VAT Administration in Korea

1
VAT Administration in Korea
March 2005

• National Tax Service

2
Value Added Tax Law

• 1. Background
• In 1977, 8 indirect taxes were integrated
  into VAT in order to streamline Korean tax
  system.
• 2. Tax Rate of VAT
• Basic rate 10 of added value
• Zero-rating Transactions relating to
  the exported goods and the services provided in
  foreign countries.
• Exemption Transactions relating to
  non-processed foods, medical service, educational
  service, financial and insurance services, and so
  on.

3
Value Added Tax Law

• 3. Suppliers collect VAT
• Suppliers(Sellers) add 10 to the price on
  each transaction and pay the 10 to tax offices
  every 3 months.
• 4. Deduction of VAT collected
• Suppliers deduct the amount of VAT that is
  collected by another supplier when they purchase
  goods and services.
• It is not applicable to the suppliers who
  provide the goods and services under VAT
  exemption.

4
Value Added Tax Law

• 5. Exception Simplified Taxation
• Background VAT was introduced in order
  to simplify the tax reporting procedure of small
  companies and thus enhance the level of tax
  compliance.
• Target self-employeds under 48 mil won
  ( 46,600) on annual sales basis
• Taxable Period every 6 months
• Calculation of Tax Sales during taxable
  period