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[Installment and Monthly Payment of Customs Duties]

Ⅰ. Payment of Customs Duties in Installments

■ Meaning

Installment Payment System is paying customs duties levied on certain goods on the basis of the Customs Act. The system, as a part of measures of supporting taxpayers under the influence of natural disasters or facilitating and supporting specific industries, is designed to relieve cost burden of such taxpayers temporarily.

■ The Period of Installment Payment

Excessive long period of Installment payment may cause unnecessary increase in import. On the contrary, too short period of installment payment may cause the result which is against the original aim of the system, that is, the alleviation of cost burden.

Accordingly, installment payment system of Korea is applying different period of installment payment according to the nature of businesses. In the event where natural disasters, etc. occur, relevant business is required to pay installment payment in 1 year, and for normal cases, it is required to pay in 5 years.

■ Applicable goods to Installment Payment and the Methods of Payment

☉ Payment of Customs duties in Installments in case of natural disasters, etc.

ㅇ The head of a customshouse can permit a taxpayer to pay customs duties in installments within 1 year, in case of where the taxpayer isn't capable of any notification, the submission of documents or payment until the due date of payment due to a natural disaster, a calamity or other grounds.

ㅇ The applicant of installment payment has to submit related data to the customshouse, and customshouse gives a permit, by assessing the qualification.

☉ Payment of Customs Duties in Installments for Specific Goods

The head of customshouse can approve payment of customs duties in installment within a period not exceeding five years where goods falling under following conditions are imported. (Provided, that goods whose customs duties are less than 300,000 won per the case of import declaration are excluded from the category of installment payment)

ㅇ Installation machinery, foundation plants, raw materials for construction, construction equipments whose customs amount is above 5 million won(100 million for a small business);

ㅇ Fire engines, patrol cars, equipments for education, plumbing, etc. that are imported by government or a local government;

ㅇ Goods which are imported by schools, vocational training centers and medical institutions, prescribed in related ordinances;

ㅇ Goods, which are imported by research institutes attached to companies, industrial technology research associations, nonprofit research institutions and similar research institutions prescribed by Ordinance of the Ministry of Strategy and Finance for the research and development of technology and for the experiments and practices;

ㅇ Goods which are imported by manufacturing business as a small company for its own purpose;

ㅇ Goods which are hard to be produced within the country among educational goods and experimentation practical training goods imported by vocational training centers affiliated with company for its own purpose.

■ Notes on Installment Payment

☉ Prior-inspection of tax amount

Customs house inspects tax amount prior to the acceptance of import declaration concerning goods whose customs duties are intended for payment in installments.

☉ The Scope of Installment Payment

Payment in installments covers only customs duties, and value-added tax and internal taxes are required to be paid in accordance with rules. In this point, there is a difference from monthly payment system under which internal taxes are available for such monthly payment.

☉ Pledging of Security

In case where importing goods whose payment of customs duties in installments was approved, security, equivalent to customs amount payable in installments, should be offered at the time of importation of such goods.

☉ Application Period of Installment Payment

The person who intends to obtain approval of payment of customs duties in installments is required to submit application form to the head of a customshouse, for the cases of natural disasters, within due date of payment, and for normal cases, he/she is required to submit application during the period from import declaration prior to the acceptance of import declaration.

☉ Post Management

For the goods whose customs duties are abated or exempted under certain conditions and obligations, or the goods whose payment of customs duties in installments is approved, a customs house examines whether such relevant goods were used for originally recognized purpose, or transferred to others without a notice. This is called Post Management.

ㅇ Where the person who obtained approval of payment of customs duties in installments intends to change the usage of goods or transfer to others, he/she is required to obtain approval of the head of a customshouse in advance.

ㅇ For the goods whose payment of customs duties in installments is approved, where such relevant goods are used for other purpose than the relevant purpose, or customs duties aren't paid within a period fixed, or a bankruptcy is declared or a corporate is dissolved, the full amount of customs are immediately collected, regardless of the remainder of due date for payment.

ㅇ The person who obtained approval of payment of customs duties in installment is required to ship relevant goods into the place where the goods are used or built within 1 month from the date of the acceptance of import declaration. The person who shipped in goods is necessary to place books with related information to goods in relevant places.

Ⅱ. Monthly Payment of Customs Duties

■ Outline

Monthly payment of customs duties is the system that a taxpayer is paying customs duties in bulk, for customs duties whose due date for payment is on same month, regarding the period until last date of the month to which same due date belongs as a case, until last date of next month.

It's significant that most of companies can capitalize on it, regardless of the subject or purpose of import, unlike payment of customs duties in installments of customs.

Each business can choose an payment of customs duties in installments agency, and it is required to pay monthly customs in bulk in the name of same taxpayer.

■ Pledging of Security of Monthly Payment

The business which intends to be allowed to pay in monthly payment is required to pledge all risks security in accordance with the Customs Act. Provided, that pledging of security isn't required for companies which are allowed for monthly payment, pertaining to credit mortgage companies at the same time.

■ Requirements of Application for Monthly Payment

ㅇ Taxpayer who doesn't have history of punishment in charge of violating the Customs Act for recent 2 years

ㅇ Taxpayer whose customs duties, etc. aren't in arrear for recent 2 years

ㅇ Taxpayer who has tax payment record and revenue for recent 3 years or isn't required to pledge security

■ Procedures of Application for Monthly Payment

ㅇ The business owner who intends to pay customs duties, etc. on monthly basis is required to draw up application for monthly payment and submit to the head of a customshouse in jurisdiction of relevant area.

ㅇ The business owner is required to submit a copy of business license and the record of import and tax payment.

■ Goods Uncovered for Monthly Payment

Following goods are excluded from targeted monthly payment goods even though they're equipped with other conditions.

ㅇ Goods subject to a notice of imposition of customs duties;

ㅇ Goods shipped out before the acceptance of import declaration;

ㅇ Goods which are granted approval for the extension of due date of payment or for payment of customs duties in installments;

ㅇ Goods which are declared as targeted goods for payment before the acceptance of import declaration;

ㅇ Goods which are subject to payment in bulk or payment, described in The Act on Special Cases Concerning the Duty Drawback;

ㅇ Bonded goods such as bonded construction and bonded factory.

■ Payment of Customs Duties, etc.

☉ The due date of Payment

Tax amounts whose due date of payment is on the same month is required to be paid until the end of next month based on monthly payment document.

☉ Time of Writing Monthly Payment Document

Where the last day of relevant month is 31 : 17th of relevant month

Where the last day of relevant month is 30 : 16th of relevant month

Where the last day of relevant month is 29 : 15th of relevant month

Where the last day of relevant month is 28 : 14th of relevant month

☉ The Scope of Payment

Customs duties and internal taxes(surcharge, etc.) are required to be paid in bulk.

■ Cancellation of Approval for Monthly Payment Business

The competent head of a customshouse can cancel approval during the term of validity of approval for following reasons.

ㅇ Where qualification of requirements is lost by being involved to violation of the Customs Act and a default, etc.;

ㅇ Where it's deemed hard to maintain qualification due to a closing business, a bankruptcy, and a dissolve of a corporation;

ㅇ Where a business owner give ups the qualification as a monthly payment business;

ㅇ Where a business is warned over 3 times by the head of a customshouse;

ㅇ Where a business violates the obligation to report change of approval into a monthly payment business;

ㅇ Where a business violates the orders or instructions of the head of a customshouse related to the operation of monthly payment system.