Tax rate by region South Korea

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

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. 

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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

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

How-To Guides: South Korea SaaS VAT

Step: 1 Threshold

Effective July 1, 2015, South Korea requires non-resident vendors of certain digital services to consumers (B2C) in South Korea to register for and collect VAT, regardless of the sales amount.

 

Effective July 1, 2019, South Korea expanded the scope of digital services falling withing the scope of the non-resident digital services rules to include advertising services, cloud computing services, and intermediary online-to-offline services effective July 1, 2019.

Step: 2 Business Registration

Register online via the Hometax portal (National Tax Service). Foreign providers use the “Simplified Business Operator Registration” scheme. Registration must be completed within 20 days of the start of business.

Step: 3 TIN/VAT Number

Upon registration, business recieve a business registration number. It is a unique 10-digit number (format: 123-45-67890) issued upon approval.

Step: 1 Standard VAT Rate

In South Korea, the standard VAT rate is 10%.

Step: 2 Determine if you need to register.

To calculate your tax amount, use the following formula:

 

Tax Amount = Net Price x 10%

Step: 3 Reverse Charge (B2B)

Yes. Foreign suppliers do not charge VAT on B2B sales to registered Korean businesses. The Korean buyer is responsible for self-assessing and paying the VAT (Reverse Charge).

Step: 1 Selling B2C

Charge 10% VAT on all digital services (e.g., games, software, cloud services) supplied to individuals in South Korea.

Step: 2 Selling B2B

Do not charge VAT. Ensure you validate the customer’s Business Registration Number to confirm they are a registered business.

Step: 3 Invoice Requirements

For the “Simplified” scheme (foreign B2C), formal VAT invoices are often waived, but you must issue a receipt/commercial invoice containing:

• Supplier Name & Registration Number
• Date of Supply
• Description of Service
• Total Amount (VAT inclusive)

 

For B2B: Indicate “Reverse Charge” and the buyer’s Tax ID.

Step: 1 Filing Interval

Taxes should be filed quarterly.

Step: 2 Filing Deadline

Taxes should be filed by the 25th day of the month following the quarter (e.g., April 25 for Q1).

Step: 3 Submission

File electronically via the Hometax portal. Payments are made via bank transfer to the NTS account (often Woori Bank) designated for foreign taxpayers.

Step: 4 Record Keeping

All tax records should be kept for 5 years.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating South Korea’s VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

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