Modern society has developed a digital economy where consumers and corporations can transact goods and services through the internet. This change has accompanied the development of new information and communication skills deviated from traditional commercial services that were previously provided. The goods and services in the new digital economy are digital instead of physical. Thus, nowadays consumers are being supplied digital goods through the internet web application or digital services through connecting on central data servers. The VAT’s object of taxation is online streaming fees or payment for the download of digital goods and services. The Republic of Korea legislated VAT Act Article 53-2 in 2014 in order to enhance the taxation right against foreign entrepreneurs which do not have domestic work place. Moreover, in accordance with VAT enforcement ordinance Article 96-2 the government is able to impose VAT consistently as a service whether digital goods are goods or services. In spite of this rule, there are still arguments that digitized transactions should be confirmed as digital goods or digital services to impose VAT to foreign entrepreneurs which do have a place of business in Korea. I write in opposition to these arguments. However, we need to make clear the scope of services in the fields of publishing business, as well as the production and distribution of motion pictures according to the change of Korean standard industrial classification that was made this year.

We are able to see opinions that Korea does not impose VAT to foreign entrepreneurs’ supply of services because VAT law designates only supply of service (Article 11) and import of goods (Article 13) as an object of taxation and VAT does not designate ‘import of services’ as an object of taxation in some academic journals. Many specialists in the tax law field are using the expression, ‘import of services’ in contrast with import of goods and it creates confusion regarding this concept. Therefore, I will correct the error by analyzing the VAT system and by explaining the category “supply of services” in contrast with the concept of import and export of goods when foreign entrepreneurs supply digital services in Korea.

▶ Key Words：digital service, domestic supply of service, digital economy, foreign entrepreneurs, payments by proxy