Hastings Law Journal


Ariela Freed


The Republic of Korea is one of the fastest-growing economies in Asia and the eighth-largest trading partner of the United States. Despite its increasing prominence in the world market, Korea's trade practices reveal a degree of protectionism more common among less developed countries. Nowhere is this more apparent that in its policies concerning the taxation of imported computer software.

The author argues that Korea's practice of charging customs duties on the total transaction cost of software media and its data content, and later taxing the revenue derived from its domestic sale, is a form of double taxation that is virtually unprecedented among software-importing nations. The author analyzes the customs valuation of software and concludes that Korea's content-based valuation policy is not only undesirable, but also contrary to prevailing international standards. Moreover, Korea's implementation of this unpublished policy to target United States software companies may violate provisions of the General Agreement on Tariffs and Trade. The author also discusses the approaches of the Korean Taxing Authority and the United States Internal Revenue Service to the characterization and taxation of software revenue, and proposes measures that the Korean government should take to ensure more equitable treatment of imported software products.

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