Multinational IT names facing VAT in Korea from July likely to up service charges

2019.06.19 14:24:11 | 2019.06.19 16:32:03

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IT multinationals like Google, Facebook and Amazon facing 10-percent value-added tax (VAT) from the Korean government from July are expected to translate that much of surcharge on consumers and businesses in Korea.

According to sources from the National Assembly and ICT industry on Wednesday, Google recently sent an email to paid account holders to notify a price increase of 10 percent starting July for accounts without a corporate registration number.

The move came after a bill that imposes a 10 percent VAT on services of the multinational IT firms including B2C online ads, cloud computing, sharing and online-to-offline services passed the National Assembly last December. Park Sun-sook, a lawmaker from the minor opposition Bareunmirae Party proposed the amendment, demanding a level playing field for local tech rivals by getting foreign names pay their fair share of tax.

The move will be welcomed by Korean platform operators as they have long complained of reverse discriminations as multinationals have enjoyed various tax-free rides due to lack of physical presence in the host country. Multinationals so far paid corporate tax and no VAT because they have servers overseas.

The revised rule would also help Korean tax authorities to obtain detailed financial information of the foreign tech firms including their earnings and sales. But the new taxation, however, does not cover their business-to-business (B2B) services. The National Assembly plans to continue its work to impose the tax on B2B dealings as well.​

By Oh Dae-seok and Choi Mira

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