Issuing Purchase Confirmations and Zero-Rate Tax Invoices in a Global HQ-Korea Branch-Supplier Structure

Question

We are a manufacturer (Supplier, C). The Global HQ (A) has sent a purchase order to the Supplier (C), and the address on the purchase order is listed as the Korea Branch (B). The goods are scheduled to be delivered domestically first and then exported overseas. In this case, I would like to inquire about the following: 1) Can the Korea Branch (B) issue a Purchase Confirmation on behalf of the Global HQ (A) and deliver it to the Supplier (C)? 2) Should the Supplier (C) issue a zero-rate tax invoice to the Korea Branch (B)? 3) When the Korea Branch (B) subsequently exports the goods, if they retain the Export Declaration and B/L as supporting documents, will there be any tax risks for the Supplier (C)?

tflow_expert · Accepted Answer

The Korean branch (B) can issue a Purchase Confirmation only when B acts as the domestic exporter and supplies goods purchased domestically to an overseas destination. As stated in your question, B cannot issue a Purchase Confirmation on behalf of A. If the objective is to apply a zero tax rate, it appears more appropriate to apply the zero tax rate provisions under Article 31, Paragraph 2, Item 5 of the Value Added Tax Act. This regulation applies to supplies made under a direct contract with a foreign corporation located abroad, where the payment must be received in foreign currency through a foreign exchange bank, the goods are delivered to another domestic business entity designated by the foreign corporation, and that business entity either exports the goods as they are or exports them after manufacturing or processing. Please consult with your tax accountant to determine whether this specific provision applies to your case.

Issuing Purchase Confirmations and Zero-Rate Tax Invoices in a Global HQ-Korea Branch-Supplier Structure

Answer 1

Write an answer

Comments 0