Whether a Purchase Confirmation is required when exporting raw materials for overseas processing
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Our company is a manufacturer that outsources processing to an overseas factory, imports the finished goods back into Korea, and then supplies them domestically. The transaction structure is A (Domestic company, recipient), B (Domestic company, supplier), and C (Overseas factory, processor). We received raw materials from Company B and were issued a purchase tax invoice; however, when Company B attempted to issue a zero-rated tax invoice, they requested a Purchase Confirmation. Meanwhile, when Company A exports raw materials to Company C for processing, they file export declarations as either Free Export (GN) or Processing Trade (PT) depending on the situation. I would like to inquire whether a Purchase Confirmation must be issued in the case of free export versus the case where only processing fees are paid.
Answer 1
- 0A Purchase Confirmation is a document applied for by a purchaser of raw materials or components intended for earning foreign exchange in order to apply a zero tax rate. Based on your question, your company's export appears to be the removal of raw materials for processing purposes rather than an export intended to earn foreign exchange. In this case, since it is unrelated to the purpose of earning foreign exchange, it is determined that it is not subject to the issuance of a Purchase Confirmation. However, if the products are exported after undergoing the removal and return process for processing, they would naturally be subject to the issuance of a Purchase Confirmation.Machine translated
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