South Korean value added tax compliance and rates

The standard value added tax (VAT) rate in South Korea is 10%. This applies to most goods and services sold in the country. Unlike most countries with VAT systems, South Korea does not have any reduced rates. There are however a number of zero-rated goods and services. More details are below:

Businesses with a VAT number must submit periodic VAT returns detailing all taxable supplies (sales) and inputs (costs).

There are two return periods each year in South Korea: January 1–June 30, and July 1–December 31. However, preliminary returns are also required at the end of the first and third calendar quarters.

The return deadline in South Korea is 25 days from the period end, and any associated VAT liability must also be paid by this deadline.

In the case of a tax credit (where the VAT incurred by the company exceeds the VAT charged on its sales in the reporting period), approved credits will be paid over to the company within 30 days of the return deadline.

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

• 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

If a foreign company is not making taxable supplies in South Korea, but is incurring South Korean VAT on local goods or services, then the VAT may, in certain circumstances, be recovered through a VAT reclaim. However, this regulation applies only where the tax refundable exceeds KRW 300,000 (approximately €200,000) and where a similar taxation system like VAT does not exist in the foreigner’s nation, or a reciprocity agreement is in place with the foreign taxpayer’s country of residence.