SEOUL, Aug. 7 (Korea Bizwire) – Beginning in July next year, the government will impose 10-percent value-added taxes on smartphone applications sold on overseas open markets such as Google Play and Apple App Store.
According to a plan announced by the Ministry of Strategy & Finance on August 6, it would assess taxes on apps sold on foreign open markets. Until now, all open markets whose servers are not located within the jurisdiction of the Korean government were not subject to taxation.
As a result, large companies such as Google and Apple could enjoy the tax-free privilege while domestic rivals such as T Store have to pay a 10-percent tax, which constitutes a clear case of tax discrimination. Given it is app developers who pay the tax, not the app market operators, imposing the value-added tax would be an added cost burden to the developers.
An official with an app development firm said, “It is equivalent to seeing the price of an app rising from 1,000 won from 1,100 won. This will make the competition among domestic app developers fiercer. A policy measure intended to reduce the flow of money going overseas through Google and Apple may backfire and unwittingly hurt domestic development firms.”
By Sean Chung (firstname.lastname@example.org)