Korea Customs Service

What is ACVA* program?

* Advance Customs Valuation Arrangement

Purpose

It provides tax predictability for Multinational Enterprises while guaranteeing steady stream of revenue and lowering administrative cost for the customs

Meaning

An advance agreement between a taxpayer and the customs authority, at the request of the taxpayer, on customs valuation of imports traded between related parties, i.e, an overseas parent company and its domestic subsidiary

History

- 2008 : Launched & Implemented ACVA Program

- 2015 : Initiated Easy-ACVA for SMEs

- 2017 : Revamped Audit System for boosting ACVA Program

- 2018 : Introduced Review scheme of ACVA Rulings

- 2020 : Formulation of the ACVA procedure in higher legal instrument to strengthen legal stability

- 2023 : Application Office for ACVA advance ruling pre-consultation changed from Regional Customs to CVCI

- 2025 : Extension of ACVA validity period (up to the end of the fiscal year in which the date falling three years from the date of notification of the result occurs)

ACVA Benefits

Suspend of PCA

When an applicant applies for ACVA, he/she may request the suspend of PCA on customs value of goods for which ACVA is sought

The declared price is accepted as the customs value for three years from the approval date(expendable for up to two additional years)

Penalty tax waiver

Applicants are eligible for provisional value declaration from the time of filing ACVA application

if taxpayers correct customs duties having been that are self-assessed and paid before the notification of the ACVA result, they will be exempted from penalties for mis-declaration(equivalent to 10% of tax deficiency) if they do so within two months after the ruling is issued

Waiver of submission of documents for determination of a customs value

For goods subject to ACVA rulings, the submission of documents for customs value determination may be waived

Electronic customs screening for provisional value declaration

The system has been improved to allow electronic customs screening for provisional value declarations in accordance with ACVA rulings, thereby enabling expedited customs clearance

Fulfillment of Basic Requirements for provisional value declaration for a compensating adjustment

If an ACVA examination finds that transaction value has been 'un-influenced' by related-party transaction, it fulfills the basic requirements for provisional value declaration for a compensating adjustment

Availability of Advance Tax-Duty Adjustment Scheme

Advance tax-duty adjustment scheme enables taxpayers to apply for ACVA with the customs authorities (KCS) and APA with the tax authorities (NTS) at the same time for the sake of their convenience

ACVA Application & Evaluation

Main Determination Areas (selectable)

Whether the relationship influenced the transaction value

Validity of the proposed customs valuation method (Methods 1–6)

Whether any additions or deductions apply

Appropriateness of the customs value

Whether the domestic tax authority’s Advance Pricing Arrangement (APA) approval or application can be accepted as a customs valuation method

Eligibility

Importers located in Korea that continuously import goods from overseas exporters with whom they have a relationship

ACVA Processing Procedure

1. Pre-consultation

   Pre-consultation may be requested if necessary

2. Application for ACVA

   Submission of supporting documents for the pricing method of the imported goods, such as the transfer pricing policy/report or contracts

3. Evaluation

   Evaluation period: 1 year

4. Notification of Evaluation Results

   Applicant indicates whether they agree with the evaluation results

5. Issuance of
   Advance Review
   Certificate

   Valid for 3 years

6. Submission of
   Annual Report

   Annual report submission required

ACVA Responsible Departments

Operation, review and advance review of other customs valuation methods of ACVA : Evaluation Department of the Customs Office

Policy on ACVA and evaluations of related-party transactions: Customs Valuation Policy Division, Korea Customs Service (Tel. 042-481-7767)

Comparison between ACVA and VAR

Advance Ruling on customs valuation is divided into two types; "Valuation Advance Ruling(referred to as VAR)" for general imports traded between unrelated parties(Article 37.1.1 and 2 of the Act), and "ACVA" for imports in related party transactions(Article 37.1.3 of the Act)