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.

The post VAT on Electronic Services in Korea: A Short Guide for Foreign Digital Businesses appeared first on Ara Tax.

“I only report the money I bring into Korea.”

I hear this constantly from foreign professionals living in Korea. It sounds reasonable, and it is one of the most expensive misunderstandings in Korean tax. Whether you are an expat employee, a freelancer, or a remote worker earning from clients overseas, the rules that decide what you owe in Korea are usually not the ones people assume. This guide walks through them in plain English.

The rule everyone gets half right

Korea does offer a genuinely friendly rule for newcomers. If you are a foreign national who has lived in Korea for five years or less over the past ten years, Korea taxes your foreign income only on the part you actually bring into the country. Money you earn abroad and keep abroad stays outside the Korean net. This is often called the remittance basis, and the benefit is real.

The catch sits in one phrase: foreign income. Everything depends on what counts as foreign, and that is where most people go wrong.

What counts as “foreign income” in Korea

Korea does not decide the source of your income by looking at where your client is, or which bank account receives the payment. It looks at one thing: where you were when you did the work.

If you are sitting in Seoul when you do the work, that income is Korean income. It does not matter that your client is in New York, or that the money lands in your account back home. The place of work is Korea, so the income is Korean.

If you are physically abroad when you do the work, that income is foreign income.

This single distinction drives everything below.

Are you a Korean tax resident this year?

Your obligations depend first on whether you are a Korean tax resident for the year. In simple terms, you are generally a resident if you spend 183 days or more in Korea during the year, or if your home and economic life are centered here.

One change matters from 2026. Korea can now look at a continuous stay that runs across two calendar years. If you arrive late in one year and stay into the next without a real break, those days can be added together to reach 183. A genuine move abroad resets the count. A short trip home for a holiday or a family visit does not.

So a person who comes and goes with long gaps between stays is judged year by year. A person who settles in and stays put may cross into resident status even if no single calendar year reaches 183 days on its own.

Your reporting obligations, case by case

Here is where it comes together. Assume your income comes from work you perform wherever you happen to be living at the time.

Case 1: You are a Korean tax resident this year

Income from work you do while in Korea is Korean income. You report all of it, no matter which account receives it, and whether the money stays in Korea or goes abroad.

Income from work you do while abroad is foreign income. If you are a foreign national inside the five year window described above, you report only the part you bring into Korea, meaning income paid into Korea or sent to Korea. Income you earn abroad and leave abroad is not taxed in Korea.

Case 2: You are not a Korean tax resident this year

Income from work you do while in Korea is still Korean income, and you report it, whatever account receives it.

Income from work you do while abroad is not taxed in Korea at all.

Notice the pattern. The treatment of work done in Korea is the same in both cases: it is always reportable. The only thing that changes between resident and nonresident is how your overseas work is treated.

One more point for nonresidents. Even if you are not a resident, work you perform in Korea can still be taxable here once it passes a low income threshold, and a tax treaty between Korea and your home country can adjust the result. If you are near the line, this is worth checking for your specific country.

Why getting it wrong is expensive

Two features of the Korean system make quiet underreporting risky.

First, income received into overseas accounts is treated as offshore activity. For offshore matters, Korea can review your filings for a much longer period than the usual window that applies to ordinary domestic income. Years you thought were closed may still be open.

Second, if the tax office finds the gap first, penalties climb and interest runs from each original due date. Deliberate concealment carries the heaviest treatment of all.

None of this is a reason to panic. It is a reason to get the structure right early.

How to get it right

Start by confirming where you actually perform your work, because that decides the source of your income. Then confirm your residency status for each year, using the day counts and the 2026 rule on continuous stays. From there, apply the case that fits you and report accordingly.

If past filings only captured the money you sent to Korea, and some of that income was really Korean income all along, the safe move is to correct it voluntarily. Coming forward before an audit reduces penalties significantly, and it closes the exposure on your own terms rather than the tax office’s.

