App Taxation

 

The Korean government will impose a 10 percent value-added tax on applications that are sold on foreign open markets such as the Google Play Store and Apple's App Store from July next year.

According to current tax law, taxes cannot be levied on applications sold in stores which have servers located outside of Korea. Google and Apple have earned huge profits on their application stores but have paid no taxes at all, while developers supplying apps to domestic application markets like the T-Store have had to pay taxes.

Controversy over the reverse discrimination has been addressed, at least to some extent, through the revision to the tax law. However, concerns still remain. The value-added tax could result in higher prices of applications and consumers could suffer. Besides, it is developers, not Apple and Google, that must pay the tax.

“The higher the price of applications, the fiercer the competition will be among app developers,” said an industry insider, adding, “The goal of the tax law revision is to decelerate foreign currency outflow, but it could backfire to pose a burden on developers.”

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