๐ 2025-01-07
A must-know for business owners! Everything about VAT from calculation to filing and refunds.
Value Added Tax (VAT) is a tax imposed on added value at each transaction stage of goods and services. Rate is 10%, ultimately borne by consumers. Business owners pay the difference between output tax and input tax. Zero-rate (0%) and exemption items also exist.
VAT = Supply value ร 10%. Example: Supply 1M KRW โ VAT 100K KRW โ Total 1.1M KRW. Reverse: Total 1.1M รท 1.1 = Supply 1M, VAT 100K. Tax payable = Output tax (collected) - Input tax (paid). If input tax is larger, receive refund.
General taxpayer: Annual sales โฅ80M KRW. 10% rate, file twice yearly (Jan/Jul). Simplified taxpayer: Annual sales <80M KRW. Industry-specific value-added rate (0.5-30%), file once yearly (Jan). Simplified has lower tax burden but limited input tax deduction. Consider converting to general if planning growth.
Zero-rate (0%): Exports, international transport/services. 0% rate but input tax deductible (refund possible). Exemption: Basic agricultural products, medical/education services, housing rental. VAT exempt but no input tax deduction. Zero-rate benefits businesses, exemption benefits consumers.
General taxpayer: Period 1 (Jan-Jun) โ File/pay by Jul 25. Period 2 (Jul-Dec) โ File/pay by Jan 25 next year. Simplified taxpayer: File once yearly by Jan 25. E-filing (Hometax) is convenient. Must issue tax invoices, penalties apply for non-issuance.
โ Maximize input tax deduction: Get tax invoices/card receipts for business expenses. โก Simplify proof with credit cards. โข Consider simplified taxpayer conversion (sales <80M). โฃ Check zero-rate eligible industries. โค Apply for early refund of provisional tax. โฅ Input tax deduction when purchasing business assets.
VAT is an important tax obligation for business owners. Avoid penalties with accurate calculation and timely filing, and reduce tax burden by maximizing input tax deductions.