Value Added Tax

A person who engages in the supply of goods or services independently in the course of business, whether for profit or not, is subject to the VAT.

The VAT is imposed on the following transactions:

(1) Supply of goods and services
Goods are all tangible and intangible objects that have a value as property.  Tangible objects include commodities, products, raw materials, machinery, buildings, and any other objects in tangible form.  Intangible objects include heat, other controllable forces of nature, and rights.  Services mean all labors and other activities that have a value as property, other than goods.

(2) Importation of goods

(1) The current tax rate
: 10%

(2) Application of the tax rate
: Where the tax rate is applicable on the VAT exclusive price, the 10% rate is applied.  However, where the VAT is not separately collected at the time of the transaction, the tax rate of 10/110 is applicable on the VAT inclusive price.

The zero-rate VAT is applied to the supply of the goods and services listed below.  The zero-rate VAT is applicable to taxpayers who are residents or domestic corporations.  However, the taxpayers who are non-residents or foreign corporations are subject to the zero-rate VAT on a reciprocity basis only.

• Goods for exportation
• Services rendered outside of Korea
• International transportation service by ships and aircraft
• Other goods or services supplied for foreign exchange earning

(1) First period : January 1 through June 30

• Preliminary taxable period : January 1 through March 31
• Final taxable period : April 1 through June 30

(2) Second period : July 1 through December 31

• Preliminary taxable period : July 1 through September 30
• Final taxable period : October 1 through December 31

A taxpayer is required to file a quarterly VAT return to the competent tax office within 25 days from the end of each quarter.

(1) Computation of tax amount
The amount of VAT payable is computed by deducting the input VAT amount from the output VAT amount chargeable on the goods or services supplied by the taxpayers.  The input VAT which exceeds the output VAT is refundable.

(2) Non-deductible input VAT
The following input VAT is not deducted from the output VAT:

• If the taxpayer has not received a VAT invoice, or has not recorded either the whole or a part of the necessary items to be recorded on the VAT invoice, or if the contents of the VAT invoices are proved to be different from the facts
• The input VAT on expenses that are not directly related to the business
• The input VAT on the purchase and the maintenance of passenger cars except for those used in transportation business
• The input VAT related to entertainment expenses or other similar expenses etc.