[Digital Times, Kim Yang-hyuk] The sales portion of imported car companies, which recorded the lowest level since May this year, has been increasing since June. In particular, the sales of high-priced imported cars over KRW 100 million have increased significantly. It is interpreted that a high-priced imported car is judged to be more advantageous for a corporation than an individual to buy, even in the case of a corporate vehicle purchase condition, such as a corporation`s upper limit for the cost of purchasing a vehicle, and the proof of business use. It is pointed out that the government`s tax laws, which have been implemented since 2016, are about to catch up with the `private corporate vehicle for business use only`.

According to the Korea Automobile Importers & Distributors Association (KAIDA) on August 15, among the 17,728 imported cars registered in Korea this year, the total number of registered cars was 6352, accounting for 36.03% of the total. This is a 1% increase from the previous year, and the proportion of corporate import car sales, which dropped to 32% in April and May this year, remained at 35% since June.

The sales recovery of the imported car business is attributed to vehicles over KRW 100 million. Imported cars registered in Korea by July this year totaled more than KRW 100 million, up 24.63 % from the same period last year. Bentley and Lamborghini, the leading high-end brands, have recorded sales of 78.95% and 86.36% respectively. This was an increase of 2.62 % points and 13.64 % points from the same period last year.

The domestic sales price of Bentley and Lamborghini exceeds at least KRW 200 million. In addition, Rolls-Royce vehicles, which cost more than KRW 400 million, accounted for 47 out of 52 cars and more than 90% of them were purchased by the corporation. Among the 1,786 sports car brand Porsche, 1094 cars (61.25%) were bought by the corporation.

It is a dominant view that it is difficult to see such high-priced imported cars for corporate business purposes. Most of the cars purchased by corporations such as Lamborghini and Porsche this year are sports cars equipped with high-performance engines, and they are far from business for sales.

As a result, the Korean government has pointed out that the effects of the corporate tax law and the income tax law revised last year has fallen. An import car company representative said, "It seems that it is advantageous to purchase by corporation car which is advantageous in cost processing rather than individual purchase even considering the demanding regulations such as logbooks."

The government revised the Corporate Tax Law and the Income Tax Act in 2016 to prevent the private use of business vehicles and realize fair taxation. As a result, when a business car is purchased under the name of an individual business, the upper limit of the purchase cost that can be treated as an annual cost is limited to a maximum of KRW 8 million. Also, when a consumer wants to get more than KRW 10 million as a cost by combining vehicle purchase cost and maintenance cost, a consumer has to write the log and proved that it is used for business purposes. Besides, only employees of the company should be allowed to operate auto insurance, so that 50% of the related expenses such as the purchase cost and the maintenance cost will be recognized and the tax will be deducted. In the past, up to KRW 200 million was taxed for KRW 40 million every year for 5 years, and it was able to be treated at a cost without any maintenance cost limitation.


By Kim Yang Hyuk mj@


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