VAT, GST and Sales Tax in South Korea


Name of the tax Value-added tax (VAT)
Local name Boo-ga-ga-chi-se
Date introduced 1-Jul-77
Trading bloc membership None
Administered by National Tax Service (
VAT rates
Standard 10%
Other Zero-rated and exempt
VAT number format 000-00-00000 (showing tax office location, legal entity type and serial number)
VAT return periods Quarterly
Registration thresholds None (except for simplified taxation)
Simplified taxation Individual businesses with prescribed categories and with turnover less than KRW48 million in previous calendar year
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods and services by a taxable person
  • Reverse-charge services received by an exempt business person in Korea
  • The importation of goods, regardless of the status of the importer

Who is liable

Any person that independently undertakes the supply of taxable goods or services in the course of business, whether or not for profit, is liable for VAT.

Reverse charge. Reverse charge generally applies where a busi­ness receives a supply of taxable services and intangible proper­ties from a nonresident or foreign corporation and uses the services and intangible properties for its tax-exempt business. The recipient of such taxable services and intangible properties must collect the VAT at the time of the payment and pay the amount to the government.

If a business receives a supply of taxable services and intangible properties from a nonresident or foreign corporation, and such supplies are used for both its taxable and tax-exempt activities, VAT on the reverse charge is calculated by reference to the ratio of turnover related to exempt supplies for the year compared to total turnover.

A nonresident or foreign corporation for VAT purposes is one of the following:

  • A nonresident or foreign corporation that does not have a place of business in Korea
  • A nonresident or foreign corporation with a domestic place of business, provided that the supply of services is not rendered through the domestic place of business

Tax representatives. In certain circumstances, an individual tax­payer must designate a tax administrator to deal with filing tax returns, making tax payments, requesting refunds and handling other necessary matters. Information about the tax administrator must be reported to the competent tax office.

Registration procedures. Any person that begins a business must register the place of business with the district tax office within 20 days after the date of business commencement. The business may be registered before the date of business commencement. The tax office that has jurisdiction over the business location issues a business registration certificate. Where a taxpayer operates more than one business place, the taxpayer is allowed to register two or more business places as a single business unit for VAT purposes.

Late-registration penalties. If a person fails to register a business within 20 days after business commencement, a penalty tax equal to 1% of the value of supplies made is imposed. If a taxpayer provides goods or services without registration or with late regis­tration, the penalty applies to the value of the supplies made dur­ing the period beginning on the business commencement date ending on the day before the date on which the registration is made. The penalty amount will adjust the amount of tax payable or deductible. The penalty is capped at KRW100 million (KRW50 million for small and medium-sized enterprises [SMEs]). The cap covers every six-month period.

Group registration. Not applicable.

Non-established businesses. “Non-established business” refers to a business that has no fixed establishment in Korea. A non-established business is not required to register for VAT in Korea unless it provides certain electronic services to Korean customers.

Digital economy. Effective 1 July 2015, South Korea applies VAT on electronic services purchased by South Korean customers from abroad. Foreign providers of electronic services must register with the South Korean tax authorities through the simplified business registration system.

The VAT on electronic services will not apply if the electronic services are rendered to a domestic entity that is registered for VAT purposes in Korea (i.e., in business-to-business transac­tions).

Deregistration. A registered business that ceases to operate is required to deregister by returning its business registration cer­tificate to the tax office.

VAT rates

In Korea, the VAT rates are the standard rate of 10% and the zero rate (0%). The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides for the zero rate or an exemption.

Examples of goods and services taxable at 0%

  • Exported goods
  • Services rendered outside Korea
  • International transportation services by ships and aircraft
  • Other goods or services supplied for foreign currency

Examples of exempt supplies of goods and services

  • Social welfare services (for example, medical and health ser­vices and education services)
  • Goods or services related to culture (for example, books, news­papers, magazines, official gazettes and communications, artistic works, and admission to libraries)
  • Personal services similar to labor (for example, by actors, sing­ers and academic research services)
  • Postage stamps
  • Basic life necessities and services (for example, unprocessed foodstuffs such as agricultural products, livestock products, marine products, forest products, piped water, briquette and anthracite coal)
  • Services supplied by the government
  • Finance and insurance services
  • Supplies of land

Option to tax for exempt supplies. A business that supplies certain goods and services that are exempt under the Korean law may choose to tax these supplies by filing a report on waiver of VAT exemption.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.”

