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.
Individual Refund |
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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.
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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.
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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.