Louis Vuitton Korea raised its domestic retail prices by 40% over the past three years while cutting the import prices it pays to overseas affiliates by at least 7%, according to findings by Korean authorities. The Korea Customs Service viewed this as an artificial adjustment of import prices between related parties to reduce customs duties and imposed a levy worth hundreds of billions of won. Louis Vuitton has contested the action and is continuing its dispute at the Tax Tribunal. Given that Louis Vuitton previously clashed with the National Tax Service over corporate taxes for allegedly inflating import prices to reduce its Korean unit's profits, industry observers are questioning whether the company has been adjusting import prices like a rubber band depending on the period to minimize its customs and corporate tax burden.
According to the Korea Customs Service and the luxury industry on Tuesday, the agency reassessed the dutiable value of roughly 10,000 import declarations covering leather goods, clothing, shoes and accessories that Louis Vuitton brought in from its Hong Kong and Singapore affiliates between July 2020 and October 2023, saying the company had "arbitrarily lowered transaction prices." In a pre-assessment review, the Customs Service said, "The retail price in August 2023 rose about 40% compared to April 2019, while the 2020 import price was cut by 7%," adding that "simply comparing the increase in inventory risk cost (9%) and the reduction in import price (7%) using only selected items as examples lacks sufficient justification for lowering import prices."
Louis Vuitton imports all of its products sold in Korea through related entities in Hong Kong and Singapore. The import price is calculated by multiplying the domestic retail price by a certain adjustment coefficient (discount rate). In other words, the Korean unit first determines the selling price in Korea and then applies a certain ratio to set the price at which it buys from overseas affiliates.
The Customs Service found that Louis Vuitton Korea arbitrarily lowered this adjustment coefficient on two occasions, in June-July 2020 and August-September 2023, thereby reducing import prices. The agency concluded that the company lowered the import price ratio — which had been maintained at around 70% of the domestic retail price until 2019 — without reasonable justification. "It cannot be regarded as a normal price-setting method between independent parties for the import price to remain similar or even decline while the retail price continued to rise," the Customs Service said.
Louis Vuitton raised prices five times in 2021 alone as luxury demand surged amid pandemic-era revenge spending. It then raised prices twice in 2022, once in 2023, twice in 2024, and five times last year. The price of its flagship "Capucines MM" jumped from the 6-million-won range to the 10-million-won range during this period. As a result, Louis Vuitton Korea's revenue grew from 784.6 billion won in 2019 to 1.85 trillion won last year, while operating profit surged from 54.9 billion won to 525.6 billion won over the same period.
Louis Vuitton countered that, given the nature of the luxury industry, domestic retail and import prices are not unilaterally determined by headquarters but are negotiated based on the domestic market environment and competitor pricing. The company argued that it adjusted the coefficient to reflect heightened inventory risk during COVID-19 and subsequent investment increases for store, warehouse and online platform expansions, not to distort prices by exploiting related-party status. However, the Customs Service dismissed these arguments in its pre-assessment review in November 2024, saying, "Even though domestic sales surged due to revenge spending after COVID-19, the company did not make sufficient efforts to restore the adjustment coefficient to its original level."
Louis Vuitton paid the duties first and is continuing its challenge through the Tax Tribunal. The company has booked part of the previously paid customs duties as accounts receivable, expecting to recover them. The amount grew from 12 billion won in 2024 to 26.3 billion won last year. Earlier, Valentino Korea also filed two petitions with the Tax Tribunal over import prices between related parties and won both cases. After winning an initial cancellation decision in February 2024, the company secured another cancellation in October 2025 when Incheon Customs reissued the assessment. The Tax Tribunal ruled that "it was arbitrary for the customs authority to mechanically apply the discount rates of past comparable companies in a uniform manner."
Industry observers have raised questions over whether foreign headquarters are adjusting import prices like a rubber band to manage the tax burden of their Korean units. Louis Vuitton Korea's import prices have moved up and down depending on the period. Between 2014 and 2018, the company took the opposite approach, keeping import prices relatively high, which prompted a transfer pricing dispute with the National Tax Service over corporate taxes on the grounds that the Korean unit's profits had been kept excessively low. At the time, Louis Vuitton's average gross profit margin from 2014 to 2017 was 28.67%, while its operating margin stood at just 8.5% — less than half the 19% operating margin of its British unit. The National Tax Service imposed corporate taxes, arguing that the import cost from the Singapore affiliate was set too high, funneling profits to the Singapore entity. Louis Vuitton contested the levy, and in 2024 the Tax Tribunal partially sided with the company, ordering a corporate tax refund.
Prada Korea also recovered 4.3 billion won in corporate taxes in 2024 through a double-taxation adjustment procedure with Italian tax authorities. "In the past, corporate tax disputes were the main battleground, but the front line has now shifted to customs challenges," a retail industry official said. "With no clear standard for calculating import prices, luxury brands appear to be adjusting import prices like a rubber band to minimize their customs and corporate tax burdens."
