[VAT]Have you heard of Tax invoice?

 

 

I assure You would know ‘invoice’ but have you heard of Tax invoice?

 

1.Almost every transaction require Tax invoice In Korea

 

In Korea there is a unique system called the tax invoice. and it is required for every transaction that occurs between business owners. 

This means that both the seller and the buyer should issue and receive a tax invoice for every transaction.

The value-added tax (VAT) in Korea is 10%, and it is applied to almost every goods and service.(There are few exception that VAT is not applied e.g. goods which is essential to life (rice, water,,) exporting to aborad)

 

Therefore, when a business owner receives payment from a customer, they should also collect the applicable VAT on top of the price of the goods or service.

 

For example, if you sell a product for 220 Korean won (including VAT), the VAT amount would be 20 Korean won, and the actual price of the product would be 200 Korean won. You should issue a tax invoice to the buyer, which will allow them to claim a VAT refund of 20 Korean won through VAT filing. Check below tax invoice.

 

Similarly, if you purchase a product and pay the VAT with the price of the product, you should also receive a tax invoice and claim a tax refund through VAT filing.

 

It is important to note that tax invoices are reported to the National Tax Service (NTS). If you issue a tax invoice incorrectly, you should correct it through the NTS system. Failure to issue a tax invoice on time may result in penalty taxes.

 

 

2.Electronical Tax invoice vs Paper Tax invoice

There are two types of tax invoices in Korea: one is issued electronically, and the other is issued on paper. 

Both types have the same legal effectiveness, but the way of issuing them is different. The Korean tax office encourages all business entities to issue tax invoices electronically, but it could be burdensome for small business owners who may not have access to a computer. Therefore, if you are an individual business owner and your sales amount is below 100,000,000KRW (80,000,000KRW from 2024.7.1), you can still issue tax invoices on paper. However, if you are a corporate business owner or your individual business sales are over 100,000,000KRW, you must issue tax invoices electronically, and if you fail to do so, you may be subject to a penalty.

Please note that a digital certificate is required to issue tax invoices electronically.

*you can see '전자(electronic)' written on the left tax invoice. and if you see the right tax invoice there's no word '전자'

 

 

If you are a foreign corporate or individual business struggling with tax invoice issuance in Korea, G-tax provides tax invoice issuance services to help you navigate the Korean tax system.

 

Thank you for read my article! I hope it helps.

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