Expanded Scope for Electronic Services of Foreign (Non-Korean) Company Subject to VAT effective from July 1, 2019

Under the revised Value-added Tax Law in Korea, the scope of electronic services of foreign (non-Korean) company subject to VAT was expanded to include advertising, brokerage and “cloud computing” from July 1, 2019. The cloud computing is defined as the services of renting storage space in central computer connected to internet, software stored in central computer, etc.

Therefore, if a foreign (non-Korean) company not having a PE in Korea provide electronic services including games, sounds, video files, electronic documents, software and additionally advertising, brokerage and cloud computing, 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 reporting purposes in Korea) and received compensation from such customers, the non-Korean company should apply for a simplified VAT registration and have an obligation to file and pay VAT on such provision for electronic services quarterly in Korea.