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Value Added Tax

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Subject
VAT Taxation on the National Subsidy for the Service provided
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Date
2016-08-31
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Taxation of Value-added Tax on the National Subsidy

for the Service provided

 

 

1. Overview

 

This is to review here for the taxation of value-added tax on the national subsidy whether it is required to be imposed on the national subsidy when a participating company receives it on their supply of service as per the technology development agreement with a supervision institution authorized by the government

 

 

2. Fact Relevance

 

 (1) We (A) have settled a technology development agreement with a supervision institution (B) which is an organization authorized by government   

 

 (2) An inquiry was brought on the taxation of value-added tax on the national contribution what a company (A) receives from the government or supervision institution regarding the technology development.  

 

 

3. Factual Judgement

 

(1) The scope of supply of service, under Value-added tax act, includes the offering of labor services based on the contractual or legal grounds. (Article 11 of Value-added Tax Act, supply of services)

 

(2) If the government or supervision institution has the ownership for the results of research, the value-added tax is to be imposed, as the national contribution is paid for the supply of service.  

 

(3) But, if the Company (A) has the ownership for the results of research, the national contribution regarding the technology development is to be exempted for value-added tax imposition as per Article 29-5-4 of Value-added Tax Act).  But, in this case of receiving a national contribution, an Invoice is normally being issued as the evidential documents are required by payer.     

 

 

4. The Reference Provisions 

. . .

 

 

5. Relevant regulations

. . .

  

 

6. Conclusion

 

It is required to consider the ownership for the results of research to judge whether it is taxation case or tax exemption case for value-added tax when a Company provides services as per the agreement with an institute which is authorized by government and receive the national subsidy as a participating institute.  The relevant party should decide who has the ownership for the research results after the comprehensive consideration based on the contents of the contract.


. . .

Please refer the enclosed for more information.


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