Korean Tax Newsletter (September, 2020)

▲ Tax law revisions

An amendment to the enforcement decree on Korea’s VAT law revises the exemption from VAT for goods provided to employees to celebrate holidays or congratulatory events or for funerals. 

Prior to the amendment, gifts provided to employees were exempted from VAT up to a value of KRW 100,000 per year. Under the amendment, the KRW 100,000 limitation applies per event (i.e., “Seol Nal", “Chuseok” and other personal events).
The amendment to the enforcement decree also permanently exempts from VAT passenger transportation services for intercity express buses; however, premium express buses continue to be taxable (VAT Law Article 37-1).
The changes apply as from 7 October 2020

▲ News from the tax authorities 

Measures to support taxpayers affected by Typhoons Maysak and Haishen

The National Tax Service has introduced measures to support taxpayers who have been affected by Typhoon Maysak and Typhoon Haishen:

• VAT and individual income tax payment deadlines are extended by up to nine months for those who have been affected by the typhoons.
• The collection of national taxes that already have been notified is deferred for up to nine months and, for taxes currently in arrears, the disposition of real estate that has been seized for tax collection is deferred for up to one year. 
• To receive the above support, taxpayers can apply by mail or visit their local tax office. In addition, taxpayers can apply online by logging into the National Tax Service’s Hometax website.
• Tax audits of businesses affected by the typhoons are suspended until the end of 2020. 
  - If a tax audit has been notified or currently is in progress, the audit may be postponed or suspended at the request of the taxpayer.
• National tax refunds will be made as soon as possible, and if more than 20% of business assets were lost due to the typhoon, tax credits will be granted. 
• Eligible taxpayers may claim a tax credit by submitting an application to the National Tax Service within one month from the date of the disaster or by the filing due date of the relevant tax return.
  

▲Tax rulings 

1. Services provided by a taxpayer were not eligible for the zero VAT rate where a domestic company compensated the taxpayer for the services on behalf of an overseas company. (Seomyeon-2019-interpretation of VAT Law-4176, 2020.09.01)  

Facts and background
The taxpayer provided services to a domestic company that was designated by an overseas company with no fixed place of business in Korea according to a business contract concluded between the taxpayer and the overseas company. The overseas company attempted to pay the taxpayer for its services; however, the tax authorities of the overseas company’s country of residence froze the overseas company’s bank account. The taxpayer, the overseas company, and the domestic company then entered into a three-party contract, according to which it was agreed that the domestic company would pay the funds to the taxpayer in settlement of the domestic company’s payable to the overseas company. 

Ruling
Because the taxpayer did not receive the compensation for its services from the overseas company, the services provided by the taxpayer were not zero-rated for Korean VAT purposes. 

2. Where the person conducting a construction project for the Knowledge Industry Center is changed after the date of approval for use of the building, the project is still eligible for local tax exemption as long as the change was made before the completion of construction filing. (Department of Restriction of special local tax law-1949, 2020.08.20)

Ruling
Changes to the construction approval can be made at any time before the completion of construction filing, which must be submitted within two months from the date the building is approved for use.
Therefore, the project will still be eligible for the special local tax exemption if the change occurs before the completion of construction filing.

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Contacts

For further questions or inquiries, please kindly contact representatives listed below.

Inbound Tax Leader, Scott Oleson, +82 (2) 6676-2012 / scoleson@deloitte.com
Inbound Tax Leader, Hong Seok Han : +82 (2) 6676-2585 / hseok@deloitte.com
M&A Tax Partner , Young Pil Kim : +82 (2) 6676-2432 / youngpkim@deloitte.com
BPS Tax Partner, Park Sung Han, +82 (2) 6676-2521 / sunghpark@deloitte.com
TP Partner, Lee Yong Chan, +82 (2) 6676-2828 / yongclee@deloitte.com
GES Partner, Seo Min Soo, +82 (2) 6676-2590 / mseo@deloitte.com