am Cheon kkh@donga.com iam@donga.com