Register a business in Korea and the first tax you meet is VAT (value-added tax) — the 10% you collect from customers and remit to the government. Whether you're a general or simplified taxpayer changes your burden and filing a lot. Here are the confusing parts, cleared up for 2026.
What VAT is
VAT isn't your earnings — it's tax you collect from customers on the government's behalf. You remit the difference between VAT collected on sales and VAT you paid on purchases.
| Term | Meaning |
|---|---|
| Output VAT | Collected on sales (supply × 10%) |
| Input VAT | Paid on purchases (tax invoices, cards) |
| Payable | Output − Input |
So the better you document purchases, the less you remit.
General vs simplified
The key fork, split by annual revenue.
| Item | General | Simplified |
|---|---|---|
| Threshold | ≥ 104M won | < 104M won |
| Rate | 10% | Sector value-added rate × 10% (lower) |
| Input credit | Full | Limited |
| Tax invoices | Yes | Limited (required above 48M) |
| Filings/year | 2 | 1 (next January) |
Simplified is lighter but limits input credits/refunds, so businesses with big startup purchases may prefer general.
Payment exemption — under 48M won
Simplified taxpayers under 48M won in revenue are exempt from paying VAT (still file). This differs from a "tax-exempt business" (no VAT at all by sector).
| Annual revenue | VAT burden |
|---|---|
| Under 48M | Simplified + payment exempt (file only) |
| 48M – 104M | Simplified (reduced rate) |
| 104M+ | General (10%, full input credit) |
Filing periods
- General — H1 (Jan–Jun) by Jul 25, H2 (Jul–Dec) by Jan 25.
- Simplified — once a year, by Jan 25.
- How — Hometax e-filing, largely pre-filled.
Choosing general vs simplified
| Situation | Better choice |
|---|---|
| Big startup fit-out/equipment | General (input refund) |
| Small purchases and sales | Simplified (reduced rate) |
| Clients need tax invoices | General |
| Revenue under 48M | Simplified (payment exempt) |
Note: a simplified taxpayer whose revenue exceeds 104M won is auto-converted to general the next year (and back if it falls).
FAQ
Is simplified always better?
No — it limits input credits/refunds. With big startup purchases, general can refund more.
Is VAT the same as income tax filing?
No. VAT is Jan/Jul; income tax is May. Business owners file both.
Under 48M — skip filing?
Payment is exempt, but you still file.
Can I spend the VAT I collected?
No — it's held on the government's behalf. Set it aside.
Exempt from paying is not exempt from filing
The 48 million won threshold removes the payment, not the paperwork. A simplified taxpayer under that line still files by 25 January, and still files in a year with no sales at all. Skipping it is what turns a zero-won bill into a penalty. There is a second reason to file properly even when nothing is due: recording your purchase invoices now preserves the deduction if your turnover later pushes you into general taxpayer status. A quiet first year filed correctly is worth real money in the second.
Sources and where to check
- Seoul Labor Rights Center — the VAT payment exemption. Turnover under 48 million won exempts you from paying, but not from filing; new businesses are judged on a 12-month equivalent.
- Seoul Labor Rights Center — filing as a simplified taxpayer. You file by 25 January even with no sales; penalties are 20% for not filing and 10% for under-reporting.
- Seoul Metropolitan Government — VAT filing notice. Confirms that general taxpayers file in July on January–June trading.
Written as of July 2026. The 48 million won exemption, the simplified filing deadline and the penalty rates come from the pages above. One caveat: the 104 million won line dividing simplified from general taxpayers could not be checked against a public-agency page — verify it on Hometax. Sector value-added rates were also revised in 2021, so older notices carry different figures. This is not tax advice. See also comprehensive income tax and the tax calendar. If you also file comprehensive income tax, the income tax calculator estimates that side.