Frequently asked questions

Do I pay Korean tax if I work remotely from Korea for a company abroad? Yes. If you do the work while physically in Korea, that income is Korean income, even when the employer and the payment are overseas.

I am not a Korean resident. Do I still file anything in Korea? Possibly. If you performed work while in Korea, that portion can be Korean income and reportable, even as a nonresident. Work you did entirely abroad is not taxed in Korea.

Does the money have to reach a Korean bank account to be taxable? No. For work done in Korea, the account does not matter. The Korean account question only affects overseas work, and only for residents inside the five year window.

What is the five year rule in Korea? If you are a foreign national who has lived in Korea for five years or less within the past ten, Korea taxes your foreign income only on the part you bring into the country. Once you pass five years, your worldwide income comes fully into scope.

When do I become a Korean tax resident? Generally when you spend 183 days or more in Korea in a year, or when your home and economic life are based here. From 2026, a continuous stay that bridges two calendar years can also count toward the 183 days.

Getting help

Korean tax for foreign professionals is full of these quiet traps, where a reasonable assumption turns into a real liability. At ARA TAX, we help foreign professionals and foreign invested companies read the rules correctly and fix past filings before they become problems, all in plain English.

If you are living in Korea and earning across borders, let’s make sure the rules work for you.

Ara Jung, CTA
ARA TAX

The post Do You Owe Korean Tax on Income You Earn Abroad? A Guide for Foreign Professionals in Korea appeared first on Ara Tax.

Recently, the National Tax Service in South Korea released an important notice via Naver Blog informing taxpayers to declare the tax for income obtained through the sale of properties. The date of the declaration is crucial and taxpayers must ensure it’s done by the 2nd of June, 2025.

The increased personal overseas stock transactions have significantly increased the number of people notified for final tax returns on foreign stocks each year.

Final Tax Returns

The National Tax Service started mobile delivery of the instructions among the 140k eligible taxpayers for the final tax returns of income tax in 2024. To make the process easier for all taxpayers above 60 years of age who had transferred real estate, the service has also dispatched postal notifications.

Digitized Support System

To enhance taxpayers’ convenience, the National Tax Service provides a digitized support service to declare capital gains tax through various final tax return services accessible through HomeTax and SonTax.

Taxpayers can access multiple help resources, such as case studies on final tax return forms, and examples of error cases on HomeTax. Further, taxpayers can verify their provisional return information and update their final returns without missing any crucial information via the ‘pre-filled provisional return information’ service.

The service has also simplified the evidence submission process by enabling taxpayers to capture images of their documents using a mobile camera and submitting it through SonTax. Alternatively, they can fax the documents using a virtual fax number from HomeTax.

Final Tax Returns – Scope and Deadline

The taxpayers eligible for final tax returns are those who have transferred assets such as real estate or stocks in 2024 without prior declaration of their taxes. This includes taxpayers who’ve had more than two transfers and have not reported their income, and those who’ve dealt with foreign stocks or derivative products and have made income in 2024. The final tax declaration must be filed before June 2, 2025.

Taxpayers can submit their final tax returns either electronically using HomeTax (PC) or SonTax (Mobile), or they can manually fill up the tax return form and submit to the tax office in their local jurisdiction.

The tax can be paid electronically via HomeTax, mobile, or by using a credit card. For amounts exceeding KRW 10 million, taxpayers can split their payments into two parts, to be paid by June 2 and August 4.

:::warning
Even if taxpayers have not received instructions for final tax returns, those who have dealt with foreign stocks and have income applicable for reporting, must make the declaration. Violators will be dealt with severely, with a 20% non-declaration additional tax levied on their unpaid tax amount and late payment of non-declaration tax levied at 0.022% per day.
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Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Tax for income gained through property sale must be declared by June 2nd, 2025! appeared first on Ara Tax.

