Taxes on the sales of passenger cars in South Korea will be calculated differently from next month in a bid to bridge the gap between taxes on domestic and imported cars.

The National Tax Service(NTS) said on Wednesday that it decided to apply a new system for domestically produced passenger vehicles that can accommodate up to eight people.

The new system seeks to impose the individual consumption tax of five percent on the price of a car after subtracting 18 percent from the car’s factory price.

In the event a consumer buys a domestic car valued at 42 million won, the consumption tax will now be applied to a final price of 34-point-four million won that accounts for the deduction of 18 percent, which will save the buyer 540-thousand won, or around 400 U.S. dollars.

Currently, consumption taxes on domestic cars are calculated based on factory prices, which include distribution costs.

Taxes on imported cars exclude such distribution costs, resulting in relatively lighter tax burdens for imported car purchases.

The NTS plans to keep the 18-percent rate for three years.