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South Korea VAT System – Complete Guide

📘 What is VAT in South Korea?

South Korea imposes a Value Added Tax (VAT) on the supply of goods and services, and on imports. It is a destination-based indirect tax, meaning VAT is charged where the consumption occurs.
The system is administered by the National Tax Service (NTS) and applies to both resident and non-resident businesses engaged in taxable activities in Korea.

📊 VAT Rates in South Korea

the VAT structure in South Korea is as follows:

🔹 Standard Rate: 10%
Applies to most goods and services supplied or imported into Korea.

🟢 Zero-Rated Supplies:
  • Exported goods
  • International transportation
  • Certain services provided to non-residents (e.g., research, IT)

🚫 VAT-Exempt Supplies:
  • Financial services (e.g., interest, insurance)
  • Education services
  • Health and medical care
  • Residential property leases
  • Certain cultural and public-interest services

🏢 VAT Registration in South Korea

✅ Who Must Register?
  • Businesses supplying goods/services in South Korea
  • Domestic companies must register regardless of turnover
  • Foreign businesses (without a PE) may appoint a Korean tax agent to register and file on their behalf

📝 Registration Process:
  • Submit application to the National Tax Service (NTS)
  • Provide identification and business documents
  • Receive a VAT registration number
  • Start issuing tax invoices and filing returns

🧾 VAT Invoice Requirements

To be compliant, a South Korean VAT invoice must include:
  • Supplier’s name, business number, and address
  • Buyer’s details (if applicable)
  • Invoice issue date
  • Description of goods or services
  • Net price, VAT amount (10%), and total payable
  • Invoice serial number
South Korea uses an Electronic Tax Invoice (e-Tax Invoice) system, which is mandatory for most businesses.

📅 VAT Filing & Payment

⏳ Filing Frequency:
Bi-monthly filing (six times a year)
  • 1st period: Jan–Feb
  • 2nd: Mar–Apr
  • 3rd: May–Jun
  • 4th: Jul–Aug
  • 5th: Sep–Oct
  • 6th: Nov–Dec

📤 Filing Process:
Submit VAT return via the HomeTax e-filing system
Include sales and purchase data
Report input and output VAT
Pay balance or claim refund

💸 Payment Due Dates:
  • Returns and payments are due by the 25th day of the month following each tax period.

🌍 VAT on Imports & Cross-Border Services

  • Imports are subject to 10% VAT at customs, paid by the importer
  • Foreign service providers (e.g., online platforms, streaming, SaaS) supplying Korean consumers must register and collect VAT (B2C)

🧮 VAT Calculation Example

Scenario:
A Korean company sells machinery worth KRW 100,000,000
  • Output VAT = 10% of 100,000,000 = KRW 10,000,000
  • Total invoice amount = KRW 110,000,000
  • Suppose input VAT = KRW 2,000,000
  • Net VAT payable = KRW 8,000,000

🚫 VAT Exemptions (Detailed)

VAT-exempt goods/services include:
  • Basic medical and healthcare services
  • Kindergarten and school tuition
  • Interest and banking services
  • Residential housing rentals
  • Cultural/artistic events under certain conditions
📌 Note: Exempt businesses cannot claim input VAT credits.

✅ Compliance Tips for Businesses

  • ✔️ Use Korea’s e-Invoice system (HomeTax)
  • ✔️ File returns on time (bi-monthly)
  • ✔️ Maintain accurate electronic records for at least 5 years
  • ✔️ Clearly differentiate between taxable, zero-rated, and exempt supplies
  • ✔️ Foreign companies: Appoint a tax agent for compliance

📌 Conclusion

South Korea’s VAT system is efficient and digitalized, with a flat 10% standard rate and robust electronic invoicing. Businesses local or foreign must stay compliant with registration, invoicing, and timely VAT filings to avoid penalties.
👉 Use the South Korea VAT Calculator at gstcal.org to simplify VAT calculations and stay compliant.