If your company sells software, streaming content, games, cloud services, or online advertising to customers in Korea, you may owe Korean value added tax even without an office, an employee, or a server in the country. Many foreign digital businesses miss this, and that gap is where liabilities quietly build.
Korea has taxed electronic services supplied by foreign providers to Korean consumers since 2015, and the scope keeps widening. Here is what matters, in plain English.
What counts as an electronic service
The definition is broad and covers digital products delivered to Korean users online or over a mobile network: games, music, video, ebooks, electronic documents, and software, along with cloud computing and advertising placement services.
Consumer sales versus business sales
Your obligation turns on who your customer is. When you sell to Korean consumers, you as the foreign supplier charge value added tax at 10 percent and remit it. When you sell to Korean businesses, you still report those sales, but you do not apply the 10 percent, because the reverse charge shifts the tax to the business customer, who accounts for it on its own return. Many providers serve both audiences through one platform, so both streams belong in your reporting and only the rate differs between them.
The obligation starts with your first sale
Korea applies no turnover threshold here. The duty is event based and begins with your first taxable supply to a Korean consumer, and you must file for simplified business registration within 20 days of starting. Waiting until sales reach a certain size is not an option.
How the simplified regime works
You can comply without a Korean entity. Registration is completed online through the National Tax Service Hometax portal. After that, returns are filed quarterly with payment due by the 25th day of the month following each quarter, the rate is a flat 10 percent on your Korean consumer sales, and you keep transaction records for five years.
Where you sell through an app store or marketplace, that platform may be treated as the supplier and take on the registration and remittance duty. How your contracts and payment flows are structured decides who carries the obligation, so the supplier of record should be unambiguous.
The cost of getting it wrong
Since 2024, a penalty of 1 percent of the supply price applies for the period a business operated before registering, on top of the unpaid tax and interest. From July 2025, foreign intermediaries must also submit quarterly transaction details. Enforcement is tightening, so any foreign business that has been supplying Korean consumers without registering should resolve it now rather than wait for the authority to raise it.
Frequently asked questions
Do I need a Korean company or branch to comply? No. The simplified regime lets a foreign supplier register, charge, and remit value added tax without a Korean entity or a permanent establishment.
What rate applies? A flat 10 percent on your sales to Korean consumers.
How often do I file? Quarterly, with payment due by the 25th day of the month after each quarter closes.
What if I sell to Korean businesses rather than consumers? You still report those sales, but you do not apply the 10 percent to them. The reverse charge shifts the tax to the business customer, who accounts for it on its own return.
How long do I keep records? Five years from the filing due date for the relevant period.
How ARA TAX helps
We help foreign software companies, platforms, and content providers meet their Korean value added tax obligations without friction, from confirming whether your services fall inside the regime to handling registration, quarterly filings, and cleanup of past periods. If you are selling digital services into Korea and want certainty about what you owe and when, we would be glad to review your situation.