Korean department stores offer instant tax refunds to tourist
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South Korean department stores will start offering instant tax refund services to foreign customers from this month as part of an effort to boost sales.
Under the new program, foreigners can buy products without paying the mandatory 10 per cent value-added tax (VAT) if the item costs 30,000-200,000 won (US$25-166), observers said. Each person can be exempt from VAT for up to the first 1 million won in purchases. Products that cost more than 200,000 won require the buyer to pay the VAT and get a refund later on.
Seoul announced last year that it would implement changes to the way all local tax-free shops operate in 2016 by making it easier for tourists to spend in the country without the need to hold onto purchase receipts that must be shown at departure to get tax refunds.
Lotte Department Store, South Korea’s No. 1 luxury retailer, said the instant tax refund will be given at its main Sogong-dong flagship store in downtown Seoul.
Shinsegae Department Store said its main store in Jung-gu will offer the service to customers, while Hyundai Department Store plans to give immediate tax refunds at its main Apgujeong store and its Coex outlet in southern Seoul.
Department stores said they picked the stores because they are the most frequented by foreign visitors, with more stores to be added later.
“Foreign shoppers can buy products minus the 10 per cent VAT so there is no need to keep tabs on receipts or show the product they purchased at the airport when they leave the country,” a Lotte official said. “This can greatly reduce the hassle at airports and should fuel sales at our store.”
In addition, local department stores said they will kick off promotion sales to attract Chinese tourists who are expected to arrive in large numbers during the Chinese Lunar New Year holiday. The traditional holiday runs from February 3 through February 13 this year.
Lotte said it will give 50,000 won discounts for purchases exceeding 1 million won, with gift cards equal to 5 per cent of the purchase of the total to be given if the total tops 10 million won. Shinsegae said it too will give upwards of 30 per cent discounts and gifts to foreign tourists that buy items at its stores in February. The retailers said that to get the benefits the shopper needs to show his or her passport when making the purchase.
Questions & Answers
Q.What is the maximum value of a single item that qualifies for an instant tax refund?
What is the maximum value of a single item that qualifies for an instant tax refund?
For an item to qualify for an instant tax refund, its cost must be between 30,000 won and 200,000 won. Items exceeding 200,000 won require the VAT to be paid upfront and refunded later.
Q.What is the total purchase limit for a foreign customer to receive an instant tax exemption?
What is the total purchase limit for a foreign customer to receive an instant tax exemption?
Each foreign customer can be exempt from VAT for purchases totalling up to the first 1 million won. This applies to eligible items that fall within the specified individual price range.
Q.Which specific department store locations will initially offer the instant tax refund service?
Which specific department store locations will initially offer the instant tax refund service?
Lotte Department Store's main Sogong-dong flagship, Shinsegae Department Store's main store in Jung-gu, and Hyundai Department Store's Apgujeong and Coex outlets will initially provide this service.
Q.What documentation must tourists provide to receive the instant tax refund and promotional offers?
What documentation must tourists provide to receive the instant tax refund and promotional offers?
To receive the instant tax refund and benefit from the promotional sales, shoppers are required to show their passport at the point of purchase in the participating stores.
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