The latter part of Article 16(1) of the Value-Added Tax Act (“VAT Act”) and Article 59 of the Enforcement Decree of the VAT Act (the “Enforcement Decree”) clearly prescribe the grounds and procedures for the issuance of an amended tax invoice, and under Article 16(5) of the VAT Act and Article 56 of the Enforcement Decree, such grounds and procedures apply mutatis mutandis to the issuance of tax invoices for imported goods.
However, since Article 16(5) of the VAT Act only provides for the issuance of tax invoices on imported goods by the customs service commissioner and Article 56 of the Enforcement Decree also only provides that Article 16(1) of the VAT Act applies mutatis mutandis to the issuance of tax invoices, thus far, as a matter of customs practice amended tax invoices for imported goods have been issued without restriction under the assumption that the above statutory provisions only prescribe the issuance of “tax invoices” by the customs service commissioner and do not prescribe the grounds for the issuance of “amended” tax invoices.
As a result, even if an importer had to pay additional value-added tax (“VAT”) pursuant to a corrective disposition issued by the customs service commissioner for filing a false tax return (e.g., under-declaration), the importer was still able to receive an amended tax invoice from the customs service commissioner and thereby claim deduction of input VAT.
Legislative Announcement on Amendment of the Enforcement Decree
Against such backdrop, an announcement has been made of an amendment to Article 56 of the Enforcement Decree, which clearly prescribes the grounds for the issuance of an amended tax invoice on imported goods. Under this amendment, an amended tax invoice may not be issued if the customs service commissioner collects additional VAT on imports upon confirming that the importer has filed a false tax return.
The contents of the amendment to Article 56 of the Enforcement Decree are as follows:
The provisions of Article 56 of the Enforcement Decree, excluding the heading, shall become Paragraph 1, and Paragraphs 2 and 3 shall be newly established, as follows:
② The customs service commissioner shall issue an amended tax invoice to an importer if VAT is collected or refunded pursuant to Articles 38-2(1), 38-3(1) to (3), 38-4(1), 46 or 106 of the Customs Act, and such amended tax invoice shall be submitted to the head of the district tax office pursuant to Article 20 of this Act; provided, however, that any importer falling under any of the following subparagraphs who knew in advance that the tax base or tax amount would be reassessed shall be excluded:
- [the importer] has received a notification of customs investigation;
- if a customs officer has initiated an on-site visit or verification work for the collection of tax data or to handle complaints; or
- any other cases similar to those in subparagraphs (A) and (B) above, where it is recognized that [the importer] knew in advance that reassessment would occur.
③ If the customs service commissioner issues an amended tax invoice pursuant to the main part of Paragraph 2 above, the date of collection or refund shall be stated as the date of issuance, and in the remarks column, the issuance date of the original tax invoice shall be stated, and then the amount of additional tax shall be written in black while the amount deducted shall be written in red or marked as “none.”
Thus, in summary, this legislative announcement states that the Enforcement Decree will be amended by limiting the grounds for the issuance of an amended tax invoice to the cases set forth in Articles 38-2(1) (application for adjustment of duty amount), 38-3(1) to (3) (application for correction or reassessment), 38-4(1) (application for adjustment of taxable amount and subsequent reassessment), 46 (refund of overpaid customs duty) and 106 (refund of custom duty on goods different from contract terms) of the Customs Act, and thereby prohibits the issuance of an amended tax invoice in cases where the customs service commissioner has issued a corrective disposition (Article 38-3(4) of the Customs Act) or a notice of imposition of customs duty (Article 39 of the Customs Act) upon an importer filing a false tax return (e.g., under-declaration).
Furthermore, Article 1 of the supplementary provisions of the above amendment provides that this enforcement decree shall become effective upon promulgation, and Article 4 of the supplementary provisions provides that the amended provisions of Article 56 shall apply to all corrections and reassessments that occur after the effective date of this enforcement decree, and therefore contemplate the application of such amended provisions to imported goods declared prior to the effective date of this amendment.
Impact of Amendment
Thus far, VAT was not a factor to consider in determining whether to file a claim regarding the imposition of additional customs duty on imported goods by the customs service commissioner since the importer could obtain a deduction of input VAT. After this amendment goes into effect, however, the entire amount of VAT is now expected to be a factor to consider in determining whether to file a claim.