VAT and Sales Tax in North Korea

North Korea does not impose a Value Added Tax (VAT). Instead, the country uses a transaction tax on goods with rates ranging from 3% to 15% depending on the product category. For simplified calculation purposes, an average rate of 5% is used.

No VAT / GST

North Korea has no VAT, no GST as understood in Western tax systems. The country operates a transaction tax system on the sale of goods rather than a broad-based consumption tax.

Transaction Tax System

Instead of VAT, North Korea imposes a transaction tax on the sale of goods:

• Rate Range: 3% to 15% depending on goods category
• Average Rate: Approximately 5% for simplified calculation
• Scope: Applied to goods at the point of sale

Revenue Sources

The North Korean government raises revenue primarily through:

• Corporate income tax (25% for foreign enterprises, ~10% domestic)
• Personal income tax (progressive PIT 0-20%)
• Transaction taxes on goods
• Customs duties and tariffs on imports
• State enterprise profits (primary source of government revenue)

Import Duties

Goods imported into North Korea may be subject to customs duties and import taxes. The rates vary by goods type and are collected at the border by customs authorities.

Services Taxation

Services in North Korea are generally not subject to transaction tax. The system primarily focuses on goods.

Comparison with Other Countries

Most countries impose a VAT or sales tax. North Korea's transaction tax system is an older-style consumption tax model:

• No input VAT recovery (not applicable)
• Simpler compliance for businesses
• Lower effective tax rate on average (~5%)

Future Developments

As of 2026, there is no indication that North Korea will introduce a VAT system. The transaction tax model continues to be used, though tax reform in special economic zones may introduce alternative regimes.