"Bought Because It Was Cheap"... Must Calculate 'This' When Buying Alcohol Directly [Heotdari Economy]

(37) Warning Against 'Tax Bomb'

On the 26th, marking the official start of the summer vacation season, Incheon International Airport Terminal 1 duty-free area is bustling with crowds heading overseas for travel. Photo by Jo Yongjun jun21@

Editor's NoteMany people thought they were engaging in smart economic activities to get something better, but it often turned out to be a misstep. When consumers are deceived by corporate marketing or blinded by momentary gains and make wrong decisions, they end up being the ones who suffer. We aim to examine economic activities where people have made mistakes by misjudging everyday situations.

Min Ji-yoon (38) found a whiskey priced in the 100,000 KRW range on an overseas direct purchase (overseas direct buying) site while looking for Chuseok gifts. It was about 30,000 KRW cheaper than domestic sites, so she clicked the purchase button. However, a tax of over 150,000 KRW was added. Adding the tax to the whiskey price pushed the total well over 260,000 KRW. Min said, "I only looked at the direct purchase price and didn’t realize the taxes would be this high," regretting buying through direct purchase.

If you bring in liquors like whiskey or other spirits through overseas direct purchase just because the selling price is cheaper than in Korea, you may face a tax bomb, so caution is needed. You must calculate the cost considering the taxes payable during customs clearance.

According to the Korea Customs Service import-export trade statistics, the import volume of whiskey types such as Scotch and Bourbon in 2023 was 30,586 tons. The import volume in 2021 was 15,661 tons. The import volume more than doubled in two years. This is interpreted as a result of increased demand for premium alcohol after the COVID-19 period and the 'highball' craze mainly among younger generations.

When purchasing alcohol via overseas direct purchase, if the selling price is under $150 (based on Naver exchange rate of 1 USD = 1,331 KRW, about 199,000 KRW), limited to one bottle and a volume of 1 liter (ℓ) or less, customs duties and value-added tax are exempted regardless of the country or origin. If any one of these three conditions is exceeded, additional charges apply. You must also consider liquor tax of 72% and education tax of 30% applied to the whiskey’s ex-factory price. Different laws apply when travelers personally bring alcohol from overseas. The limit is two bottles, with a combined volume of 2 liters (ℓ) or less. The combined price must also be under $400 (about 530,000 KRW).

This is why you need to keep taxes in mind and check the expected amount before purchasing liquors such as whiskey or wine on overseas direct purchase sites. For example, in the case of wine, a customs duty of 15% is applied to the taxable freight (purchase price + shipping cost). If you buy wine priced at 200,000 KRW, a customs duty of 15% on 200,000 KRW, which is 30,000 KRW, is added. Then, a liquor tax of 69,000 KRW is added. The liquor tax is calculated by adding the customs duty (30,000 KRW) to the taxable price (200,000 KRW) and multiplying by the liquor tax rate of 30%. An education tax of 6,900 KRW is also added, which is 10% of the liquor tax (69,000 KRW). Finally, a value-added tax of 30,590 KRW is added. The VAT is calculated by adding the taxable price (200,000 KRW), customs duty (30,000 KRW), liquor tax (69,000 KRW), and education tax (6,900 KRW), then multiplying by the VAT rate of 10%. If you purchase wine priced at 200,000 KRW, you will pay a total of 336,490 KRW. The tax alone amounts to 136,490 KRW.

When purchasing cognac, a customs duty of 15% is applied to the taxable freight, and a liquor tax of 72% is applied to the sum of the taxable freight and customs duty. An education tax of 30% of the liquor tax is added. A value-added tax of 10% is applied to the total sum of all these amounts, resulting in the final payment price. Whiskey is similar to cognac but has a higher customs duty rate of 20%.

Depending on the type of alcohol, the final tax rate (tax amount) is about 68% for wine, about 156% for brandy, vodka, and whiskey, and about 177% for gaoliang liquor. Since the process is complicated, it is also good to check the estimated tax amount in advance through the Korea Customs Service’s 'Estimated Tax Inquiry System' on their website.

Professor Lee Young-ae of the Department of Consumer Studies at Incheon National University emphasized that consumers should recognize and verify that the displayed price during overseas direct purchase is not the final price. Professor Lee said, "If consumers perceive the displayed price as the final price, they will make payments without comparing or analyzing other sellers," adding, "Don’t just think it’s cheap based on the price alone; calculate the customs clearance price in advance and calmly compare the provided information."