Reasons for Proposal and Major Provisions

A duty-free shop commission is a commission paid by a domestic duty-free shop to a travel agency or tour guide (hereinafter “travel agency, etc.”) to attract foreign tourists. 

The series of transactions begins when a duty-free shop pays the commission, after which the travel agency, etc. declares and pays the value-added tax. Tourists are then recruited and transferred between higher and lower-level travel agencies, etc. (hereinafter “customer recruitment service”) and brought to the duty-free shop.

However, travel agencies often evade value-added tax by deliberately shutting down before declaring value-added tax. It is not practical to investigate a travel agency that has shut down, which makes it difficult to determine the exact scale and route of tax evasion.

Low entry barriers to the travel industry create a high incentive to evade taxes by shutting down and then establishing a new travel agency to recruit tourists.

Accordingly, the Amendment introduces a special reverse charge mechanism where value-added tax is not paid by travel agencies, etc. that provide a customer recruitment service, but by a financial institution that manages a separate dedicated customer recruitment service transaction account and that pays the value-added tax directly to the National Tax Service via the dedicated account, thereby promoting the transparency of customer recruitment service transactions and normalization of value-added taxation (Article 106-11 newly inserted).