ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Problems and Improvement Measures in the VAT System for Imported Rights

  • Chung, Ji－Sun University of Seoul Graduate School of Taxation
  • Yoon, Sung－Man Department of Business Administration, Seoul National University of Science and Technology

Asian Tax Journal Vol. 25 No. 5 (2024), pp. 111-142

Abstract

The problems with the current VAT on rights income are as follows. First, because there is a difference in the scope of taxable objects (taxable items) between the VAT Law and the Customs Law. Second, in terms of system consistency between the VAT Law and the Customs Law, imports of goods are applied differently. Third, active tax avoidance by multinational companies is increasing, either by reporting the customs value at a high value to avoid corporate tax burden or by reporting the customs value at a low value to avoid the burden of customs duties. Fourth, when considering whether to purchase a domestic right or an overseas right with the same supply price, if business purchase a domestic right, it must pay the supply price and input tax for the right, whereas if business import the right from abroad, it must pay the purchase tax. Since only the supply price of the rights is borne, the fairness between these two transactions is impaired. Therefore, this study seeks to suggest ways to improve value－added tax on the current rights classes as follows. First, it reflects the concept of “import” under the VAT Law. Second, the reverse charge system must be improved to increase the efficiency of VAT on rights income. Third, the reporting and payment regulations for imports of goods under the VAT Law must be revised. Fourth, there is a need for detailed notification of customs administrative processing for rights imports. In the current situation where the scale of international trade in rights has reached an enormous level, the current VAT Law has legislative in－sufficiencies as it was enacted at a time when the scale of trade in rights was minimal. In the current situation where the tax base capture and verification function for income from rights is possible, there is a need to normalize it to a principle－based tax system rather than this exceptional tax system.

Keywords

  • Import rights
  • value－added tax
  • customs duties
  • intellectual property rights
  • reverse charge

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