South Korea VAT on intra-group supplies clarified

Tue 7th May 2013

The rules on delegation agreements and the South Korean VAT treatment between foreign companies and their local operations has been clarified recently.

The clarification was contained within a recent tax ruling involving the foreign telecommunications supplier, and its Korean subsidiary.  The subsidiary was offering supplies to local companies on behalf of its group parent.
The facts in this ruling are that a foreign company provides network services to multinational companies and their related companies worldwide and does not have a domestic place of business in Korea.  This included providing telco services to the Korean branches of other international companies.  The Korean VAT authorities deemed this to be a taxable supply in South Korea by the Korean telco subsidiary.