This tax guide provides an overview of the indirect tax system and rules to be aware of for doing business in South Korea.

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Indirect tax snapshot

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What is the principal indirect tax?

Value Added Tax (VAT) is the main type of indirect taxation in South Korea.


In general, a business entity (individual as well as company) should collect 10% VAT from customers when it supplies goods or services, along with issuance of VAT invoices, and then remit the VAT (net of input VAT paid to vendors upon purchase of goods or services) to the tax authorities on quarterly basis with filing VAT return. VAT return is due within 25 days after each calendar quarter ends. 

Zero rate VAT

Followings are subject to zero rate VAT (that is, no VAT shall be charged).

  • Goods exported to abroad
  • Goods or services supplied to foreign embassies/consulates/diplomats stationed in Korea, subject to certain conditions
  • Goods shipped to a domestic business entity carrying out VAT-taxable businesses under a contract entered into with non-residents, for consideration collected in foreign currency from the non-residents
  • Certain services (like professional & technology services, business support services and marketing services, etc.) supplied to non-residents for consideration in foreign currency, when the same tax treatment (i.e., exemption from VAT, GST or any other indirect taxes or zero rate applied) is granted to services supplied to Korean residents in the jurisdiction where the non-residents reside. 

VAT exempted goods or services

While most transactions are VAT-taxable, VAT Act enumerates dozens of goods and services as VAT-exempted ones, among which listed below are important ones.  

  • Unprocessed agricultural / livestock / fishery / forestry products
  • Medical services
  • Education services meeting certain qualification
  • Public transportation
  • Books, newspaper and magazine
  • Tabaco meeting some conditions
  • Financial & insurance services
  • Rent of residential house
  • Land
  • Certain professional services rendered by an individual

While the supplier of VAT-exempted goods or services are not required to collect VAT from customers, they cannot reclaim input VAT paid to vendors.

Non-reclaimable input VAT

In general, a business can reclaim input VAT paid upon purchase of goods or services as far as it uses those goods or services for its VAT-taxable businesses (subjected to 10% or zero percent) and receive legitimate VAT invoices describing the transactions exactly. As exceptions, input VAT paid upon with following purchases cannot be reclaimed.

  • Input VAT associated with purchase or lease / rental of non-business purpose passenger cars or operation thereof (like gas, maintenance & repair, parking fee and toll fee, etc.)
  • Input VAT associated with entertainment expenditures (such as meal & drink, gift or golf, etc. for customers or vendors, etc.)
  • Input VAT associated with expenditures made out of business purpose
  • Input VAT associated with acquisition of land (including capital expenditures for land)

VAT on imported goods and services

While VAT on domestically traded goods or services are collected by suppliers, VAT on imported goods is collected by the customs authorities along with customs duty from importers.

For services purchased from non-resident suppliers, in general, the purchaser should pay reverse charge VAT (@10%) to the tax authorities when the service fee is paid. If the service is used for VAT-taxable business, such reverse charge VAT is exempted.

Is there a registration limit for the tax?


Does the same registration limit apply to non-established businesses?

N/A. Any non-resident individuals or foreign corporations who have a business place in Korea should register with the tax authorities. Non-resident suppliers of electronic services to Korean consumers (in B2C transactions) should also register with the tax authorities even though they do not have a business place in Korea.

Is there any specific legislation to tax non-resident supplies of electronically supplied/digital services to private consumers resident in your country?

With effect from July 1, 2015, non-resident suppliers are required to register with the tax authorities and collect VAT (at 10%) for electronic services from Korean consumers and remit the VAT to the tax authorities for every quarter.  

Does a non-established business need to appoint a fiscal representative in order to register?

It may be necessary to appoint a fiscal representative in order to register with the tax authorities if non-resident individuals or corporations do not have their own employees in Korea.

How often do returns have to be submitted?

A business should, in general, file VAT return for every calendar quarter along with payment of VAT within 25 days after each calendar quarter ends. 

Are penalties imposed for the late submission of returns/ payment of tax?

A penalty amounting to 20% of underpaid tax will be levied if a business does not file VAT return by due date. The penalty may be relieved by 20~50% if an overdue return is filed within 6 months.

In addition, interest charge shall be levied until the underpaid VAT is paid at certain interest rate (currently 8.03% per annum).

Are any other declarations required?

A business should declare not only supplies of goods or services but purchases from vendors to the tax authorities in VAT return by submitting the schedule of output VAT invoices issued to customers as well as input VAT invoices received from vendors.

For service fee paid abroad, a business carrying out VAT-exempted business should pay reverse charge VAT (at 10%) for every quarter.

Are penalties imposed in other circumstances?

Penalties can be imposed for a range of errors or omissions such as underreporting of taxable supplies or purchase from vendors, no or incorrect issuance of VAT invoices, etc.

Can the VAT incurred by overseas businesses be claimed if they are not registered in South Korea?

Non-resident individuals or foreign companies can reclaim input VAT charged by local vendors if they have received VAT invoices from local vendors, subject to certain conditions. To receive VAT invoices from vendors, they would need to register with the tax authorities as representative office.

What information must a VAT invoice show?

A VAT invoice must show as mandatory:

  • The supplier’s name and tax registration number
  • The customer’s tax registration number
  • The transaction amount and corresponding VAT
  • Date of preparation of the VAT invoice

In addition, the following may be written in the VAT invoice as elective:

  • The supplier’s address
  • The customer’s name and address
  • The business type and industry category of the supplier and customer
  • Goods or services supplied
  • Unit price and quantity
  • Date of supply
  • The business place where the supply takes place in case of business which elected consolidated VAT filing.
Are there any current or anticipated Standard Audit File for Tax (SAF-T) or similar electronic/digital filing requirements eg invoice listing data file/real-time VAT reporting?

A business (corporations as well as individual businessmen over certain threshold) should issue electronic VAT invoices through the tax authorities’ system, ERP system meeting certain qualification or licensed IT service providers and such VAT invoices should be forwarded to the tax authorities.

Contact us

For further information on indirect tax in South Korea please contact:

Jeong Guen Lee
T +82 (0)2 2056 3713


International indirect tax guide
International indirect tax guide
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