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South Korea operates a single standard value-added tax (VAT) rate of 10%, distinguishing it from most VAT jurisdictions that apply multiple rates. The Korean VAT regime is straightforward in its application but demands rigorous compliance from domestic and foreign businesses.
VAT Structure
South Korea does not provide for reduced VAT rates. The 10% standard rate applies to all taxable goods and services, while zero-rating applies to specific sectors, including:
- Exports and related logistics services
- Financial and insurance services
- International services rendered abroad
- Select business support services
There are no super-reduced or intermediate VAT rates as seen in jurisdictions like the EU.
Filing Obligations
Businesses registered for VAT in South Korea must adhere to a biannual VAT return system, covering the periods:
- January 1 – June 30
- July 1 – December 31
However, preliminary returns must also be filed quarterly at the end of March and September. All VAT returns and payments are due within 25 days of the end of the reporting period.
Businesses can claim a refund if input VAT (incurred) exceeds output VAT (charged), with refunds issued within 30 days of the return deadline.
Invoicing Requirements
All VAT invoices in South Korea must include:
- Business name and address
- Valid VAT registration number
- Description of goods/services supplied
- VAT rate applied
- Sequential invoice number
Failure to comply may result in penalties or the denial of input tax recovery.
VAT Refunds for Foreign Companies
Foreign companies not registered for VAT in Korea but incurring Korean VAT (e.g., through hotels and local services) may apply for VAT reclaims under strict conditions:
- Minimum reclaim threshold: KRW 300,000 (~€200,000)
- Only applicable where the claimant’s country has a VAT system or reciprocal agreement with South Korea
This limits eligibility largely to OECD economies or nations with tax treaties in place.
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