Handling Invoices and Purchase Confirmations between Domestic Companies in Tripartite Multilateral Trade (Intermediary Trade)

Question

I am planning to conduct tripartite multilateral trade and would like to inquire about document processing. The transaction structure is as follows: A (Overseas Manufacturer), B (Domestic Distributor), C (Our Company, Domestic), D (C's Client, Domestic), E (D's Client, Overseas), and F (End Customer, Overseas). The Purchase Order (PO) flows in the order of F→E→D→C→B→A, and all payments are processed in USD. Logistics move from A→E→F, and a B/L switch will be performed locally after the shipment from A arrives at an intermediate transit point. In this scenario, I would like to inquire how the domestic tax invoice processing for companies B, C, and D should be handled. Question 1) Is it correct for Company B to request a Purchase Confirmation from us (C) and issue a zero-rated tax invoice (purchase)? Question 2) Is it correct for us to also issue a Purchase Confirmation and a zero-rated tax invoice (sales) to Company D? Question 3) When preparing the Purchase Confirmation, should the amount entered be the total PO amount or the actual remittance amount?

tflow_expert · Accepted Answer

The matter you inquired about is a multilateral transaction. In cases where goods produced abroad are supplied and the goods move directly from one foreign location to another, it is not considered a domestic transaction and is therefore a non-taxable transaction not subject to VAT. Consequently, you cannot issue a tax invoice or a zero-rated tax invoice, which are issued for transactions subject to VAT under the VAT Act, between parties B, C, and D; instead, you must issue a computer-generated invoice (calculation sheet) as proof of transaction under the Corporate Tax Act (Income Tax Act). Furthermore, since a Purchase Confirmation is a document required to apply a zero tax rate when purchasing goods traded domestically for export abroad, it is determined that it cannot be issued for the aforementioned type of foreign transaction.

Handling Invoices and Purchase Confirmations between Domestic Companies in Tripartite Multilateral Trade (Intermediary Trade)

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