Customs - Yulchon LLC

News Alert
Customs
February 2014
MAJOR LAW AMENDMENTS IN 2014
CONCERNING CUSTOMS & FOREIGN EXCHANGE
CUSTOMS
Expansion of Scope of Customs Duty Refund Application
In a related party transaction, the Korea Customs Service (KCS) and National Tax Service (NTS) determine the
transaction value in their own independent ways in pursuit of increasing their respective tax revenues, which
may lead to a different valuation for the same goods and subject the taxpayer to double taxation. In order to
address this problem, amendments were made in 2012 to the Customs Act and the Law on Coordination of
International Tax Affairs (so-called the harmonization of customs and transfer pricing), whereby the taxpayer
is allowed to seek a refund from the KCS based on a lower customs value if the NTS makes a tax assessment
based on a transfer pricing adjustment to lower the value of the imported goods (but, not by way of an APA
(advance pricing arrangement) and to seek a refund from the NTS based on a higher imported goods value if
the KCS assesses an additional customs duty based on the higher customs value for such goods.
The 2014 amendment goes a step further and would allow the refund application in the case of a
discrepancy between the customs value and the transfer pricing of imported goods caused by a
retroactive adjustment made in accordance with the NTS’ approval of an APA. As such, in the cases
where the Director of the NTS approves an advance pricing arrangement (APA) pursuant to the Law on
Coordination of International Tax Affairs, it would be possible to seek a refund of customs duty with
respect to the relevant imported goods. (The Customs Act, Article 38.4).
It is expected these amendments will revitalize the harmonization of customs valuation and transfer pricing,
thereby helping taxpayers that were at a disadvantage due to the disparity in system created by the two
competing authorities.
Expanded Application of Penalties for Falsified Report
At the time of an export/import reporting, if one specifies an inaccurate information in the required fields on
the report, such person could be sanctioned for a falsified report or price manipulation. However, the same
rule did not apply to filing of amended returns. The 2014 amendment to the Customs Act now expands the
scope and stipulates that penalties for falsified report or price manipulation apply in the case of filing
amended returns as well as export/import reports. (The Customs Act, Articles 270.2 and 276).
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Korea TEL : +82 2 528 5200
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Vietnam TEL : +84 4 3837 8200
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News Alert
Customs
Therefore, care must be taken to ensure so as to avoid the risk of being subject to a sanction for falsified
reporting or price manipulation when filing amended returns as well.
FOREIGN EXCHANGE
Amendments Simplify Reporting Process for Certain Transactions and Expand the Scope of Transactions
Subject to Overseas Direct Investment Reporting
According to the foreign exchange regulations, a set-off transaction between a resident and a non-resident or
a third-party payment should be reported to the foreign exchange authorities in advance.
Effective 2014, small-amount set-off transactions or third-party payments of a USD 1,000 and lower
value are exempt from the reporting requirement. In addition, in respect of set-off transactions, the
authority to which the report should be made has changed to a foreign exchange bank in general
(previously, reportable to the Bank of Korea), with the exception of multi-party set-off transactions,
which should be reported to the Bank of Korea. As such, the reporting procedure has become
considerably simplified. (Foreign Exchange Transactions Regulation, Article 5-4 and 5-10).
In respect of an overseas direct investment by a Korean resident, the amendment has added additional events
such as change of the investment amount or liquidation with respect to the local foreign corporation’s
subsidiaries or second-tier subsidiaries as those triggering the report requirement, in addition to
establishment of subsidiaries or second-tier subsidiaries. Accordingly, one must take care to make a
timely filing of the requisite overseas direct investment report whenever any change occurs with
respect to the overseas direct investment. (Foreign Exchange Transactions Regulation, Article 9-5).
Yulchon’s Customs and Trade Team consists of highly experienced lawyers and customs attorneys.
Please feel free to contact us at any time, if you have any questions or concerns regarding the areas of
customs and foreign exchange issues.
Customs and Trade Team
 Dong Soo Kim, Partner
☏ 02-528-5219
 [email protected]
 Jeong Cheol Cho, Partner
☏ 02-528-5558
 [email protected]
 Un Sang Jung, Senior Customs Attorney
☏ 02-528-5653
 [email protected]
www.yulchon.com
Korea TEL : +82 2 528 5200
China TEL : +86 10 8567 0828
Vietnam TEL : +84 4 3837 8200
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News Alert
Customs
Material included in our newsletter has been prepared for informational
purposes only and is not offered as legal advice on any particular
matter. Yulchon and contributing authors disclaim all liability for the
newsletter’s content and are not responsible for any third party contents
which can be accessed through this newsletter.
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Tel : +82-2-528-5200
Fax : +82-2-528-5300
E-mail : [email protected]
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P.R. China
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www.yulchon.com
Korea TEL : +82 2 528 5200
China TEL : +86 10 8567 0828
Vietnam TEL : +84 4 3837 8200
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