Supply price and withholding tax on daily assessments to a foreign company

1. 01Question

   Where a Korean credit card company paid a daily assessment fee to a foreign card company with no domestic permanent establishment and added the equivalent of the withholding tax on that fee to the VAT base, was it lawful to include it regardless of whether the fee was the foreign company's domestic-source income?

2. 02Holding

   It was not lawful. Under Article 13(1) of the former Value-Added Tax Act the supply price is the consideration received in money for the supply, and the prior decision left open that the whole daily assessment fee might be the card company's business income, so the fee could not simply be treated as domestic-source income. The VAT base could not be computed by uniformly adding the withholding tax on that premise, and the remand court must settle which tax treaty applies, then the fee's legal character, and whether the taxpayer had a duty to withhold the tax.

   Points at issue, verbatim

   발급사일일분담금이 위 외국법인의 국내원천소득인지와 관계없이 그 원천세 상당액을 공급가액에 포함시키는 방식으로 부가가치세의 과세표준을 산정한 것이 적법하다고 본 원심판단에 부가가치세 과세표준 및 공급가액에 관한 법리오해 등의 잘못이 있다고 한 사례

   Unofficial English translation

   a case in which it was held that the judgment of the court below, which calculated the value-added tax base by including in the supply value the amount equivalent to such withholding tax regardless of whether the issuing company's daily share constitutes domestic source income of the foreign corporation, was erroneous for misapprehension of legal principles, etc. regarding the value-added tax base and the supply value

3. 03Disposition

   Reversed and remanded Stated in the decision

   원심판결을 파기하고, 사건을 서울고등법원에 환송한다.

   Unofficial English translation

   The judgment of the court below is reversed, and the case is remanded to the Seoul High Court.

4. 04Form of the test

   Existing test applied Read from the decision

   발급사일일분담금이 △△△카드사의 국내원천소득임을 전제로 그 원천세 상당액을 구 부가가치세법 제13조 제1항의 공급가액에 일률적으로 포함시키는 방식으로 부가가치세의 과세표준을 산정할 수는 없다고 봄이 타당하다.

   Unofficial English translation

   It is reasonable to consider that the value-added tax base cannot be calculated by uniformly including the amount equivalent to the withholding tax in the supply value under former Article 13 (1) of the Value-Added Tax Act, on the premise that the issuing company's daily share constitutes domestic source income of △△△ card company.

5. 05Factors

   • 경정거부처분 취소소송의 소송물(=정당한 세액의 객관적 존부) 및 소송 도중 과세관청이 처분사유를 교환·변경할 수 있는지 여부(한정 적극)
   • 감액경정청구에서 주장하지 아니한 사유를 경정거부처분 취소소송에서 주장할 수 있는지 여부(적극)
   • 구 부가가치세법 제13조 제1항에서 정한 공급가액의 의미
   • 국내 고정사업장이 없는 외국법인에 지급한 발급사일일분담금에 관한 원천세가 부가가치세의 과세표준인 공급가액에 포함되어야 하는지 문제 된 사안에서
   • 발급사일일분담금이 위 외국법인의 국내원천소득인지와 관계없이

   Unofficial English translation

   • The subject matter of suit in an action for revocation of a refusal disposition (i.e., the objective existence or non-existence of the proper tax amount) and whether the tax authority may exchange or amend the grounds for a disposition during the course of the lawsuit (affirmative, limited)

   • Whether grounds not asserted in a claim for a reduced amendment may be asserted in an action for revocation of a refusal disposition (affirmative)

   • The meaning of the supply value as defined in former Article 13 (1) of the Value-Added Tax Act

   • In a case where it was at issue whether the withholding tax concerning the issuing company's daily share paid to a foreign corporation with no domestic fixed place of business must be included in the supply value, which constitutes the tax base for value-added tax

   • Regardless of whether the issuing company's daily share constitutes domestic source income of the foreign corporation,

6. 06Relation to precedent

   Follows earlier decisions Stated in the decision

   대법원 1984. 3. 13. 선고 81누412 판결, 대법원 2019. 9. 10. 선고 2017두61119 판결 등 참조

   Unofficial English translation

   See Supreme Court Decision 81Nu412 decided March 13, 1984; Supreme Court Decision 2017Du61119 decided September 10, 2019, etc.

   Decisions referred to

   [1] 대법원 2002. 9. 24. 선고 2000두6657 판결(공2002하, 2601), 대법원 2004. 8. 16. 선고 2002두9261 판결(공2004하, 1550) / [2] 대법원 1984. 3. 13. 선고 81누412 판결(공1984, 707), 대법원 2019. 9. 10. 선고 2017두61119 판결(공2019하, 1998)

7. 07Burden of proof

   Not addressed Not in the decision

8. 08Open question and revisit condition

   Which tax treaty governs the daily assessment fee paid for use of an international payment network, and under that treaty is the fee royalty income of the foreign company carrying a withholding obligation?

   The remand judgment of the Seoul High Court, once it fixes the applicable tax treaty, the fee's legal character and the existence of a withholding duty, will show how the supply price is computed in practice. A change to Article 29(3) of the Value-Added Tax Act or to the relevant tax treaty would also require this entry to be read again.

Read 2026-10-25 · Cross-read 2026-10-25. All quotes matched against the official text. The Chinese-character placeholders the court used for anonymised parties are given in their Korean readings, and parenthetical Chinese-character glosses are omitted.

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