On July 2, 2013, the National Assembly passed bills amending the Value-Added Tax Act (“VAT Act”) and the Customs Act.

First, in accordance with the Amendments to the VAT Act (Article 35) and the Amendments to the Enforcement Decree of the VAT Act (Article 72), which were enacted to encourage importers to comply with their obligations to report and pay taxes, an amended tax invoice may be issued only when a local customs office receives, levies or refunds taxes to an importer who files a report revising, correcting or rectifying its customs tax amount.  Also, an importer may issue an amended tax invoice only when it can prove that it is not responsible for the correction or rectification, in cases where a local customs office determines or rectifies the tax basis or amount, or where such importer requests a correction or rectification of its tax invoice in accordance with the Customs Act with the anticipation that the local customs office will correct the tax basis or amount.  Accordingly, importers now need to pay greater attention when reporting and paying value-added tax.

Also, under the above amendment to the Customs Act, the authority of the tax authorities has been strengthened by extending the statute of limitations for customs assessments from two years to five years (in the case of fraud, from five years to ten years).  Tax authorities are further allowed to determine the taxable value of goods by applying reasonable methods accepted in light of the substance and general practice of transactions (for example, tax authorities may apply a price adjusted from the international market price when a reasonable standard for determining the taxable value of goods is unavailable).  The amendment additionally protects the rights of taxpayers by extending the statute of limitations on the taxpayers’ application for the correction of a customs tax amount from two years to three years, and also includes a new provision subjecting an individual who reports a false price to the customs office for the purpose of unjustly acquiring or having a third party acquire property or financial gain during the customs clearance process to imprisonment of up to two years or a fine up to the correct price of such goods or KRW 50 million, whichever is higher.  Therefore, it is now necessary for importers to be more prudent during the customs clearance process.