What are you looking for? We can help!
On July 1, 2015, South Korean tax legislation was changed in respect of overseas digital service suppliers charging, collecting, and remitting VAT on certain supplies.
South Korean VAT applies to the customer at the standard VAT rate of 10%.
No, there is no registration threshold.
If you are an overseas business supplying digital services to South Korean consumers then you need to register with the Korean National Tax Service to become a Simplified Business Operator.
Assuming your product/services qualify as digital goods/services in South Korea, then complete the following steps:
- Log into the Taxamo portal and go to My account > Tax regions.
- Enable in test mode or live mode for the relevant dates.
- If you have registered as a foreign business (Simplified Business Operator) in South Korea, enter your registration number.
Note: If you are using an integration other than the API, or the Taxamo checkout form, please confirm that your integration type has been upgraded to support South Korea.
You will need to first access the Korean National Tax Service Hometax website (via the Simplified Business Operator link). Then, you can sign up for a membership and apply to be a Simplified Business Operator.
If I sell in currencies other than South Korean Won (KRW) to South Korean residents, how do I convert these for tax payment?
In principal, VAT shall be paid in South Korean Won (KRW). In case of being paid from abroad, taxpayers are allowed to pay VAT in USD by applying the current standard foreign exchange rate. Considering the required time to deliver a remittance, taxpayers should pay their VAT three days earlier from the end date of payment period.
When a provider receives foreign currencies or foreign exchanges as the compensation of his/her e-service, the provider should file the tax base by converting the received currency into KRW based on the standard foreign exchange rates1 as of closing date of the taxable period.
Note: 1. The standard rate noticed by Seoul Money Brokerage Services (www.smbs.biz) is applied.
To receive a VAT refund, you need to open a bank account in a bank, etc., in Korea which enables a tax office to transfer the VAT refund. The bank account shall be opened under the name of the Simplified Business Operator. After opening the bank account, the taxpayer should file a return for opening a bank account to NTS Namdaemun District Office.
Note: The issuance of a certificate of business registration is available at any District Tax Office. A taxpayer is required to submit the certificate of business registration to open a bank account for the purpose of verifying the taxpayer’s name. Also, the refund of a transaction is applied to that transaction’s settlement quarter.
Businesses supplying digital services to consumers based in South Korea should record or collect documentary evidence relating to business transactions and retain them for five years after the filing period has ended.
A VAT invoice must contain the following items in order to be valid:
- Supplier’s business registration number, name, and address
- Recipient’s business name, name, and address
- Supplier’s and recipient’s business category and status
- Amount of the supply and the VAT amount
- Date of issuance of the invoice
- Type of the item being supplied, the quantity supplied, and the unit price
- Date of the supply
- Transaction type
For entrepreneurs using the Single Business method, the location and business name of the actual place of business that is supplying or receiving the goods or services.
Advice from the Korean National Tax Service is that companies can, of course, hire a lawyer, a tax agent, or a certified public accountant to handle their tax affairs in Korea, but it is not necessary.
In order to file a VAT return via Hometax, you must first receive a business registration number. Then, you can file your VAT return by log-in (enter ID, Password, and Business Registration Number) on the National Tax Service Hometax (for Simplified Business Operator) website.
The following are some of the details you will need to supply when applying for a business registration number:
- Business operator’s name
- Representative person’s name
- Email address
- Website address
- Registered country and business registration number of foreign business operator
- Commencement date of e-service in Korea
- Service type
- Tax agent information
Once registered you have to pay (send) taxes to the VAT bank account designated by the Korean National Tax Service (Woori Bank).
A business operator who has his/her business registration number receives the VAT bank account number via e-mail, and the bank account number can be seen on the ‘Basic information of Simplified Business Operator’ screen.
Bank details are as follows:
Once you have sent your VAT payment you can check several items including whether your VAT return is properly filed, what is your tax base, and what is the payable tax amount on the ‘My VAT Returns’ screen.