Businesses Operating in South Korea
How does Korea's mandatory electronic tax invoice system work?
South Korea operates one of the world's most comprehensive mandatory e-tax invoice (jeonjaesejeongsoguseo) systems. All VAT-registered corporations must issue electronic tax invoices; for individual entrepreneurs, the obligation applies above the revenue threshold. E-tax invoices must be transmitted to the NTS (National Tax Service) by the end of the next business day. The NTS provides a free issuance system (e-Sejong) and permits use of accredited commercial service providers.
How are Korean e-tax invoices issued and transmitted?
The Korean e-tax invoice issuance process:
- Generation: Supplier generates the electronic tax invoice in the prescribed format
- Signature: Must be digitally signed with a certified electronic signature
- Transmission options: Via NTS e-Sejong system (free) or accredited commercial service provider
- NTS reporting: Invoice data transmitted to NTS by end of next business day after issuance
- Recipient delivery: Electronic tax invoice delivered to buyer's registered email or portal
- Buyer confirmation: Buyer can confirm acceptance via the NTS system
- Archiving: Both parties must archive e-tax invoices for 5 years
Frequently Asked Questions
- What is the VAT rate in South Korea?
- South Korea's standard VAT rate is 10 percent. Zero-rating applies to exports, certain agricultural products, and specific essential services. Exempt supplies include financial services, medical services, educational services, and some cultural activities. The 10 percent standard rate has been unchanged since VAT was introduced in Korea in 1977.
- What penalties apply for failure to issue e-tax invoices in Korea?
- Failure to issue an electronic tax invoice when required results in a penalty equal to 2 percent of the supply value. Late transmission to NTS (beyond the next business day) results in a 0.5 percent penalty on the supply value. Issuing a paper tax invoice instead of an electronic one when electronic issuance is required results in a 1 percent penalty. These penalties are significant and apply per invoice, making systemic non-compliance very costly.