Introduction
Electronic Transaction Framework Act
Electronic Signature Act
Promotion of Information and Communications Network
Electronic Transaction Consumer Protection Guidelines
Tax Issues


Introduction

Korea has more than 10 million internet users and this number is expected to double by the end of the year 2000. The use of the Internet and continued reliance on electronic information has precipitated the advent of new information industries to Korea perhaps more rapidly than any other countries in Asia.

In the past two years, the government has enacted 39 new laws and regulations in order to build a framework for a new digital information society. Furthermore, it is expected that 22 new provisions will be introduced before the end of 2000, concerning:

  • public information disclosure;
  • protection of electronic intellectual property rights; and
  • facilitated use of encryption.

The following recent laws provide a comprehensive regulatory framework for the establishment and maintenance of electronic documents.

Electronic Transaction Framework Act

The Electronic Transaction Framework Act of 1998 concerns electronic documents and digital signatures, and provides for the support and promotion of digital data.

The act:

  • provides that electronic documents shall enjoy the same legal effects as their traditional documentary counterparts;
  • establishes guidelines for the execution and recording of electronic documents;
  • provides the basis for use of electronic documents;
  • seeks to protect personal information obtained in the process of using electronic services, or provided by the certification authorities; and
  • establishes standards regarding e-commerce, government cooperation, consumer protection, management and establishment of support facilities, and protection of intellectual property rights.

Electronic Signature Act

The Electronic Signature Act, enacted in 1999, is modelled on Utah's Digital Signature Act.

The act:

  • deals comprehensively with the establishment of certification authorities and declares their role in the management and use of digital signatures;
  • lists guidelines concerning certification qualification and license;
  • governs licensing procedures for companies seeking to gain government authorization, and procedures regarding authentication;
  • emphasizes the need for safeguarding private keys; and
  • imposes criminal and civil penalties for mishandling private keys and digital signatures (imprisonment for up to three years and fines of up to W30 million).

Promotion of Information and Communications Network

The Act Concerning the Promotion of Information and Communications Network deals specifically with the use and safety of information services networks and, in particular, the protection of personal information. The statute limits the use of personal information by information service providers and the amount of information that can be collected by the providers.

Further, the statute provides for the establishment of safety measures to guard against the leakage of protected information being leaked to third parties. Civil and criminal liability is imposed upon those who mishandle personal information or infringe users' privacy.

Electronic Transaction Consumer Protection Guidelines

In January 2000 the Korea Fair Trade Commission published e-commerce guidelines for businesses. According to the guidelines:

  • businesses must disclose information on cancellation of contracts, refund of price policies, and payment methods;
  • business entities must retain all information regarding electronic business transactions for five years, and personal liability is imposed for failure to safe-keep private information transmitted over the Internet, even if the business concerned has assigned such duties to a third party;
  • businesses may not obtain more personal information about a consumer than is necessary to conduct relevant transactions; and
  • businesses must obtain a consumer's approval before using information obtained in the course of business transactions for purposes other than the one for which it was given.

The guidelines also deal with issues such as:

  • payment and delivery;
  • exchange; and
  • consumer complaints regarding goods purchased over the Internet.

Tax Issues

Existing statutory and regulatory provisions have not yet been amended to provide for the tax treatment of electronic delivery of goods or services. However, as far as cross-border transactions are concerned, it seems that customs duties in Korea will not presently apply to goods delivered online.

Some commentators have suggested that the traditional source rules do not apply neatly to e-commerce, implying a need to develop new source rules. The domestic tax authorities, however, have not yet stated a formal position on this issue.

The Ministry of Finance and Economy and the National Tax Service are currently considering tax issues in electronic commerce in general, and new regulations may be promulgated in accordance with the rules of the Organization for Economic Cooperation Development (OECD).

Regarding domestic transactions, the government has no plans to enact new tax laws specifically addressing e-commerce. Rather, it is expected that existing laws will be adapted to deal with this issue.


For further information on this topic please contact Sai Ree Yun or Dong Soo Kim at Woo, Yun, Kang, Jeong & Han by telephone (+82 2528 5200) or by fax (+82 2528 5228) or by e-mail ([email protected] or [email protected]).


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