SERVICES

CUSTOMS REFUND
SERVICE

Overview of Customs Duties Refund

Customs Refund refers to the ‘return of the duties initially paid to Custom. The refund can be applied for certain reasons stipulated in the statutes, and the types of refunds can be categorized depending on the reasons – refunds under the 「Customs Act」 and refunds under the 「Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export」. Refund under the 「Customs Act」 are refunds of 1) customs duties overpaid or erroneously paid, and 2) customs duties on goods different from contract terms. Refund under 「Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export」, however, refunds the customs duties that have been initially paid when importing the raw material for export, to the exporter or producer when exporting the exporting goods, in order to increase the international price competitiveness of the exporting goods.

Types of Customs Refund

Methods for Customs Refund

Customs Refund under 「Act on Special Cases Concerning the Refund of Customs Duties, etc. Levied on Raw Materials for Export」 can be divided into two types: Individual Refund and Simplified Fixed Amount Refund

Individual Refund

This is a method of checking the name, specifications, and quantity of the raw materials used in the manufacturing of the exporting goods and the tax amount initially paid when importing such raw materials individually, and calculating the refundable amount accordingly. An individual refund is more complicated to prepare than a simplified fixed amount refund but is more accurate and proper in its refund.

  • Applicable to all exporting companies
  • Documents to submit: export confirmation document, Certificate of tax payment, and Calculation Bill of Yield Ratio
Simplified Fixed Amount Refund

This method has been implemented to simplify the refund process in order to encourage the exportation of small and medium sized companies that do not have the ability to receive individual refund. When calculating (including when issuing Certificate of Tax Payment on Basic Raw Materials on supplied goods by means of local letters of credit) the refund amount for small and medium sized companies, with a refund of 600 million won or less in the year to which the refund application year belongs and a refund of 600 million won or less for each of the latest two years, a certain amount determined by the government (refer to the simplified fixed amount refund rates table) is considered as the paid tax amount for imported raw materials for manufacturing exporting goods, and can be refunded.

  • Applicable for small and medium sized companies (a refund of 600 million won or less in the year to which the refund application year belongs and a refund of 600 million won or less for each of the latest two years)
  • Documents to submit: export confirmation document

Domestic Transaction Proof System for Raw Materials for Export

Although the transaction of raw materials is made domestically, if the materials are used for final products to be exported, customs refund can be claimed with supporting documents on such transactions.

Certificate of tax payment on basic raw materials
A system to certify the tax amount paid, including the import duty on imported raw materials, after providing the finished products to the exporter or producers of exported goods (including the producers of processed raw materials)
Certificate of Divided Import Tax Amount
A system to certify the tax amount paid – including the import duty on imported raw materials, after providing the raw materials in the same condition as they were imported (as they were purchased if they are produced domestically) – to the exporter or producers of the exporting goods (including the producers of processed raw materials)

Customs Refund Audit

Receiving the refund application under the Special Acts on Refund, the head of Customs determines the refund amount by reviewing the details on the refund application. The accuracy and legality of the refund is reviewed after the refund is paid.

Post Audits of Customs Refund must be finished in 5 years from refund application date in principle, except in cases where the head of Korea Customs Service determines otherwise. When the Customs selects the subjects for post-audits, there is an automatic selection method by customs refund system, and a manual selection method of Customs by considering the characteristics of each applicant.

Major Items in
Customs Refund Audit

  • 01
    Whether the export is subject to refund or not
  • 02
    Whether the used material corresponds to the material subject to refund or not
  • 03
    Whether the refund was applied for the same standard materials used in the production of goods for export or not
  • 04
    Whether the calculation of yield and yield ratio is accurate or not
  • 05
    Whether the by-product is generated and the calculation of the deduction ratio for a by-product is appropriate or not
  • 06
    Whether the refund is limited or not; and whether other items related to the calculation of the refund is appropriate or not.