Expanded scope for electronic services of foreign (non-Korean) company subject to VAT

Currently if a foreign (non-Korean) company not having a permanent establishment (PE) in Korea provides electronic services (e.g., games, sounds, video files, electronic documents, software, etc.) to an individual or a company in Korea (except for provision of electronic services to an individual or a company who is registered for VAT purposes in Korea) and receives compensation from such customers, the non-Korean company should apply for a special VAT registration to the Korean tax authorities. The proposals expand the scope of electronic services to include “cloud computing” of foreign (non-Korean) companies. The cloud computing is defined as the services of renting storage space in central computer connected to internet, software stored in central computer, etc.

This revision will be applied to the cloud computing services provided on or after July 1, 2019.