The time of supply for goods and services in the Korean VAT Act.

I.      Why the time is important?

The time of supply for goods and services are the timing standard that will be decided when the taxable transaction are arisen. Based on the this timing standard, the related parties have the obligators' of transaction withholdings and Tax Invoice issuance and then have to file the VAT tax base to National tax Service(“NTS”) each reporting deadline. If company do not have a right judgments of the time of supply for goods or service, both supplier and buyer have to bear the additional tax, Non-deduction of input Tax and other disadvantages in the futures

II.     The Time of supply for Goods

1.     General criteria

 The time of supply for goods shall be the time provided in each of the following.

①     Where moving goods is required: The time when the supply of goods is delivered.;

②     Where moving goods is not required: The time when the goods are made available;

③     Where none of the above ① and ② is applicable: The time when the supply of goods is decided.

 However such as the rights or the real estate which are no need to move the goods, the time of supply is the time when goods are made available.

The meaning of “The time when the goods are made available” is that both contracting parties are executed the contract and the good's buyer can be claimed the ownership or buyer can be used under the approval of supplier.

The meaning of “The time when the supply of goods is decided” is that it's possible time for both parties to decide the amount of supply, the time of supply and the contracting parties.

2.     The time of supply for each transaction type

Except the general transaction type, other timing of supply is the followings based on VAT Act

(1)   Cash sales, sales on credit and installment sales

-       The time of sales is “the time when the supply of goods is delivered” or” “the time when the goods are made available”.

(2)   Conditional or fixed term sales

-       The time of supply is the time when the contractual conditions are achieved or the deadline is passed.

(3)   Long-term instalment sales, Percentage of completion basis, interim payment condition basis and continuous supply basis

-       The time of supply is the time when each consideration of the contract is supposed to receive

III.   The time of supply for services

The time of supply for services shall be the time provided in each of the following:

①     The time when the offer of labor is completed;

②     The time when facilities, rights, or other goods are used.

1.     The time of supply for each transaction type

(1)   Long-term instalment sales, Percentage of completion basis, interim payment condition basis and continuous supply basis

-       The time of supply shall be the time when each consideration of the contract is supposed to receive

(2)   If company can't be applied the time when completed the service or received the consideration

-       The time of supply shall be the time when completed the service and decided the value of supply

(3)   Lease guarantee deposits and the rental fee both in advance or deferred

-       The time of supply shall be the last day of each VAT filing date both a provisional and a final returns

(4)   In case the long-term service provided

-       If the service will be continued more than two VAT taxable period and the  consideration of service are received in advance, the time of supply shall be the last day of each VAT filing date both a provisional and a final returns

IV.   The time of importation for goods

-       The time of importation for goods shall be the time when an import declaration under the Customs Act is accepted.