The following tax information is translated from Korean for foreign-invested
companies, and is not legally binding.
Q.Changes to the Value Added Tax Act and VAT filing rules in 2016
A.◈ Extension of period for collection of tax receipts eligible for input tax deduction
☞ Related laws : Article 75 Subparagraph 3 and 5 of the Value Added Tax Act and Article 108 Subparagraph
5 of the Enforcement Decree of the Act
☞ Objective : To reduce tax burden from delayed collection of tax receipts
☞ Applicable for goods and services supplied on or after Jan. 1, 2016.
◈ Deferment of import VAT payment for exporting SMEs
☞ Related law : Article 50-2 of the Value Added Tax Act and Article 91-2 of the Enforcement Decree of the Act
☞ Objective : To reduce the import VAT burden, when exporting SMEs import goods such as raw materials,
import VAT to be paid to the customs office shall be deferred until VAT returns are filed
☞ Applicable for goods imported on or after Jul. 1, 2016.
Q. If a company supplies products to a domestic buyer at a discounted price by reflecting profit generated from overseas sales, is such discount considered sales allowance?
A. Domestic company A supplies manufacturing components to domestic manufacturer B,which has a special relationship with company A. Under mutual agreement, A provides a discount on the sale price of the goods supplied to B by reflecting the profit generated from exporting goods to an overseas special related company. In this case, if the sale price is not excessively discounted for the purpose of unfairly reducing tax burden, the sale price discount shall be considered allowance under Article 29 (5) 1 of the Value Added Tax Act.
However, to determine whether the sale price discount is considered excessive for the purpose of unfairly reducing tax burden, the relevant facts such as company B’s production plans and price discount plans shall be considered.
Source: National Tax Service (Apr. 18, 2016)
Q. Is a test service supplied by a non-resident considered electronic service?
A. ‘Electronic service’ such as the supply of game, audio, video file or software executed in a mobile communication device or computer as prescribed by Article 53-2 (1) of the Value Added Tax Act means service supplied through an information and communication network prescribed by Article 2 (1) 1 of the Act on Promotion of Information and Communications Network Utilization and Information Protection, etc. Such service refers to one of the following that can be stored and executed in a mobile communication terminal
device or computer, or used real-time without the need of storage :
1. Creative work such as game, audio or video file or software, electronic document or software that are processed optically or electronically and into formats such as codes, letters, voice, sound or video.
2. The enhancement of electronic services mentioned above.
Source: National Tax Service (May 13, 2016)
Q.Does zero tax rate apply to international air transport service supplied through a long-term charter contract?
A. If an air transport operator signed a long-term charter contract with a company and provides international air transport service and accompanying goods and services, a zero tax rate shall apply in accordance with Article 23 of the Value Added Tax Act.
Also, in regard to such services provided, the obligation to issue a tax receipt shall be exempted, in accordance with Article 71 (1) 4 of the Enforcement Decree of the Value Added Tax Act.
Source: National Tax Service (Mar. 23, 2016)