Question 1

Which input VAT amounts are not creditable?

Accepted Answer

1. Input tax related to tax-exempt business
2. Input tax related to entertainment expenses
3. Input tax related to non-business small passenger cars
4. Input tax related to land
5. Input tax incurred before business registration
6. Input tax related to acquisition, maintenance, or repair of non-business assets
7. Input tax related to tax invoices that were not submitted or were filled out incorrectly

Question 2

What personal services (freelancers, YouTubers) are VAT-exempt?

Accepted Answer

Conditions for a personal service provider:
1) No physical facilities
2) No hired employees
3) Independent status
4) Provides services specifically listed in the law (writing, calligraphy/painting, composing, music, dance, actors, voice actors, singers, entertainers, athletes, dancers, authors, fortune-telling, etc.)

Question 3

Can zero-rating still be applied if supporting documents are not submitted?

Accepted Answer

Even if zero-rating supporting documents are not submitted, the zero rate may still be applied once the relevant tax base is confirmed to qualify. However, the taxpayer will be subject to the penalty for failing to report the zero-rated tax base.

Question 4

How is VAT calculated for a simplified taxpayer?

Accepted Answer

1. (Sales x industry-specific value-added ratio x 10%) - deductible tax
2. Deductible tax = Purchases x 0.5%

Question 5

Can a tax-exempt business issue cash receipts?

Accepted Answer

1. A VAT-exempt business may issue tax-exempt cash receipts under Article 126-3 of the Restriction of Special Taxation Act
2. Even in exempt industries, cash-receipt mandatory-issuance industries must still issue them

Question 6

Can a new business apply the simplified tax regime?

Accepted Answer

1. If the total supply value for the calendar year is expected to fall below the threshold, the business can file a simplified-taxation application at registration
2. Industries excluded from the simplified regime cannot apply

Question 7

Who is required to issue electronic tax invoices, and what are the benefits?

Accepted Answer

1. Who is subject
  1) All corporations
  2) Sole proprietors with supply value of KRW 80 million or more in the previous year

2. Benefits
  1) No need to keep tax invoices for 5 years
  2) If the issued documents are transmitted by the 11th of the month following the end of the tax period, there is no need to submit sales/purchase summary schedules
  3) Sole proprietors with prior-year supply value under KRW 300 million, or new businesses, can receive a VAT credit of KRW 200 per invoice up to KRW 1 million

Question 8

What is the deadline for issuing an electronic tax invoice?

Accepted Answer

1. By the 10th of the month following the month of supply of goods or services
2. Late or non-issuance incurs a penalty

Question 9

Is 10% VAT refundable when purchasing a business-use passenger vehicle?

Accepted Answer

For passenger cars other than compact cars seating fewer than 9 people, the input VAT is not creditable.
Compact cars, vans (9 or more seats), and cargo vehicles are creditable if used for business purposes.

Question 10

Why might a VAT refund be denied?

Accepted Answer

1. Expenditures unrelated to the business
2. Missing documentation such as tax invoices
3. The refund amount is excessive or abnormally volatile
4. Transactions with simplified or tax-exempt businesses

Frequently Asked Questions (FAQ)

Frequently Asked Questions