Goods are deemed to be supplied at the following times (also, see the next paragraph):

  • A supply of goods that requires the goods to be moved: when the goods are delivered
  • A supply of goods that does not require the goods to be moved: when the goods are made available
  • For other cases: when the supply of goods is confirmed

The following are the times of supply for specified types of sup­plies:

  • Cash or credit sales: when goods are delivered or made avail­able
  • Sales made for long-term installment payments: when each por­tion of the proceeds is received
  • Supply of goods under the payment term of percentage of work completed, or under terms of partial payments: when each por­tion of the proceeds is received
  • Processing deemed to be a supply of goods: when the processed goods are delivered
  • Self-supplies or the supply of goods for personal use or for a gift: when the goods are consumed or used
  • Business closure: the date of closure
  • Goods supplied through vending machines: when the taxpayer takes money from the machine
  • Exports: the date of shipment
  • Goods that are considered imported goods and that are supplied by a business in a bonded area to outside the bonded area: the date of the import declaration

The time of supply for services is as follows:

  • General rule: when the services are completely rendered
  • Services provided under terms of payment based on the per­centage of work completed, partial payment, deferred payment, or any other payment terms: when each portion of the payments is to be received
  • A deemed rent deposit for a lease or advance or deferred pay­ment of rent for the leasing of land, buildings or other structures built on the land: when the preliminary tax return or the tax period has been completed
  • Other cases: when the services have been completely rendered and the value of the supply is determined

If a business receives partial or full payment of the consideration for a supply of goods or services and issues a tax invoice or receipt for the payment before the general time of supply occurs (as described above), the time of supply is deemed to be the date that the tax invoice or receipt is issued.

Imported goods. The time of importation for goods shall be the time when an import declaration under the Customs Act is accepted.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. The basic rule for VAT recovery in Korea requires a supply of goods or services to be made by a taxable person in the course of business. Any VAT claimed must be supported by a valid VAT tax invoice, customs document or similar document.

Deductibility of input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business purposes. Input tax incurred on expenses directly related to the business is generally recoverable.

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • The value-added tax amount on goods or services that are used by taxpayers for their own business
  • The value-added tax amount on the importation of goods that are used by taxpayers for their own business or imported by them for such use

However, certain input tax is not recoverable.

Examples of items for which input tax is nondeductible

  • Input tax on expenses not directly related to the business
  • Input tax on the purchase and maintenance of small automo­biles used for nonprofit purposes
  • Input tax on the purchase of goods or services that are used in VAT-exempt business
  • Input tax on entertainment expenses or similar expenses out­lined in the Presidential Decree governing VAT recovery
  • Input tax amount incurred more than 20 days before the date of registration

Partial exemption. If goods or services purchased by a taxpayer are used both for taxable and exempt business, the creditable input tax is calculated based on the ratio of turnover related to supplies entitled to a VAT credit compared to the taxpayer’s total turnover.

Capital goods. Capital goods are items of capital expenditure that are depreciated and used in a business over several years. Input tax is deducted in the VAT taxable period in which the goods are acquired. The amount of input tax recovered depends on the tax­payer’s partial exemption recovery position in the VAT taxable period of acquisition. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxpayer’s partial exemption recovery percentage changes to a certain extent during the adjustment period.

Refunds. If a taxpayer is entitled to a refund, the competent tax office refunds the amount of tax refundable for each tax period concerned. This is generally done automatically through the sub­mission of the periodic VAT return.

The tax office may refund the amount of tax due to a taxpayer within 15 days after the date of preliminary return and final return if 1) the taxpayer makes zero-rated supplies, 2) the tax­payer operates a newly established business, or 3) the taxpayer acquires, expands or extends its business facilities. This proce­dure is referred to as an early refund.

Preregistration costs. Not applicable.

  1. Recovery of VAT by non-established businesses

Korea refunds VAT incurred by businesses that are neither estab­lished nor registered for VAT in Korea. A non-established busi­ness may reclaim VAT to the same extent as a VAT-registered business, but only if the resident country of the non-established business provides VAT refunds to non-established Korean busi­nesses in that country on a reciprocal basis.

A foreign company that is engaged in business in its home coun­try but does not have a permanent establishment in Korea may reclaim the VAT incurred on the purchase of the following goods and services pursuant to the Tax Incentives Limitation Law:

  • Meals and hotel charges
  • Advertisements
  • Electricity and telecommunications
  • Real estate rentals and leases
  • Certain goods and services necessary for the maintenance of an office in Korea

Refund application. A foreign company that seeks to reclaim VAT paid in Korea must submit an application, together with the required documents, to the district National Tax Service (NTS) by 30 June of the year following the calendar year covered by the claim. The district NTS must refund eligible VAT by 31 December of the year in which the application is submitted. The following documents must accompany the claim:

  • A certificate that proves the foreign company is a registered business in its home country
  • A detailed transaction list
  • All original tax invoices
  • A power of attorney, if necessary


Tax invoice. When a taxpayer supplies goods or services, it must issue a tax invoice to the other party to the transaction. The tax invoice must contain the following information:

  • The registration number and the name of the individual or cor­porate taxpayer
  • The registration number of the other party to the supply
  • The value of the supply and the VAT charged
  • The date, month and year in which the tax invoice is issued
  • Other particulars as prescribed by the Presidential Decree

Monthly tax invoices. If it is deemed necessary, a taxpayer may prepare and issue a tax invoice by aggregating the total receivable transactions to the end of the month. The invoice must be issued by the 10th day of the following month.

