A Seoul Administrative Court ruled that some imported nicotine liquids for e-cigarettes are not subject to tobacco-related taxes, distinguishing between nicotine derived from tobacco leaves and stems. The October 19 decision partially upheld a lawsuit filed by a local importer, referred to as “Company A,” challenging a 510 million won ($357,000) public health surcharge imposed by the Ministry of Health and Welfare.
The importer brought nicotine liquids from Malaysia and China between August 2018 and June 2019, declaring the products tax-exempt on the grounds that Malaysian nicotine was extracted from tobacco stems, not leaves. Under South Korea’s Tobacco Business Act, products derived from leaves are taxed, while those from other plant parts are not. The court canceled 212 million won ($148,000) in taxes on Malaysian imports but upheld 298 million won ($209,000) on Chinese shipments, which evidence showed were derived from tobacco leaves.
Judge Kang Jae-won highlighted that documentation from the Chinese supplier indicated extraction from “leaf veins,” justifying taxation, while Malaysian documentation lacked proof of leaf usage. The ruling highlights the regulatory complexity of South Korea’s growing e-cigarette market, where small botanical and chemical distinctions can determine tax liability for importers and manufacturers.