If we damage a luxury bag while repairing it, is the compensation also recognized as an expense?
Yes, compensation for damage or loss of a high-value item is deductible as a business-related loss compensation payment, and a shop handling luxury goods should carry high-value liability insurance, with the premium also recognized as an expense. If your repair business qualifies as a mandatory cash-receipt-issuance business, you must issue a receipt without a request for transactions of KRW 100,000 or more, and issue one on request regardless of amount below that — given how common small-ticket, high-volume transactions are in this business, manage this carefully to avoid any missed issuances.
The Trickiest Part — Luxury-Goods Liability and Small-Ticket, High-Volume Transactions
You need to manage both the risk of handling high-value goods and documentation for a high-volume, low-price business model
Luxury-Goods Damage Liability Insurance Is Safer
Damaging a luxury shoe or bag during repair can create significant compensation liability, so carrying high-value liability insurance is safer. The premium is recognized as an expense, and even if you pay compensation directly without insurance, you can expense it as long as you keep the agreement and processing records on file.
Don't Skip Cash Receipts on Small Transactions
If your repair business qualifies as a mandatory cash-receipt-issuance business, you must issue a receipt without a request for transactions of KRW 100,000 or more, and issue one on request regardless of amount below that. Given how common small-ticket, high-volume transactions are, be careful about missed issuances.
Income Structure Features of Shoe & Bag Repair Shops
Key Expense Items
Must-Know for Shoe & Bag Repair Shops
Split Repair Equipment & Materials by Category to Save on Taxes
From sewing machines to luxury-goods liability, categorizing each item correctly is what cuts unnecessary tax
Long-Term Fixed Assets — Equipment Subject to Depreciation
Repair equipment: industrial sewing machine, sole-repair machine, buffer
Store fixtures: display case, POS system
Once a per-unit purchase exceeds KRW 1 million, it's classified as a depreciable asset and must be expensed over its useful life.
Consumables — Immediate Expense
Leather, materials, heels, zippers, thread, and other repair materials are expensed in full at the time of purchase. High-grade materials used for luxury-goods repair carry a higher price, so keep purchase documentation carefully.
Liability Management Costs
Liability insurance premiums covering damage or loss during luxury-goods repair are a necessary cost of doing business and are recognized as expenses.
Franchise Fees & Headquarters Management Costs
If you're a franchisee, royalties, training fees, and headquarters group-buy materials costs are a recurring monthly cost, expensed in full at the time incurred, and you should always obtain a tax invoice or receipt from headquarters.
| Category | Typical Examples | Tax Treatment |
|---|---|---|
| Long-term fixed assets | Industrial sewing machine, sole-repair machine, POS | Depreciated once over KRW 1M |
| Consumables | Leather, materials, heels, zippers, thread | Fully expensed immediately at purchase |
| Liability management | Luxury-goods liability insurance premium | Expensed immediately |
| Franchise fees/headquarters | Royalties, training fees, group-buy costs | Expensed immediately |