South Korea VAT Guide 2026

Standard Rate — 10%

The standard South Korean VAT rate is 10% on the supply of goods and services. VAT is levied at each stage of the supply chain, with businesses entitled to input tax credits (매입세액공제) for VAT paid on their purchases. The final consumer bears the full 10% cost. The VAT base is generally the consideration received for the supply. VAT-inclusive pricing is common in B2C transactions in Korea, while B2B transactions are typically quoted exclusive of VAT.

VAT returns are filed semi-annually, divided into two filing periods: January–June (due July 25) and July–December (due January 25 of the following year). Electronic filing (홈택스) is mandatory for most businesses.

Zero-Rated Supplies (영세율)

The following supplies are zero-rated (0% VAT) — the supplier can still claim input tax credits:

• Export of goods (수출)
• International transportation services
• Goods and services supplied to the Republic of Korea Armed Forces stationed abroad
• Services supplied to non-residents (certain conditions apply)
• Shipbuilding and aircraft manufacturing for foreign buyers
• Overseas construction and engineering services

Zero-rated supplies are distinct from exempt supplies — zero-rated suppliers can recover input VAT, while exempt suppliers cannot.

Exempt Supplies (면세)

Certain supplies are exempt from VAT (면세), meaning no output VAT is charged and no input VAT recovery is allowed:

• Unprocessed foodstuffs (농수산물 — unprocessed agricultural, livestock, and fishery products)
• Medical and health services (의료서비스)
• Educational services (교육서비스)
• Financial and insurance services (금융·보험용역)
• Books, newspapers, and magazines (도서·신문·잡지)
• Passenger transport services (여객운송 — urban buses, subway, taxis)
• Rental of residential housing (주택임대 — monthly rent, not commercial property)

Simplified Taxation for Small Businesses (간이과세)

Small businesses with annual revenue below KRW 80 million can elect for the simplified taxation regime (간이과세). Under this regime, the effective VAT rate is lower than 10%:

• General businesses (manufacturing, wholesale, retail): 2% effective rate on gross revenue
• Service businesses (restaurants, accommodation, repairs): 4% effective rate on gross revenue
• Construction businesses: 3% effective rate on gross revenue

Simplified taxpayers cannot deduct input VAT but pay a reduced rate on their total revenue. The regime is designed to reduce compliance burdens for small businesses. Simplified taxpayers must still issue tax invoices (세금계산서) for B2B transactions. Once annual revenue exceeds KRW 80 million, the business automatically converts to the general VAT regime.

E-Commerce VAT Rules

South Korea has specific VAT rules for e-commerce and digital services. Since 2025, foreign digital service providers (e.g., online platforms, streaming services, app stores, cloud services) with annual Korean revenue exceeding KRW 100 million must register for VAT and charge 10% on supplies to Korean consumers. The NTS enforces these rules through platform reporting requirements.

For domestic e-commerce, online platform operators may be subject to additional reporting obligations. Marketplaces that facilitate transactions between third-party sellers and buyers may need to collect and remit VAT on behalf of sellers in certain circumstances. Cross-border e-commerce imports valued under KRW 150,000 are generally exempt from customs duties and VAT, though this threshold is subject to periodic review.

Electronic tax invoices (전자세금계산서) are mandatory for all B2B transactions and must be issued through the NTS's national e-tax invoice system within the same month as the supply.

Tax Invoices (세금계산서)

Every VAT-registered business must issue tax invoices for B2B supplies. Electronic tax invoices (전자세금계산서) issued through the NTS 홈택스 system are mandatory. The invoice must include: supplier and recipient business registration numbers, date of supply, item description, VAT-exclusive price, VAT amount, and total. Failure to issue or receive valid tax invoices can result in penalties and disallowed input tax credits.

Filing and Payment

General VAT taxpayers file semi-annual returns. The preliminary return (예정신고) for January–June is due by July 25, and the final return (확정신고) for July–December is due by January 25. Monthly prepayments may be required for large businesses. Simplified taxpayers file once per year (annual return due by January 25). Electronic filing via 홈택스 is required for all businesses with annual revenue exceeding KRW 48 million.

FAQs

Is VAT included in the listed price in Korea?

In B2C transactions (retail, restaurants, etc.), prices are typically VAT-inclusive. In B2B transactions, prices are typically quoted exclusive of VAT, and the VAT is added on top.

Can foreign businesses register for Korean VAT?

Yes, foreign businesses providing digital services or other supplies to Korean consumers can register for VAT through a local tax representative. The threshold for mandatory registration is KRW 100 million in annual Korean revenue.

What are the penalties for late VAT filing?

Late filing penalties vary depending on the lateness and type of non-compliance, generally ranging from 10% to 40% of the unpaid tax, plus daily interest.

How do I claim a VAT refund as a foreign tourist?

Tourists can claim a refund of VAT on purchases made at participating stores (Tax Free shops) if the total purchase per store exceeds KRW 30,000. The refund is typically 5–7% of the purchase amount (after deduction of fees).

Disclaimer

This guide provides general information about South Korean VAT for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Korean tax advisor (세무사) or the NTS directly for advice specific to your situation. InvestmentKit does not provide tax advice.