Tax rate by region South Korea

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Understanding South Korea’s VAT for SaaS

South Korea implemented a Value-Added Tax (VAT) system in 1977 to enhance tax compliance and modernize its tax administration. The current standard VAT rate for SaaS and other digital services is set at 10%. While there is no reduced rate or specific exemptions for digital goods or services, businesses are required to maintain detailed records for a minimum of five years. These records include sales and purchase records such as tax invoices, credit notes, import documentation, and accounting records. Additionally, businesses with an annual revenue exceeding KRW 100 million (approximately USD 75,000) are obligated to comply with e-invoicing requirements.

South Korea

South Korea adopted a VAT system in 1977 to improve tax compliance and modernize its tax administration.

Official government link: National Tax Service

10.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

E-books currently are zero rated

Exempted product categories

No specific digital goods or services are tax exempt

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

After the first sale

Online registration possible

Yes

Local representative needed

Yes

Registration procedure

A foreign taxpayer should visit the NTS Hometax Website and apply for business registration within 20 days from the start of their business.

Requirements for Business Registration:

Name of the business operator or representative (if a corporate business operator uses a different name for transactions, include the transaction name), contact number, address, email address, and website address.
Information related to the business registration (e.g., registered country, address, registration number), type of e-service, start date of e-service in Korea.
Tax agent’s name, resident number/tax registration number, contact number, email address (if a tax agent is hired).
Account number (if the taxpayer opens an account at a financial institution or communications agency to receive a VAT refund).
A competent tax office will issue a simplified business registration number within 5 days of application after reviewing the applicant’s information (e.g., the existence of actual business, document completeness). The number will then be sent to the taxpayer (and their tax agent, if applicable) via email.

List of digital and electronic services liable for tax

Downloadable or streamed digital content:

Movies, music, e-books, games, online courses, etc.
Software and applications:

Downloadable software, mobile apps, software as a service (SaaS), cloud-based storage, etc.
Online services:

Web hosting and domain registration
Online advertising and marketing services
Online gaming and gambling platforms
E-learning platforms and online courses
Online consultations and professional services
Digital subscriptions and memberships
Online ticketing and booking services
Streaming services for music, videos, etc.

Penalties

If the payment is not made by the due date, a tax payment notice will be issued. If the taxpayer misses the due date, a penalty tax of 3% of the unpaid amount will be applied. If the payment is still not made, an additional penalty tax of 1.2% will be imposed each month.

Registration threshold

No threshold, non-resident companies must register for VAT

Filing interval

Quarterly

Filing deadline

No later than the 25th day of the month following the reporting quarter

E-invoicing requirements

Yes, but only if the annual revenue is above KRW 100 million (USD 75.000)

Record keeping

For a minimum of 5 years the following must be kept:

Sales and Purchase Records:

Tax invoices (including e-Tax invoices)
Credit notes and debit notes
Import and export documentation
Other relevant documents related to transactions
Accounting Records:

General ledger
Subsidiary ledgers
Cash book
Bank statements
Journal entries related to VAT transactions
VAT Returns:

Copies of filed VAT returns
Proof of payment of VAT

Effortless Subscription Management and Billing

South Korea SaaS Sales Tax: Key Requirements

To ensure compliance with South Korea’s SaaS sales tax regulations, businesses must file VAT returns quarterly and make payments by the 25th day of the following month. It’s crucial to consult with tax professionals to understand the specific requirements and ensure accurate filing and payment. Proactive communication with the tax authorities and timely submission of returns are essential for maintaining good standing and avoiding potential penalties.

Insights and Best Practices

Businesses operating in South Korea’s SaaS market should consider the following best practices: leveraging technology to automate tax calculations and filings, maintaining accurate and organized records, and staying informed about any changes in regulations. Additionally, exploring the benefits of e-invoicing can streamline compliance and improve efficiency. Consulting with tax experts can assist businesses in navigating the complexities of SaaS sales tax and ensure compliance with the evolving regulatory landscape.

What is the standard VAT rate for SaaS in South Korea?

The standard VAT rate for SaaS and other digital services in South Korea is 10%.
Are there any reduced VAT rates or exemptions for specific categories of SaaS products or services?

No, there are currently no reduced VAT rates or exemptions for specific categories of SaaS products or services in South Korea.
What are the record-keeping requirements for businesses selling SaaS in South Korea?

Businesses selling SaaS in South Korea are required to maintain the following records for a minimum of five years: sales and purchase records (including tax invoices, credit notes, import documentation) and accounting records (general ledger, subsidiary ledgers, cash book, bank statements, journal entries related to VAT transactions).

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