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.
VAT means remitting tax you collected. General vs simplified turns on revenue and startup purchases — one quick calc before registering can save millions of won.
This is general tax information, not tax advice. Exclusions and rates vary by sector/area — check Hometax or a professional. See also comprehensive income tax and the tax calendar.
