contents

3. Taxable Transactions

a. General

(1) Taxable transactions

Value added tax is imposed on the following transactions:

(a) the supply of goods and services; and

(b) the importation of goods.

(2) Range of goods and scope of services

(a) Range of goods

Goods are all tangible and intangible objects that have the value of property.

Tangible objects include commodities, products, raw materials, machinery,

buildings, and other objects with tangible form. Intangible objects include motive

power, heat, other controllable forces of nature, and rights.

(b) Scope of services

Services mean all services and other actions that have the value of property,

other than goods.

(c) Subsidiary supply of goods and services

Supply of goods and services that takes place necessarily and incidentally to the

supply of goods that is treated as the main transaction is deemed to be included

in the main supply of goods. The subsidiary supply to the supply of services that

is treated as the main transaction is also deemed to be included in the main

supply of services.

b. Supply of Goods

(1) Supply of Goods

The supply of goods includes delivery or transfer of goods due to contractual or

legal obligations.

(2) Self-supply of goods

Where a trader directly uses or consumes goods that are acquired or produced in

the course of his business, such direct use or consumption except for the case of

stock-in-trade to use or consume goods as raw materials, is deemed to be a supply

of goods to the trader.

(3) Personal use and donation

Where a trader uses or consumes goods produced or acquired in the course of his

business for his or her personal use or for the employees, or where a trader

donates such goods to customers or other persons, such use, consumption, or

donation is deemed to be a supply of goods.

(4) Inventory goods at the time of liquidating business

Inventories owned at the time of liquidation of a trader's business are considered to

be supplied to himself. The same applies where a registered person fails to actually

start a business commencement.

(5) Transactions through a consignee or an agent

The sale or purchase of goods through a consignee or agent is deemed same as if

the consignor or principal directly supplies the goods or the goods are supplied

directly; however, the preceding provisions of this paragraph do not apply where the

consignor or principal is not identified.

(6) Offer of security and transfer of business

Offering goods as a security or alienating a person's business to any other person

except for simplified taxpayers is not deemed to be a supply of goods.

c. Supply of Services

(1) Supply of services

The supply of services includes rendering of services or having a person use or

utilize goods, facilities, or rights due to all legal or contractual actions.

(2) Self-supply of services

Where a trader directly provides services for his own business such direct supply of

services, the trader shall, subject to the Presidential Decree, be deemed to be the

supply of services to himself.

(3) Services without consideration and worker's services

Rendering of services to other persons, without any consideration or under an

employment contract, is not treated as a supply of services.

d. Importation of Goods

Importation of goods includes carrying the following categories of goods into Korea or

from bonded areas:

(1) goods arriving in Korea from abroad (including marine products gathered in high

seas by foreign vessels); or

(2) goods licensed for exportation.

e. Time of Transaction

(1) Time of supply of goods

The time of supply of goods is the time as prescribed in any one of the following:

(a) supply of goods that requires the goods to be moved: the time when they are delivered;

(b) supply of goods that does not require the goods to be moved: the time when they

are made available; and

(c) where the provisions of items (a) and (b) are not applicable: the time when the

supply of goods is made certain.

(2) The time of supply of goods in detail is:

The time of supply of goods shall be as prescribed under the following cases.

However, if the goods are supplied after the date of the closedown, the closedown

date shall be regarded as the time of supply.

(a) Cash or credit sales: time goods are delivered

(b) Sales made on long term installment payments:

time each portion of the proceeds is stipulated as receivable

(c) Supply of goods under terms of payment on percentage of work completed, or

under terms of partial payments: time each portion of proceeds is receivable

(d) Processing that is regarded as supply of goods:

time the processed goods are delivered

(e) Self-Supply, personal use, or donation for business purposes:

time of consumption or use of the goods

(f) Business closedown: the time of closedown

(g) Goods supplied through vending machines:

time the respective businessperson removes money from the machines

(h) Other cases: time goods are delivered or deliverable

(i) Export goods: date of shipping

(j) Businessperson within a bonded area supplies goods outside the bonded area in

the country if the respective goods fall under the category of imported goods: date of

import license

(3) Time of supply of services

The time of supply of services is when services are rendered or when the goods,

facilities, or rights are used. The time of supply of services shall be as described in

the following. However, if the time of supply of services lands after the closedown of

the business, the date of the closedown shall be regarded as the time of supply.

(a) Normal supply: when the services have been completely rendered

(b) Providing services under the terms of payment for the percentage of work

completed, partial payment, deferred payment, or any other terms: when each portion

of the payments is to be received

(c) Where provisions (a) and (b) are not applicable: When services have been

completely rendered and the value of the supply determined

(d) Regarding the deemed rent of deposit for real estate leasehold or advance or

deferred payment of rent that a businessman pays upon leasing land, buildings, and

other structures built on the land: when the preliminary tax return or taxable period

has been completed

(4) Deemed time of supply.

Where a trader has received the partial payments and has issued tax invoices or

receipts for the partial payment before the normal time of supply, the time of issuance

of the tax invoices about the payments is deemed to be the time of supply. However,

in case of long-term installment sales or supplies with indivisible supply unit, the

previous system is maintained.

f. Place of Transaction

(1) The place of supply of goods

The place of supply of goods is one of the following:

(a) in the case of supply of goods which requires the goods to be delivered, the

place where the delivery of goods starts;

(b) in the case of supply of goods which does not require the goods to be delivered,

where the goods are located.

(2) The place of supply of services

The place of supply of services is one of the following:

(a) the place where services are rendered, or where goods, facilities or rights are used;

(b) in the case of international transportation carried on by a non-resident individual

or foreign corporation, the place where passengers ride or freight is loaded.