Issuance of Local L/C or Purchase Confirmation for Contract Packaging Companies in a Manufacturing-Contract Packaging-Export Agency Structure
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The transaction structure is A (Food Manufacturer), B (Contract Packaging Company), and C (Export Agency). Currently, C issues a Purchase Confirmation to A [Buyer: C, Supplier: A], A issues a zero-rated electronic tax invoice for 'Product Sales' to C, and B issues an electronic tax invoice for 'Contract Packaging' purchases to A [Recipient: A, Supplier: B].
However, B has requested that A issue a Purchase Confirmation to them. In this case, I would like to inquire about the following:
1. Is B eligible to receive a Purchase Confirmation from A [Buyer: A, Supplier: B]?
2. If A issues a Purchase Confirmation to B as requested, does this mean B will then issue a zero-rated tax invoice to A for the contract packaging services?
3. What supporting documents must A provide when applying for the issuance?
4. Additionally, A has received a Purchase Confirmation based on a certain amount of sales to C. If B requests a Purchase Confirmation for contract packaging services that exceeds that amount, must A issue the Purchase Confirmation for the larger amount?
Answer 1
- 01. Zero-rated VAT does not apply to a party (B) who enters into a processing contract (including outsourced packaging) to process export goods for a supplier (A) who supplies export goods to an exporter (C) based on a Purchase Confirmation. In other words, regardless of whether a Purchase Confirmation has been issued, a zero-rated tax invoice cannot be issued based on it. 2. A secondary or tertiary Purchase Confirmation may be issued based on a primary Purchase Confirmation; however, the issuance limit is capped at the amount of the primary issuance and cannot exceed that amount.Machine translated
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