Financial Services Commission: "AppleCare+ is an insurance product"... Kim Young-sik says "10,000 won should be refunded"

[Asia Economy Reporter Lim Hye-seon] The Financial Services Commission has issued an authoritative interpretation that some AppleCare+ products managed by Apple Korea qualify as insurance.

Kim Young-sik, a member of the Science, Technology, Information and Broadcasting Communications Committee from the People Power Party, announced on the 31st that he received an authoritative interpretation from the Financial Services Commission confirming that the "Accidental Damage Protection (ADH)" component of the controversial AppleCare+ is considered an insurance product. Accidental Damage Protection is a service that covers repair costs, excluding the deductible, when product damage or defects occur.

On the 7th, when Apple's new iPhone 14 series was officially released in Korea, citizens lined up at the Apple Store in Myeongdong, Jung-gu, Seoul to purchase the product. Photo by Mun Honam munonam@

AppleCare+ is a paid program that provides services such as battery repair and replacement for batteries with less than 80% maximum capacity, claims for accidental damage, and technical support. Under the current Value-Added Tax Act, insurance products are exempt from VAT. Since the launch of AppleCare+ in September 2019, Apple has applied VAT to its sales. Recently, Apple added clauses regarding "deception, fraud, and misuse in insurance claims" to the AppleCare+ terms and conditions. While denying that it is an insurance product and charging VAT, Apple explicitly states that if consumers intentionally damage the product, it constitutes "insurance fraud." This has led to criticism of inconsistency.

According to the Financial Services Commission's interpretation, AppleCare+ is divided into products providing technical support warranty extension and accidental damage protection (ADH). The Commission views the technical support warranty extension as an additional service directly provided by the manufacturer or seller. On the other hand, accidental damage protection is considered a group insurance contract where Apple acts as the policyholder, AppleCare+ purchasers are the insured, and the insurance company (AIG Korea) is the insurer. This group insurance requires the insurer to compensate for costs incurred for repair or replacement of the phone in cases of total or partial loss according to the insurance policy.

Representative Kim Young-sik stated, "The Financial Services Commission's interpretation has determined that the accidental damage protection part of AppleCare+ is an insurance product," adding, "It seems necessary to discuss VAT exemption for this part as well as refunds of VAT paid by existing service subscribers." Considering that AppleCare+ products are typically sold for around 200,000 KRW and half of the product is regarded as insurance, it is estimated that a VAT refund of about 10,000 KRW per subscription should be made.

Kim also said, "We plan to discuss with Apple how to proceed with refunds of VAT already paid," and added, "We will ensure that refunds are processed as soon as possible."

Kim Young-sik, Member of the People Power Party