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| Google and other global IT giants face value-added tax on their services in Korea, with new tax rules going into effect July 1 next year. / Yonhap |
By Jun Ji-hye
Korea will impose value-added tax (VAT) on global IT giants such as Google, Facebook and Amazon Web Services (AWS) starting July 1 next year as the National Assembly has passed the revision to the VAT Act, a lawmaker said Tuesday.
The revision calls for imposing a 10 percent VAT on foreign companies' business-to-consumer digital services such as online ads, cloud computing and online-to-offline services.
The passage of the revision was meaningful in that the nation now has a legal basis to broaden its discussion to impose the so-called Google Tax, which refers to corporate tax on global tech companies, criticized worldwide for their tax avoidance.
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| Rep. Park Sun-sook |
Currently, global companies pay VAT intermittently on services such as app sales at Google Play or Apple App Store here.
With the revision, those subject to VAT will be considerably expanded, Park said.
"The passage of the revision formed the basis for discussion of digital taxes," Park said. "We made a step forward in the digital economy."
It is estimated that the Korean government will collect about 400 billion won ($354 million) in tax revenue from global internet companies annually by imposing VAT.
The revision to the VAT Act, however, failed to include global firms' business-to-business services subject to VAT, though it was included in the draft.
Rep. Park said the Assembly should continue its discussion on measures to impose VAT on business-to-business dealings between global IT companies and domestic firms, considering fairness in the tax system.
There have been growing calls here to impose corporate tax on revenue of global firms' digital services, a similar move in Europe of tackling their tax avoidance.
In September, Rep. Byun Jae-il of the ruling Democratic Party of Korea proposed a revision to the Information Communications Network Act to require foreign IT giants generating revenue in Korea to set up servers here, which will become a legal basis on corporate tax.
In October, an Assembly audit also concentrated on the issue.
At the time, Park said, "Tech giants of the United States have taken global tax minimization strategy and avoided taxes. But the Korean government has taken no particular action in response to this."
As lawmakers asked the government to take prompt action, a taskforce team composed of officials from relevant ministries including the Ministry of Science and ICT was launched, with its discussion currently going on.
