법무법인(유한) 율촌 | Yulchon LLC

Yulchon has become the first in the industry to obtain a ruling from the Tax Tribunal stating that "international electronic payment gateway services are VAT exempt foreign exchange services".

Many Payment Gateway (PG) businesses have applied the zero-rate VAT to international payment gateway services when consumers or merchants are located overseas, considering them as foreign currency earning services qualifying service type condition. However, the National Tax Service has categorized payment gateway services as "other financial support services" not eligible service type for the zero-rate, imposing VAT on sales, a stance maintained by the Tax Tribunal and courts.

Yulchon approached the matter with a new argument, emphasizing that the international electronic payment gateway processing involves foreign exchange activities related to "payment, collection, and receipt between Korea and foreign countries" leveraging the revised enforcement decree of VAT law that included foreign exchange transaction services as VAT exempt service starting from February 2018. Consequently, the Tax Tribunal accepted this taxpayer argument, canceling all VAT assessments for transactions after the enactment of revised enforcement decree and also rescinding all penalties for previous transactions.

This case is significant as Yulchon addressed unclear tax interpretations in emerging industries from a different perspective than existing precedents, thus reducing the domestic VAT burden on international electronic payment gateway and enhancing their international competitiveness, garnering attention from the relevant industry as well.