VAT is taught as "output tax less input tax". A simplified taxpayer does not use that formula. Instead of subtracting input tax, the sales figure is multiplied by a value-added rate set for the sector — which is why, however large the purchases, no refund ever arrives.
1. Simplified VAT is "supply value x value-added rate x 10%". The rate turns on the sector, and there are only six bands.
2. A simplified taxpayer gets no refund. Where credits exceed the tax, the excess is treated as nil (art. 63(6)).
3. Below 48m won the payment is waived — but the return is still filed (art. 69).
4. Which regime wins is decided by the purchase ratio. For a restaurant, purchases must exceed 88.4% of sales before general VAT is cheaper.
Enter annual sales and purchases, and it shows both regimes side by side.
It follows the order the statute sets. The simplified figure is "supply value x the sector's value-added rate x 10%" (art. 63(2)). The rates are the six bands in Decree art. 111(2); the Act itself only says they are set by Decree within a range of 5% to 50%. Tax invoices received give a credit of 0.5% of their supply value (art. 63(3)1), but where the credit exceeds the tax itself the excess is treated as nil (art. 63(6)) — a simplified taxpayer never receives a refund. Below 48m won of supply value the payment is waived (art. 69(1)), though the return is still filed. The general figure is output tax less input tax, and a negative result is refunded (art. 37). Card-issuance credits, deemed input tax, penalties and interim assessments are not included. An estimate.
The simplified formula sits in an image inside the article
Article 63(2) ends: "the tax payable by a simplified taxpayer shall be the amount calculated by the following formula". Nothing follows in text — the formula is an image.
Tax payable = the tax base (supply value) x "the value-added rate for the sector, set by Decree within a range of 5 to 50 per cent, having regard to the average rate reported for that sector over the preceding three years" x 10 per cent
The Act fixes only the range and leaves the figures to the Decree. Those figures are the table in Decree art. 111(2) — and that table is an image too.
| Sector | Value-added rate | Purchases needed for general to win |
|---|---|---|
| Retail, restaurants, scrap collection | 15% | 88.4% |
| Manufacturing, farming, small-parcel transport | 20% | 82.5% |
| Accommodation | 25% | 76.7% |
| Construction, transport and storage, ICT | 30% | 70.9% |
| Finance, professional services, property rental | 40% | 59.3% |
| Other services | 30% | 70.9% |
| Decree art. 111(2) [amended 17 February 2021]. The right-hand column is our calculation. | ||
The purchase ratio decides which regime wins
Set the two formulas side by side. With annual supply value S and purchases at a share p of sales:
General = S(1 − p) ÷ 11 · Simplified = S(0.1r − 0.005p)
They meet at p = (1 − 1.1r) ÷ 0.945.
For food and retail at 15% that is 88.4%; for construction and ICT at 30%, 70.9%; for property rental at 40%, 59.3%. The lower the sector's rate, the wider the range where simplified wins.
On 60m won of annual supply value with 30m won of purchases — half of sales — a general taxpayer pays 2.73m won and a simplified retailer pays 750,000 won.
A simplified taxpayer never gets a refund
This is the part most often missed. Article 63(6):
"where the sum of the amounts credited under paragraphs (3) and (4) and article 46(1) exceeds the tax payable for the taxable period, the excess shall be treated as nil"
A general taxpayer whose input tax exceeds output tax receives the difference back (art. 37). A simplified taxpayer stops at zero. In a first year with a heavy fit-out, that difference runs to millions of won.
There is a cliff at 48m won
Article 69(1): where the supply value for the period is less than 48m won, the obligation to pay is waived.
"Less than" means one won over and the whole amount applies — not just the excess. For retail and food, 720,000 won appears in a single step at that line.
What is waived is the payment, not the return. Paragraph (2) only disapplies the failure-to-file penalty of art. 60(1), and where the business was not registered on time even that is charged at the greater of 0.5% and 50,000 won.
Questions that remain
Up to what turnover does simplified apply?
Supply value of less than 104m won in the preceding year. That figure is not in the Act — article 61(1) fixes only a range, "from 80m won to 130% of it", and 104m won is what Decree art. 109(1) chose: exactly the top of that range.
How much does a purchase invoice save?
0.5% of its supply value (art. 63(3)1). That is an order of magnitude below the 10% a general taxpayer recovers — simplified VAT barely recognises purchases at all.
What does this calculator leave out?
The card-issuance credit (art. 46), deemed input tax, opening-stock input tax, interim returns and assessments (arts. 48 and 66), penalties, and businesses operating in more than one sector — the second sentence of art. 63(2) requires each sector to be computed separately and summed.
Sources
Value-Added Tax Act — art. 37 (tax payable), art. 61 (scope of the simplified regime), art. 63 (tax base and tax for simplified taxpayers), art. 69 (waiver of the payment obligation).
Enforcement Decree of the same Act — art. 109(1) (104m won), art. 111(2) (value-added rates by sector).
Both the formula and the rate table are published as images inside the articles. Neither is reachable as text, so both were read from the alt attribute — the same place this site found the inheritance tax rate table.
The script was checked against the same model across 1,920 combinations — 2 regimes x 6 sectors x 16 sales figures x 10 purchase figures, all matching, with the 48m and 104m thresholds tested one won either side.
Where to check
The split between the two regimes, the sectors excluded from simplified VAT and the filing periods are in the VAT guide. On the income side, global income tax and the 3.3% withholding follow, and the dates are collected in the tax calendar.
