Captured from Bunjang Global

Calls are growing to reform Korea's taxation system, as current regulations result in double taxation on secondhand trading, undermining the industry's recent growth momentum amid the global popularity of K-pop merchandise.

According to data from the Korea Internet & Security Agency, Korea's resale market is expected to reach 43 trillion won ($29.3 billion) this year, up from 26 trillion won in 2023 and 4 trillion won in 2008.

The surge can be attributed to the growth of secondhand trading platforms and their overseas expansion. Delivered Korea, which helps international customers shop for goods from Korean retailers, including secondhand goods, posted 48 billion won in gross merchandise value last year, marking a more than 200 percent increase from the previous year.

Earlier this month, Bunjang, one of the biggest resale platforms in Korea, said the number of international users of the Bunjang Global platform surged 131 percent a year after its launch in July 2023.

In October 2024, Bunjang teamed up with eBay to help domestic sellers sell their products in overseas markets. Bunjang's overseas transaction volume surged by 1,105 percent, with the number of transactions jumping by 1,553 percent from October to February this year.

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A major driver of cross-border secondhand trading is K-pop merchandise. K-pop items top the sales category for Delivered Korea, while Bunjang Global has tailored its website to focus on K-pop, featuring dedicated sections for boy groups, girl groups, CDs and other related products.

The growing popularity of K-pop merchandise is fueling Korea's overall e-commerce exports. According to the Korea International Trade Association, direct overseas sales of Korean goods through e-commerce platforms rose to 1.7 trillion won in 2023, up from 679.1 billion won in 2014.

Ktown4u, an online K-pop merchandise store for international customers, was the country's top e-commerce exporter last year, shipping goods worth $93 million, outpacing big name retailers such as Olive Young.

Industry officials said the cross-border resale industry is becoming Korea's new export driver, but the country's tax regulations are undermining growth momentum.

Korea imposes a standard 10 percent value-added tax (VAT) on transactions of most goods and services. To encourage exports, however, the country applies a "zero tax rate" on general exports. For example, if a company exports a certain product, no VAT is charged for the buyer, but the exporter can still claim a refund on the 10 percent VAT paid for raw materials or related inputs.

In the case of secondhand transactions, most deals are completed without tax invoice or official documentation because they mostly involve individuals or nonbusiness entities. Due to this, most secondhand transactions are not subject to VAT deductions, leading to a double taxation issue for secondhand exporters, as they have to pay VAT again upon the resale of goods despite paying it when purchasing the goods.

While Korea does allow VAT deductions — known as deemed input VAT deductions — for purchases made without formal tax invoices, this benefit is currently limited to businesses dealing in recycled waste and used vehicles.

Due to this, industry officials are calling on the government to extend benefits, such as zero tax rates and deemed input VAT deduction, to the export of secondhand goods as well.

"Currently, Korea's secondhand goods export market faces limitations, as the zero tax rate benefit applies only to certain product categories," an official from the Korea Secondhand Export Association said.

"While general exporters are eligible for the zero tax rate, secondhand goods exporters often struggle to qualify due to the lack of proper transaction documentation ... The European Union, Japan and Australia have already introduced various tax incentives to promote their resale industry. In order for Korea's secondhand market to remain competitive globally, policy support such as expanding the application of the zero tax rate are required."