In this final 2020 Korean Tax Update, we focus on the amended Korean tax laws relating to value-added tax (“VAT”).

1. Clarification on the definition of the VAT taxpayer concerning trust property

Prior to these amendments: Where a trust property is sold under the name of the trustee, the settlor of the trust was generally regarded as the VAT taxpayer (i.e., the person who is responsible for paying the VAT payable ). Conversely, if the trustee supplies the trust property of a mortgage trust with a view to settling liabilities of the settlor, the trustee became responsible for paying the VAT payable arising from the supply.

Under the amendments: In cases where a developer sells the trust property in the course of undertaking: (i) an urban redevelopment or housing reconstruction project; or (ii) a small-scale housing improvement or reconstruction project in accordance with Article 27-1 of the “Act on the Improvement of Urban Areas and Residential Environment” or Article 19-1 of the “Act on Special Cases Concerning Unoccupied House or Small-scale Housing Improvement”, the trustee is considered to be responsible for the VAT obligation. This is intended to enhance administrative efficiency for both the taxpayer and the tax authority.

It should be noted that this tax amendment is particularly concerned with a supply of goods. In other words, there is no explicit rule in specifying which party – the supplier or the customer – should be regarded as the VAT taxpayer for a supply of services under the relevant VAT laws and regulations.

2. Clarification on the amount of non-creditable input VAT

3. Other amended tax laws relating to VAT


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