🚨 Global Expansion of Reverse Purchases Market: Tax Barriers Getting in the Way?

Today Korean Economic News | 2025.05.03

📌 Used Goods Reverse Purchase Market Expanding but Facing Difficulties with Double Taxation

💬 As the domestic reverse purchase market has grown to 43 trillion won, exports of used goods have also significantly increased. However, due to the nature of used goods, it's difficult to provide purchase evidence, limiting the application of value-added tax zero-rates. As a result, exporters face double taxation issues where they pay taxes overseas as well. The industry is demanding expanded zero-rate application for used goods exports and tax system improvements, expecting additional growth in the reverse purchase market through these changes.

1️⃣ Easy Understanding

Korea's reverse purchase market is growing significantly, but used goods exports are facing difficulties due to tax issues. Let me explain this situation in simple terms.

Reverse purchase means when foreigners buy items from Korean online shopping malls. Simply put, it's when overseas consumers directly purchase Korean products. Recently, with the influence of K-pop, K-dramas, and other Korean Wave content, foreign demand for Korean products has greatly increased, causing rapid growth in the reverse purchase market. As of 2024, it has reached 43 trillion won, more than triple the size from five years ago.

A notable point is that used goods reverse purchases are becoming more active. Foreigners are increasingly buying clothing, electronics, and K-pop merchandise through Korean secondhand trading platforms. However, tax issues are arising in this process.

Generally, export items are subject to a value-added tax "zero-rate." Zero-rate means a tax rate of 0%, so exporters don't need to pay taxes. However, with used goods, it's often difficult to present original purchase receipts or other proof of purchase, making it hard to receive this benefit. As a result, a "double taxation" situation occurs where taxes are paid in Korea, and the importing country also charges customs duties and value-added tax.

For example, let's say a consumer buys a used luxury bag for 500,000 won and sells it to an overseas buyer for 1 million won. In this case, the seller must pay about 90,000 won in value-added tax in Korea, and the buyer must also pay customs duties and value-added tax in their own country when importing. This double taxation reduces price competitiveness and profitability.

In response, used goods exporters are demanding expanded zero-rate application and tax system improvements. Industry representatives emphasize that "used goods exports are also an important industry that earns foreign currency," and that "tax barriers should be lowered to strengthen global competitiveness."

The reverse purchase market can be a new growth engine for the Korean economy. If the tax system for used goods exports improves, more sellers from individuals to small businesses could enter the global market.

2️⃣ Economic Terms

📕 Reverse Purchase

Reverse purchase refers to foreigners buying items from Korean online shopping malls.

• It's the opposite concept of direct overseas purchases (where Koreans buy foreign products) - it's the form of selling Korean products overseas.
• It's growing rapidly as overseas demand for Korean products like cosmetics, clothing, and food increases due to the Korean Wave influence.

📕 Value-Added Tax Zero-Rate

Value-added tax zero-rate means a tax rate of 0%, where no output tax occurs.

• It applies to exports, foreign currency earning goods and services, etc., to enhance international competitiveness.
• When zero-rate applies, input tax can be refunded, reducing the tax burden on exporters.

📕 Double Taxation

Double taxation is when the same income or transaction is taxed two or more times.

• A typical case is paying taxes domestically and then paying taxes on the same transaction overseas.
• To prevent this, countries often establish tax treaties or operate tax credit systems.

📕 Purchase Evidence

Purchase evidence refers to documents proving transactions that occurred when purchasing goods.

• Tax invoices, receipts, and credit card slips are typical purchase evidence documents.
• They are necessary for deducting input tax when filing value-added tax returns and are important bases for tax calculations.

3️⃣ Principles and Economic Outlook

💡 Growth of the Reverse Purchase Market and Its Economic Significance

• Let's examine the background of the rapid growth in the reverse purchase market and its economic significance.

  • First, the global spread of the Korean Wave is the key driving force behind the growth of the reverse purchase market. The worldwide popularity of Korean cultural content such as K-pop, K-drama, and K-beauty has greatly increased demand for Korean products. In particular, the global fandoms of K-pop artists like BTS and BLACKPINK have led to purchases of related merchandise, Korean fashion, and cosmetics. Also, Korean dramas that became global hits through Netflix, such as "Squid Game" and "The Glory," have created a "drama effect" generating foreign demand for products featured in these dramas. The influence of the Korean Wave has become a stable foundation for growth in the reverse purchase market, going beyond short-term trends to establish itself as a lasting consumer trend.

  • Second, the development of online platforms and logistics infrastructure supports the activation of reverse purchases. Korean e-commerce companies have strengthened overseas shipping services and introduced multilingual support and international payment systems, greatly improving accessibility for foreigners to Korean shopping malls. Major platforms like Naver, Coupang, and 11st have released global versions and are actively marketing overseas to attract foreign customers. The expansion of international express delivery services and reduced logistics costs have also lowered barriers to overseas shipping. Recently, the increasing number of purchasing agent services and overseas shipping agencies for foreign buyers has created an even more convenient purchasing environment.

  • Third, the reverse purchase market is significant as a new export channel and economic growth engine. While traditional exports were large-scale transactions centered around large corporations, reverse purchases feature small-scale distributed exports that even small businesses and individual sellers can easily participate in. This is significant in terms of diversifying export entities and expanding economic participation opportunities. Particularly after COVID-19, as non-face-to-face consumption increased and international movement was restricted, the importance of reverse purchases through online channels was further highlighted. As the global e-commerce market is expected to grow by more than 15% annually, the potential of the reverse purchase market is expected to increase even further.

• The reverse purchase market is an important channel that goes beyond simple consumer goods exports to enhance Korea's cultural influence and brand value. It also has great economic significance as a future growth engine that expands global market entry opportunities for individuals and small businesses, while creating new jobs and added value.

