Difference between duty free and tax free
The word of “duty” means import duties on the goods impoted from abroad. Duty-free shops are also referred to as bonded areas or bonded shops in the jargon, which means that taxation was reserved. All the duty-free shops in the city and duty-free shops at the departure zone in airport are corresponding to here. Duty-free shops can only be used when leaving the country soon. That is, the imposition of tax is to temporary postponing, in order avoiding unnecessary procedures to impose and return the tax, because foreigners will buy goods at duty-free shops and take them to their country. To sum it up in a word, duty-free shops disolay tax-exampt prices, and sell for goods. And the duty free shop exempts VAT, individual consumption tax, liquor tax and tobacco excise tax.
On the other hand, the tax-free is that foreigners can claim the refund when you leaving the country after purchasing goods that already taxed. Because it is regard as export. It is also referred to as the “later duty free shop(사후면세점)” in Korean, because the tax on the goods is to be returned later. There are more than 6,000 tax free shops nationwide, but only foreigners are entitled to getting the tax refund after purchasing the goods from here. Tax exemption range is 10 percent VAT and 5 to 20 percent of individual consumption tax.
- Introduce instant refund system from January 2016: It is quite cumbersome to get a refund from airport for the taxes imposed on the goods purchased from tax-free shop, because you may stand in the line at the refund desk and waste precious time on your trip. Therefore, the tax-free shop enforces “instant refund system” from January 2016 so that it can be refunded tax upon purchasing goods at the tax-free shop. However, immediate refund is limited to amount of less than 200 thousands won per purchase, and less than one million won per capita.
Tax refund procedures
What is tax refund? If you purchase goods that include tax (VAT: around 10 percent) during travels in Korea and then you would take them to your country without consuming them, or in case of gotting meducal services in Korea, then you can claim for tax refund. The tax refund can be made only when the total amount of the purchase including taxes are over 30,000 won.
Step 1: Purchasing goods at the tax free member stores which has a tax free logo.
- Check for tax refund member store : If you are considering a tax refund, you should first check to see if the store is a tax refund shop before shopping. Tax refund member stores has one of the logos as shown on the right.
- Buying goods : The minium purchase amount for the tax refunds is more than 30,000 won including taxes. If the purchase amount is less than 200 thousand won per purchase and less than one million won per person, you can buy the goods by paying amount after deduct taxes due to instant refund system that was introduced from January 2016. You should keep in mind that you must take your passport.
(It is advisable to keep well receipt until you return to your country, as it may be necessary when you import purchased goods into your country).
- Request documents for the tax refund : If you do not get a tax refund immediately when you buy something in the tax-free shop, you should present your passport to the clerk and ask for the issuance of documents for tax refund. You have to keep well the refund-related documents, and your purchase receipt issued by each store until leave Korea.
You can’t get a refund if you didn’t apply for a tax refund related documents even though you purchased the item at a tax refundable store. Also should be careful that refunds may be refused even in case of tax refund documents are written defectively.
Step 2: Get approval to export goods at the customs declaration desk in airport.
Travelers who wish to apply for tax refunds at the airport at the time of departure are advised to arrive at the airport with ample time in case the airport is busy. (The tax refund will be applied only when the goods taking out within 3 month from the purchase date)
- You will be entrusted with baggage and get a boarding pass at the check-in counter. The goods and related documents to applying for tax refund take to customs declaration desk without sending it as a baggage. But if you want to send goods that need tax refund as a checked baggage, you should tell it to the airline staff when you check-in that you have the tax refundable items in your baggage. Airline staff will then attach a tag to your baggage so you can get confirmation at the customs declaration desk. Take the luggage that attached a baggage tag go to the customs declaration desk located behind the D or J counter. After approved by the customs declaration desk, the baggage will be automatically classified and shipped to the aircraft if you put your luggage on the large baggage conveyor belt in the next to.
- You should submit your passport, purchase goods and receipt at the customs declaration desk and receive export confirmation stamp or electronic approval on the tax refund related documents. Even if you receive a tax refund at a tax-free store or got tax refund at a city tax refund center, you must also present the goods and receipt at the airport customs declaration desk and be sure to obtain the export approval. Otherwise, Korean customs will withdraw your tax refunds with your credit card information what you provided when purchasing the item after you return home. However, if your refund is less than 10,000 won, you don’t need to be export approval.
Step 3: Get a tax refund.
Skip this step if you have already received tax refund from the tax-free shop or at the city tax refund center. There are two methods for refunding in airport, that is, visiting tax refund desk or using the automated equipment, as follows:
- Visit to tax refund desk : Please visit the tax refund desk located near Gate 26~27 in the tax free zone on the 4th floor of Incheon Airport to submit tax refund documents with customs stemps and get tax refund immediately on site.
Note: Despite you have been export approval at the customs declaration desk, if you can’t get tax refund because it was closed door at the tax refund desk on your late arrival, or due to boarding time. Please put the relevant documents into the refund box located at the designated place. After a certain period of time, the refund will be deposited into your bank account, which is associated with your credit card that you used, or sent by money order.
- Using the automated equipment (KIOSK) : If you enter your passport information into the automation equipment located near Gate 26~27 in the tax free zone on the 4th floor of Incheon Airport, the refund amount will be paid according to the already approved details. (Operates 24 hours a day, 7 days a week)