외국기업 고정사업장에 대한 부가가치세 과세문제의 연구

This paper identifies and discusses potential issues arising in the course of applying VAT law to a permanent establishment (hereinafter referred to as PE) of foreign enterprises. Such VAT issues arise when tax authorities during tax audits or other enforcement checks, discovering a PE of foreign enterprises yet to be declared or re-evaluating the function of an existing PE reported as performed, argue for assessment of VAT on the transactions in which a PE might be involved, together with that of corporate tax on the (increased) attributable income of a PE. This is what has been unfolding in audit practices since mid-2010s in the realm of the services provided by foreign enterprises for domestic customers. Therefore, the main focus of this paper is VAT issues arising in the context of PE regarding supply of services. The reason why tax authorities argue for VAT assessment on PE is that they concluded that foreign enterprises should have filed VAT return and paid VAT in relation to the transactions that the PE has participated. Therefore, the requirements for VAT return and its payment on the basis of a PE are worth exploring. These are the following: First, VAT taxable supply of services by a foreign enterprise needs to exist and self-supply, meaning the supply of services between business places of the same foreign enterprise, does not qualify as VAT taxable. Existence of self-supply is only supported by physical, economic and direct flow of services. Second, the place of supply of service, defined as the place where the service is provided, must be located in Korea. When the service is provided across the border, the place where important and essential part of the service is provided is regarded as place of the supply. The place of B2C supply of most electronic/ digital services by foreign enterprises, our daily routine of present time, is deemed to be domestic by the VAT law and its VAT return and payment should be made by the foreign enterprises or their intermediaries on their behalf. However, the place of supply of foreign open market service, platform service and intermediary service with settlement function, not being among the types of services aforementioned and basically being B2B supplies, should be subject to the general criterion of the place where the service is provided and so resulting place is foreign where the computer server is located. Third, foreign enterprise must have a domestic business place. A PE based on tax treaty is treated as a business place for VAT purpose. Nonetheless, a deemed PE under the treaty should not be regarded as a VAT business place because a deemed PE is hypothetical and incompatible with VAT business place which by its definition requires geographical location with human and physical resources. Fourth, a PE should be either a supplying business place, meaning the resources of which are mobilized for provision of the service, or a business place intervening the supply of service. If a PE does not intervene the supply, the supply would be subject to reverse charge mechanism. When a PE is regarded as intervening the supply, while the prevailing view is the supply would be subject to filing obligation of VAT return, this paper argues that no other effects ensue than not being subject to reverse charge mechanism. The VAT law provides for a definition of intervention which is linked to the treaty concept of ‘effectively connected’ and ‘attributable’. However, that definition would be practically unworkable and the recommendation is to, irrespective of the law definition, pursue a rational meaning suiting the structure of VAT system. Under the prevailing view, we may interpret intervention as either supply or less than supply. The former is more practical and simple. The latter is opposed in that it would necessarily lead to a force of attraction in reality, contradicting the VAT law denying a force of attraction. Factual settings where tax authorities ex post argue that a PE already existed might be divided into two; one is a disguised PE, meaning a PE disguised as others like a separate related entity, and the other is a deemed PE, namely a dependent agent PE. The rest is where the tax authorities re-evaluate the function of an existing PE. Each is examined to see if the transactions and dealings engaged by a PE trigger an obligation of filing VAT return and its payment by foreign enterprises. According to the findings, there is almost none that requires VAT return and its payment. In particular, foreign open market service, platform service, and intermediary service with settlement function, unless the place of supply is deemed domestic, would be hardly caught in the net of Korean VAT jurisdiction. In relation to a deemed PE, small VAT assessment is theoretically possible for sales-supporting service and agency service to conclude a contract by a domestic related entity on behalf of a foreign enterprise in that such services ex post could be regarded as supplied to a deemed PE. However, a more critical and fundamental question is yet to be answered. Is a deemed PE really a business place for VAT purpose? This question awaits profound deliberation by academics, expert practitioners and tax authorities alike.