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Matter for Tax Consultation: Withholding Tax and VAT for Frozen Food Transport Business

Under the agreement for transport of frozen fish and seafood products, the company was to supply refrigerated trucks with temperature control as specified to preserve the conditions of the employee’s products during transport. The company received service fees for transport and related expenses incurred from the point of transport to the destination specified in each order. The company also had the following duties:

1. The company must arrange trucks to receive products at the origin, check the weight and number with the employer’s supervisor, and deliver the products to the destination with the correct bill of quantity within the period specified by the employer.

2. The company must store and transport the products with care in the specified temperature throughout the transport until delivery was complete.

3. All refrigerated trucks used for transport must be equipped with temperature record device to record temperature throughout the transport with the calibration test for the temperature control at least twice each year.

4. The company must keep equipment and containers in good condition and return them to the employer in their original condition. In case of damage, the company must pay for them as actual value.

5. The company must keep the trucks clean, provide training to its employees, ensure that its employees perform work in good manner and wear clean uniform, does not involve in a brawl or smoke or drink or use drugs.

The work regulations specified in the agreement set out clear objectives and aimed at the result of the tasks rather than the process of transporting products from one point to another. Such was classified as work for hire under Section 587 of the Civil and Commercial Code. Therefore, provision of transport service using the refrigerated trucks was subject to VAT as prescribed in Section 77/1(10) and Section 77/2(1) of The Revenue Code and the company or juristic partnership who paid the service fee was required to withhold tax at 3.0 per cent as prescribed in Clause 8 (2) of the Order of The Revenue Department No. Thor.Por. 4/2528 dated 26 September 1985.

Source: Matter for Tax Consultation No. KorKhor 0702/10780, 26 December 2016.