국제적 B2B 용역거래의 부가가치세 납세의무- 고정사업장 성립 이후의 과세 문제를 중심으로 -

Since the mid-2010s, value-added tax (VAT) issues concerning cross-border service transactions – particularly B2B transactions – between foreign businesses and domestic businesses have become increasingly significant. A notable perspective emerged following the Supreme Court of Korea’s ruling (2017Du72935) on June 25, 2020, which stated that the mere existence of a permanent establishment (PE) for income tax purposes does not automatically imply the existence of a domestic establishment for VAT purposes. The primary arguments supporting this view can be summarized as follows. First, current VAT law of Korea defines the place of supply for services as the location where the service is provided. According to the Supreme Court rulings, the place of supply for services should be interpreted as the place where the “essential and significant part of the service” is carried out. Hence, in cases where a foreign enterprise has both domestic and foreign establishments, the determination of the place of supply should depend on which establishment performs the more essential and significant part of the service. Second, for a domestic establishment of foreign enterprise to incur VAT filling and payment obligations, the service must be “substantively involved in” or “attributed to” that establishment. This “involvement” or “attribution” should mean that the VAT establishment – like any domestic establishment - must have the most significant role in terms of function and contribution to the service supply; in other words, it must be the establishment that physically supplies the service. This paper critically examines these emerging interpretations through systematic and comparative legal analysis and proposes a purposive interpretation consistent with fundamental principles governing the allocation of VAT jurisdiction in international trade. Furthermore, it suggests legislative reforms to resolve interpretive ambiguities surrounding the cross-border supply of service. From a purposive interpretation aligned with the destination principle of VAT, if a PE is deemed to exist in Korea and the PE employs human and technical resources in activities related to fulfilling the service supply – although it is not the establishment that plays the most significant role in income generation, it should bear the VAT reporting and payment obligations. Even in the absence of a domestic establishment of foreign enterprises, if the essential and significant parts of the supplied service are carried out in Korea, VAT should be imposed through a reverse-charge mechanism with the recipient being responsible. The counterarguments presented include the following points. As VAT is fundamentally a transaction-based tax, each transaction should be allocated exclusively to one jurisdiction. The determination of whether a transaction involves two or more distinct supplies or single supply should consider all relevant circumstances. Splitting a single supply of service is justified only if the parts of the services provided in the different establishments can indeed be identified and distinguished from each other at the time of the supply. If an unified price is charged for the supply of services, the service consists of the same subject matter(e.g. services for recruiting and referring foreign customers to domestic casino operators, intermediary services for the use of foreign-based digital platforms by domestic app developers, etc.) and the contract and payment are handled by one establishment, it is difficult to argue that two or more distinct supplies exist. Therefore, when a foreign enterprise is determined to have a PE in relation to service supply, it implies that the activities of that establishment play an essential and significant role in the company’s overall income generation, rather than merely performing preparatory or auxiliary functions. Next, if it is confirmed that the PE’s human and technical resources substantially contribute to achieving the primary – not ancillary – objective of the service supply, the PE should also be treated as an establishment for VAT purposes responsible for reporting and paying VAT on the entire revenue attributable to that establishment. This interpretation aligns with the current provision in the Enforcement Decree of the Korean VAT law, which regards a foreign enterprise’s domestic establishment for income tax purposes as an establishment for VAT purposes. Furthermore, the concept of “attribution” within current laws is not related to the ultimate destination of income or revenue, but rather aims to assess whether income or transactions are derived “through” or “in related to” the establishment. excluding unrelated income or transactions and rejecting the principle of force of attraction. From a policy perspective, limiting VAT obligations only when the most essential and significant part of services provided is performed domestically may lead to unreasonable outcomes with domestically used and funded services potentially avoiding VAT due to technical interpretations. Given that Korea’s B2B transactions to taxable businesses do not employ VAT reverse-charge system, foreign enterprises may strategically avoid establishing a PE in Korea. Such practices can lead to distortion of competition by placing foreign enterprises at a price advantage over domestic enterprises supplying the same services, thereby violating the principle of tax neutrality. In conclusion, the fundamental cause of the interpretive confusion mentioned above surrounding the cross-border supply of services arises primarily from the Korea’s VAT legislation not being updated promptly in response to the changing economic environment shaped by globalization and digitalization. Fundamental reforms are essential for greater legal certainty and fairness, along with efficient VAT collection. Recommendations are as follows. First, it is necessary to explicitly include “imported services” within the taxable scope of VAT. Second, it is also needed to revise the general rule on the place of supply for services applicable to B2B transactions, from “the place where the service is provided” to “the customer location, that is, the place of business of the recipient enterprise” in line with the OECD International VAT/GST Guideline and the EU Directive.