A Closer Look at the Economic Struggles Faced by the Younger Generation

For the 2030 generation, the cost of preparing for marriage and raising children has been skyrocketing, framing these life stages as onerous financial paths rather than periods of joy. The high-cost market for these stages often forces young adults to become ‘slaves’ to the exorbitant charges imposed by those who offer essential services such as studio photography for weddings, postnatal care services, and English kindergartens. These sectors have all been heavily criticized for their inflated prices and unregulated practices, especially due to their sheer dominance over young consumers.

The KTA has identified that these market players—while burdening consumers with excessive charges—are also evading their tax responsibilities. They are reported to use various schemes such as omitting sales, splitting business locations, and inflating expenses to avoid taxes. The businesses under investigation include 24 photostudios, bridal shops, and make-up service providers (SDMs); 12 postnatal care centers; and 10 English kindergartens.

Drilling Down into the Tax Evasion Practices Uncovered

The KTA found that these companies employed several strategies to evade paying their due tax. For instance, opaque pricing structures and hidden costs that deceive consumers were rampant among the SDM businesses. Aside from hiding the true cost of their services, they directed additional payment into several layers of bank accounts to dodge income reporting. Cases were discovered where business owners would set up additional business entities under a relative’s name to split the revenue, in effect reducing their taxable income.

Similar tax evasion methods were observed in postnatal care services. Despite their obligation to issue receipts for cash transactions, some centers used non-issuance of receipts as a condition for offering discounted cash prices. Others used funds from unreported income to purchase high-value real estate or lavish lifestyle goods. They were found to rent their properties at extortionate rates, raising their income illegally.

As for the early childhood education institutes primarily focusing on teaching English, the KTA found these establishments not only to receive exorbitant tuition fees but also to unlawfully collect cash for book fees and extracurricular activity expenses. They would then omit these proceeds from their tax reports. Some establishments also surfaced that were found to have funded the overseas education of their children from unreported income. Others were found to have falsified expenses through fake transactions with other business entities established under the names of their family members.

Government’s Further Measures & Future Direction

In response to such malpractices, the KTA has pledged to conduct rigorous tax audits. It will thoroughly examine the companies’ opaque income structures and cash outflows, and ensure that those failing to issue cash receipts will face a penalty surcharge.

The investigation will consider not just the companies themselves but also related parties including family members, tracing their wealth accumulation processes. Any tax evasion practices detected could lead to criminal charges under the Taxes on Crimes Punishment Act.

Emphasizing its commitment to tackling the issues facing the young adult generation, the KTA stated that it will continue to actively seek out instances where businesses impose excessive financial burdens on these consumers while evading taxes. By doing this, the authority seeks to enhance public confidence by tackling unfair practices and deliberate tax evasion in the sectors that have significant impacts on everyday living.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Korean Tax Authority Launches Tax Investigation into High-Cost Wedding, Childbirth, and Early Childhood Education Industries appeared first on Ara Tax.

Key Facts About the Earnest Report Verification System

The earnest report confirms the eligibility system, a protocol specifically targeting smaller corporations, and is central to promoting tax base transparency and the principle of taxation equity. It requires that the tax agent verify the appropriateness of the report contents during corporate tax reporting and deliver the earnest report verification form.

Eligibility Conditions for the Earnest Report Verification System

1. Small-scale companies and corporations whose primary business involves real estate rentals. These entities must meet these obligations:

2. The controlling shareholders and the related parties must jointly hold more than 50% of the total shareholdings.

3. The real estate business, rental income, dividend income, interest income, and the total amount of real estate (right) rental income during the relevant business year should constitute at least 50% of the total sales.

4. Companies and corporations must have less than five regular employees during the corresponding business year.

5. Domestic corporations that have converted from small business owners subject to confirmation of earnest reporting through in-kind contributions within three years from the end of the business year after the conversion (Applicable to corporations conversion since February 13, 2018).

6. Domestic corporations that have acquired the business operation of the domestic corporation converted under the conditions above by in-kind contribution, continuing the operation of the acquired business for up to three years post-conversion.

