[Asia Economy Reporter Koo Eun-mo] There have been claims that the collection of VAT on Apple’s extended warranty service combined with insurance, ‘AppleCare Plus,’ violates current law.
On the 19th, Kim Young-sik, a member of the People Power Party, stated that the VAT collection on Apple’s AppleCare Plus product violates the Value-Added Tax Act and that VAT refunds are necessary for existing AppleCare Plus purchasers (subscribers).
Apple Korea has been selling an insurance-type product that extends the warranty period of Apple devices and compensates for damage caused by consumer negligence since September 11, 2019. Article 26 of the Value-Added Tax Act exempts ‘insurance products’ from VAT, so if AppleCare Plus is considered an insurance product, consumers are not obligated to pay VAT.
Previously, in 2016, the Financial Services Commission issued an authoritative interpretation stating that KT’s ‘Olleh Phone Safety Plan,’ a product similar to AppleCare Plus, should be regarded as an insurance product exempt from VAT. Accordingly, KT refunded approximately 60.6 billion KRW (an average of 6,100 KRW per person) in VAT to about 9.88 million subscribers. Considering that the subscription (sales) cost of AppleCare Plus in Korea is in the 200,000 KRW range for iPhones and 200,000 to 400,000 KRW for MacBook products, the average VAT refund per person is expected to be higher than in KT’s case.
Rep. Kim said, “AppleCare Plus, like the Olleh Phone Safety Plan, is a combination of an insurance product and an additional service (warranty extension), so in light of the Financial Services Commission’s authoritative interpretation, it is reasonable to consider it an insurance product,” and added, “The unduly collected VAT should be refunded immediately.”
He continued, “Considering that Apple Korea included a 10% discount on AppleCare Plus and a 10% refund for existing users as part of the Fair Trade Commission’s consent decree for win-win support, it is highly likely that Apple was aware of the improper VAT collection related to insurance products being tax-exempt in Korea, unlike in the United States, and took preemptive measures,” and pointed out, “Separate from the consent decree, the improperly collected VAT must be refunded immediately.”
Rep. Kim emphasized, “In the past KT case, the Korea Communications Commission supervised and managed the prompt refund of VAT,” and urged, “The Korea Communications Commission should investigate this matter to ensure that Apple Korea’s VAT refund is properly carried out.”
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