Korea: Zero-rated VAT Denied for Domestic Part of International Freight Services, Tribunal Rules

• Zero-rated VAT is not applicable to the domestic portion of international freight forwarding services in Korea
• Tax Tribunal decision based on strict interpretation of VAT law
• Taxpayer did not have a direct contract with the shipper or full responsibility for transportation
• New enforcement fine system clarified for document submission failures during tax audits
• Tax authority cannot skip pre-assessment review if delay is their fault
• Taxpayer met requirements for sales returns under VAT Act
• Taxpayer cannot amend return due to inaccurate statistical adjustment ratio
• Transfer of leased commercial real estate not VAT-exempt as business transfer
• Customer discounts by third parties must be included in VAT base
• Additional payments under business transfer agreement are part of original consideration
• Conditions for excluding internal service transactions from arm’s length rule clarified
• Use of bonded storage by foreign corporation not a permanent establishment in Korea
• Special relationship determined by control over business under international tax law

Source: kpmg.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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