Zero-rated VAT Application and Tax Invoices for Domestic After-Sales Service Agency Services for Overseas Companies
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The transaction structure is A (foreign machinery manufacturer), B (domestic company, machinery breakdown), and C (our company, AS agency). B experienced a breakdown while using A's machinery, and since it is costly to fly in a repair technician from abroad, our company (C) provides the AS agency service.
1. We received the AS agency service fee from A (invoice issued, Certificate of Foreign Exchange Purchase held). Although the payment was received from an overseas company, the actual repair was performed domestically; can this be considered an export? For reference, B did not pay any costs (free AS).
2. If zero-rated VAT is not applicable and it is subject to standard VAT, should our company (C) issue a tax invoice to B?
Answer 1
- 0✓When providing services to a non-resident who does not have a place of business in Korea, a zero tax rate may be applied under the following conditions: 1. Payment is received in foreign currency, 2. The services fall under the types of services specified in the Value Added Tax Act, and 3. In the case of certain services, the counterparty's country must provide similar benefits, etc. Regarding your question, condition No. 1 is met, but requirements No. 2 and 3 must be reviewed; since these vary by industry, it is difficult to make a uniform determination simply because it is categorized as machine repair. It would be best to contact the National Tax Service call center or consult with your tax accountant. Additionally, regarding Question 2, since B is receiving after-sales service free of charge, we believe it is not possible to issue a tax invoice to B.Machine translated
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