Application of Zero Tax Rate and Purchase Confirmation for Domestic Vessel Leasing Used at Overseas Construction Sites

Question

Our company owns a vessel capable of manufacturing concrete at sea, and we have leased this vessel to a domestic construction company. The domestic construction company has secured an overseas construction project, and the vessel is currently being used at an overseas construction site. In this case, we would like to inquire whether our company (the vessel owner) can issue a zero-rate tax invoice and whether the domestic construction company can issue a Purchase Confirmation. Since there are opinions suggesting that the vessel lease should be treated as a taxable transaction as a transaction between domestic entities, please provide relevant legal references or statutory materials when responding.

tflow_expert · Answer

1. Whether zero-rated VAT applies to domestic vessel leasing services used at overseas construction sites The question appears to be related to Article 22 of the Value Added Tax Act (Supply of Services Abroad). According to the relevant provisions, a zero tax rate is applied to services supplied abroad; however, in practice, it is difficult to provide a definitive answer as the distinction between what qualifies and what does not varies by case. For a definitive determination, please consult the National Tax Service counseling center. Reference: Cases regarded as supply of services abroad (Written-2019-Legal Interpretation Dept-0325) / Cases not regarded as supply of services abroad (VAT Enforcement Standards 22-0-2). 2. Regarding Purchase Confirmations Under the Value Added Tax Act, the application of a zero tax rate based on a Purchase Confirmation relates to the supply of goods (Article 21, Paragraph 2, Item 3 of the Value Added Tax Act). Exceptionally, in the case of services, it is only recognized for processing services for export goods (Article 33, Paragraph 2, Item 4 of the Enforcement Decree of the Value Added Tax Act). For this reason, it is determined that it is not possible to issue a Purchase Confirmation for domestic vessel leasing services and apply a zero tax rate based on it. Whether a zero tax rate applies must be determined based on whether the service qualifies as a "supply of services abroad" as explained above.

Application of Zero Tax Rate and Purchase Confirmation for Domestic Vessel Leasing Used at Overseas Construction Sites

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