Import documentation. The Customs Office is required to prepare and issue import tax invoices for imported goods. The documents must be given to individuals and companies that make imports and must be issued in accordance with the provisions of the Customs Law.

Exemption from the obligation to issue tax invoices. Taxpayers that carry on any of the following activities are exempt from the obli­gation to prepare and issue tax invoices:

  • Self-supplies of goods, personal use of goods, donations for a business purpose, supplies in the course of the closure of a business and self-supplies of services
  • Exportations of goods, supplies of services abroad, and other specific supplies of goods or services that earn foreign cur­rency and that are subject to the zero rate

Electronic tax invoice system. The electronic tax invoice (ETI) is a tax invoice that is electronically transmitted to the information network of the NTS through an accredited certification system that can confirm information, such as a supplier’s identification and the details of tax invoices if changed.

All registered corporate taxpayers and individual taxpayers pre­scribed by Presidential Decree of VAT law must issue tax invoic­es under the ETI system and submit a statement of delivery to the NTS by the date specified by Presidential Decree of VAT law, which is currently the day immediately following the issuance date.

Self-issuance tax invoice. If the recipient of goods or services is not issued a tax invoice, the recipient may issue a self-billed tax invoice upon receiving confirmation from a tax officer that the supply of goods or services has actually taken place.

Credit note. If a tax invoice contains an error or if the taxpayer needs to make a correction to the submitted tax invoice after it has been issued, the taxpayer must prepare and reissue the tax invoice.

Foreign-currency considerations. If a VAT invoice is issued in a foreign currency, all values that are required on the invoice must be converted into Korean won (KRW), using the exchange rate at the time of supply. The exchange rate is contained in the Foreign Exchange Transaction Regulation, and it is generally the exchange rate announced by Seoul Money Brokerage Service Ltd (

Export documentation. A detailed statement is required for a sup­ply to be qualified as an export. This document must be prepared by the taxpayer.

VAT returns and payment

The VAT period is six months on a calendar-year basis (first VAT period: January through June; second VAT period: July through December). VAT returns must be filed on a quarterly basis, including preliminary returns.

VAT returns. A taxpayer is required to file preliminary returns for the first and third quarters of the year, which end in March and September, respectively. These preliminary returns must indicate the tax base and the tax amount payable or refundable. The pre­liminary return must be filed within 25 days following the last day of each preliminary return period. A taxpayer must pay the tax amount payable for the preliminary return period when the return is filed.

Taxpayers must file a final return for the quarters ended June and December for the second and fourth quarters of the year. The final return must be filed within 25 days following the end of the tax period. A taxpayer must pay the tax amount payable for the final return period at the time of filing the return.

VAT returns must be completed in Korean won (KRW), and VAT liabilities must be paid in Korean won.

Record retention. A taxpayer must keep the books in which the transactions are recorded for a period of five years after the date of the final return for the tax period in which the transactions occurred. The books must also contain details of tax invoices or receipts issued or received. Records may be kept in hard copy or in electronic format.

Payments. A taxable person must pay the VAT due at each busi­ness place at the time of filing the return. However, if a taxpayer has more than two business places, it may pay the entire VAT due at its principal place of business with the prior approval from the tax office that has jurisdiction over the principal business place.

Special schemes. Not applicable.

Electronic filing and archiving. Where a return is electronically submitted through the information network of the NTS, such return shall be treated as filed with the tax office at the time of submission to the information network of the NTS.

Businesses shall record all details of transactions related to their amount of tax payable or amount of tax refundable in their account books and maintain them at their own places of business for five years from the deadline for filing a final return for the taxable period of the relevant transactions. However, businesses that issue tax invoices using the ETI system are not required to maintain relevant records.

Annual returns. Not applicable


Penalties apply to the following VAT errors or offenses:

  • Failure to register within 20 days from the establishment of a business: 1% of the value of supply
  • Failure to issue a correct tax invoice (including ETI) or to sub­mit a correct list of tax invoices issued: 1% or 2% of the value of supply
  • Failure to transmit a list of ETIs issued: 0.5% or 1% of the value of supply
  • Failure to report a zero-rated VAT transaction in a VAT return: 0.5% of the tax base
  • Failure to file a tax return: 10% to 40% of the underpaid tax amount (overpaid tax refund)
  • Underpayment and nonpayment of taxes or overestimated refund: underpaid tax amount (or overpaid tax refund) at a rate of 10.95% annually
  • Failure to comply with the requirement to make a proxy pay­ment (reverse charge): 10% of the amount not paid

Some of the individual penalties listed above are capped at KRW100 million (KRW50 million for SMEs). The cap covers every six-month period.