South Korean VAT

Value added tax (VAT) was introduced in South Korea in 1977 to consolidate the eight indirect taxes previously in place and streamline the South Korean tax system.

VAT in South Korea is similar to the European Union’s (EU) VAT system. It is an indirect tax requiring recalculation and payments to the tax authorities at each transaction point in the onward sales chain. It’s applied to most goods and services in the country at the standard VAT rate of 10%.

VAT in South Korea is administered by the National Tax Service.

A number of goods and services are exempt from VAT in South Korea. These include certain financial services (such as insurance services), medical services, agricultural goods, and books.

Domestic and foreign companies making taxable supplies in South Korea to consumers must register for VAT. There is no annual registration threshold.

Businesses registering for VAT must also have a physical location in South Korea, with the exception of digital service providers.

Businesses will receive a VAT registration number once their application has been accepted. This number will establish the business within the South Korea tax system as a legal business.

Non-resident businesses selling digital products and electronic services in South Korea are not required to have a physical location within the country.

As with other types of businesses, digital service providers are not subject to a registration threshold. They must register as soon as they start operating within South Korea.

A foreign company is not required to appoint a fiscal representative; however, they may do so on a voluntary basis.

The representative and company are jointly liable for the reporting and payment of VAT to the South Korean authorities. In addition, the agent is responsible for all communications between the company and the tax authorities.

Businesses must ensure the correct information is contained within the VAT invoices they issue to South Korean customers. This includes:

• The name and address of the business

• Valid VAT number

• VAT rate applied to each item

• Brief description of the goods and/or services

• Invoice sequencing number