Issuing Party of Local Purchase Confirmations and Recognition of Export Sales in an Export Agency Structure

Question

We are an export agency. We intend to export products overseas, and the procedure is as follows: Domestic Product Supplier → Our Company (as the export agency, we pay the purchase price to the supplier) → Client (a Korean entity, which pays us the export proceeds and logistics costs; we are the exporter of record and issue a tax invoice to this client) → Actual export to the Client (an overseas entity). Question 1: Is our company, as the exporter, the only party capable of issuing a Local Purchase Confirmation? If so, can the supplier issue it to the client (the Korean entity) that is actually paying the funds? Question 2: What methods are available for the Korean client to obtain indirect export performance records against our company, the export agency? Question 3: Is there any issue with the fact that we export to the overseas client, but receive the payment from the Korean entity and issue the tax invoice to that Korean entity?

tflow_expert · Accepted Answer

1. Generally, in the case of export agency services, the export agent reports the agency commission (service provision) as revenue, while the actual exporter (shipper) reports the export sales of the goods as zero-rated sales for VAT purposes and recognizes them as income. Since the actual exporter handles the purchase of the export goods, the exporter recognizes both the export-related sales and the corresponding purchases in their accounting. Meanwhile, a purchase confirmation is a document used by a party intending to purchase raw materials or equipment for earning foreign exchange to confirm the purchase in order to apply the zero-rate. Therefore, as the actual exporter makes the purchase, they should issue a purchase confirmation to the purchaser. From this perspective, it is judged that you should determine whether your company or your client will recognize the export revenue, and the party recognizing the export revenue should also receive the purchase tax invoice and issue a purchase confirmation accordingly. 2. For your reference, when completing the export declaration, if the exporter classification is set to B (in cases where the export agent only provides agency services), the export agent reports the export agency commission as their own revenue, and the export sales are reported as the actual exporter's revenue for VAT purposes.

Issuing Party of Local Purchase Confirmations and Recognition of Export Sales in an Export Agency Structure

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