💡 Tax Issues in Used Goods Exports and Solution Directions

• Let's analyze the causes of tax problems in used goods exports and the directions for solutions.

  • First, the fundamental reason for limited zero-rate application in used goods exports is the lack of purchase evidence. According to the Value-Added Tax Act, zero-rates apply to exported goods, but documents proving the acquisition cost and input tax of the goods are required. However, with used goods, they are often purchased directly from the original buyer or through secondhand trading platforms, making it difficult to secure formal receipts or tax invoices. Especially in transactions between individuals, most only have simplified receipts or transfer records, which are difficult to recognize as formal evidence under tax law. Also, a double taxation problem occurs where exporters pay value-added tax on used goods purchased without tax invoices, and then import countries also charge customs duties and value-added tax.

  • Second, expanding zero-rate application for used goods exports is necessary. Currently, zero-rates can apply to used goods exports, but the condition that purchase evidence must be clear makes it difficult to receive benefits in practice. Therefore, it's necessary to relax zero-rate application criteria considering the special nature of used goods transactions. For example, the system should be improved to recognize various forms of evidence such as online secondhand platform transaction records, account transfer proof, and delivery notes. Simplifying evidence requirements for small-amount used goods exports could also be considered. Some countries like Japan and the UK have already introduced tax benefits and simplified procedures for used goods exports.

  • Third, a comprehensive support system for activating used goods exports is needed. Along with solving tax issues, expanded support for used goods exports overall is necessary. First, specialized consultation windows and educational programs providing information and procedures related to used goods exports should be operated. Also, integrated logistics support and overseas marketing support services for small-scale used goods exporters should be expanded. Especially as Korean Wave-related used goods (K-pop merchandise, used clothing, etc.) often receive special value recognition overseas, a strategic approach to cultivate them as high value-added export items is needed. In the long term, infrastructure construction such as introducing digital authentication systems to enhance transparency in used goods transactions should also be considered.

• Used goods exports are not only part of the circular economy promoting efficient resource utilization and eco-friendly consumption, but also an important industry providing global business opportunities to individuals and small businesses. Efforts are needed to lower barriers to used goods exports through tax system improvements and foster them as future export industries.

💡 Future Outlook and Development Challenges for the Reverse Purchase Market

• Let's look at the future outlook for the reverse purchase market and the challenges for continued growth.

  • First, the reverse purchase market is expected to continue growing, but competition will also intensify. As long as the global e-commerce market grows rapidly and the influence of the Korean Wave continues, the growth potential for the reverse purchase market is large. Especially as foreign consumers, centered around Generation MZ, increase their preference for Korean products, the market expansion trend is likely to continue for the time being. However, competition with Asian countries like China and Japan is also expected to intensify. China is targeting the global e-commerce market with low-priced products, while Japan maintains competitiveness based on high-quality products and thorough logistics systems. Therefore, developing differentiated products and services is important for the continued growth of Korea's reverse purchase market.

  • Second, strengthening the reverse purchase ecosystem through government and business cooperation is necessary. The government needs to expand institutional support for overall reverse purchase activation along with improving the tax system for used goods exports. This includes simplifying online export customs procedures, supporting overseas marketing, and strengthening global logistics networks. Institutional support through international cooperation related to digital trade and utilization of FTAs also needs to be strengthened. Businesses need to enhance global competitiveness through expanding multilingual services, establishing localized marketing strategies, and building efficient overseas shipping systems. Providing personalized services utilizing advanced technologies like AI and big data will become especially important.

  • Third, developing new business models for sustainable growth of the reverse purchase market is important. Beyond simply selling Korean products overseas, differentiated business models tailored to local markets and consumer characteristics are needed. For example, innovative approaches like subscription K-beauty boxes, product sales linked with Korean Wave content, and metaverse shopping malls providing Korean product experiences are possible. For used goods exports, developing services that add value, such as authentication services verifying product authenticity and condition, and specialized platforms evaluating the value of rare used goods, is important. In the long term, it needs to develop in the direction of providing a comprehensive brand experience containing Korea's cultural values and lifestyle.

• The reverse purchase market is an important channel expanding Korea's economic and cultural influence beyond simple product sales. A sustainable growth foundation must be established through tax system improvements, digital technology utilization, global logistics system strengthening, and innovative business model development.

4️⃣ In Conclusion

As the reverse purchase market has grown to 43 trillion won, it has established itself as a new export channel for the Korean economy. Particularly, with the global spread of the Korean Wave and the development of online platforms, various products such as K-beauty, K-fashion, and K-pop merchandise are being sold overseas. Recently, used goods reverse purchases have also become active, but they are facing difficulties due to tax issues.

The core problem with used goods exports is the limitation of value-added tax zero-rate application due to lack of purchase evidence. Used goods purchased through individual transactions or secondhand trading platforms often lack formal tax invoices, making zero-rate application difficult. As a result, a double taxation situation occurs where exporters pay value-added tax in Korea, and overseas buyers also pay customs duties and value-added tax when importing.

The industry is demanding relaxed zero-rate application criteria considering the characteristics of used goods transactions. Various suggestions are being made, such as recognizing online transaction records, account transfer proof, and delivery notes as various forms of evidence, and simplifying evidence requirements for small-amount used goods exports.

Used goods exports also have important economic significance. They contribute to activating the circular economy, provide global business opportunities to individuals and small businesses, and enhance recognition of Korean products. Therefore, expanded support for used goods exports overall is needed along with solving tax issues.

For continued growth of the reverse purchase market, a comprehensive approach is needed, including not only tax system improvements but also digital technology utilization, global logistics system strengthening, and development of differentiated business models. Through this, the reverse purchase market should be developed as a future growth engine for the Korean economy.