The report must be submitted within four months from the last day of the month in which the business year ends. Failure to do so results in a surcharge of 5% of the calculated tax amount, or 0.02% of the income amount, whichever is higher.

Understanding the Consolidated Tax Payment System

The consolidated tax payment system comprises one taxation unit for the parent company and its subsidiaries, allowing corporate tax payments based on aggregated income and deficits. This process ensures equivalent tax burdens are maintained, irrespective of the organizational structure.

If approved by the boss of the local tax office where the parent company is situated, they may apply the policy to an eligible corporation. However, approval can be withdrawn or forfeited upon particular situations like failure to apply the consolidated tax payment policy to an eligible corporation, or if tax is due on demand. In such cases, re-application is forbidden for five years.

The parent company bears the corporate tax reporting and payment responsibility within four months from the last day of the month in which the business year ends. The subsidiaries are obligated to pay their tax co-jointly.

Information about the Special Taxation System for Joint Enterprises

Under the Special Taxation System, a joint enterprise is considered the main operator. This scheme does not tax incomes generated from the joint enterprises but attributes them to the operators who are taxed individually.

This applies to partnerships under the Civil Code, partnerships and anonymous partnerships under the Commercial Code, partnership corporations, and legal professional corporations offering professional human services.

Joint enterprises that wish to apply for this scheme need to file a request to the relevant tax office before the start of the first taxable year of application. Following the end of the business year, they need to report the income calculation and distribution details of the joint enterprise within three months from last month’s last day.

In the next session, the NTS will provide assistance services for reporting easily and simply. These programmes aid corporations in complying with the tax regulations by making reporting straightforward and transparent.

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Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Corporate Annual Tax Report and Payment Guide: Key Information for Korean Businesses appeared first on Ara Tax.

Major Points Regarding Tax Reporting and Payment

Applicable Corporations: The tax reporting and payment deadline applies to about 1.15 million corporations. These include profit corporations, non-profit corporations running profitable businesses, and foreign corporations with domestic source income in South Korea.

Filing Deadline: The tax reporting and payment for these corporations are due between March 1 and March 31, 2025.

Method of Declaration: The National Tax Service recommends filing via Hometax electronic reporting. Last year, approximately 99.7% of corporations settled their taxes via convenient electronic reporting.

By filing electronically, corporations can also avail of a deduction of 20,000 KRW from the taxable amount of tax payable.

Corporate Tax Installment Payment and Eligibility

The payable tax must be submitted by March 31. In cases where the payable tax exceeds 10 million KRW, it’s possible for corporations to pay in installments.

For small and medium enterprises (SMEs), the payment can be made within two months after the payment due date, i.e., by June 2, 2025. For other corporations, payment can be made within one month after the due date, i.e., by April 30, 2025.

Special Considerations

For Corporate Auditor Applicable Entities: If the auditors have not completed their audit process, and the settlement has not been confirmed, the extinction of the reporting period can be requested within three days before the reporting deadline, which can be extended up to one month.

For Eligible Corporations for the Compliance Verification System and Consolidated Taxation System: Such corporations can report and pay taxes by April 30, 2025. They must submit a confirmation written and checked by a tax representative.

Non-compliance may result in a surcharge of 5% of the calulated tax and 0.02% of the income amount.

Additionally, corporations applying special tax treatments for partnership enterprises must submit the income calculation and distribution details by March 17, 2025.

Guidance for Corporations with No Transactions

For corporations with no sales and no tax adjustment items, they need to input and submit the corporation’s basic information, standard financial statements, profit and loss statement, a statement on the treatment of retained earnings/loss calculations, and a tax adjustment statement.

For non-profit corporations with only interest income, they should input and submit corporation’s basic information, corporation tax taxable standard and tax payment declaration, withholding tax payment, preparation of unique purpose business fund adjustment statement, and a surtax calculation statement.

The National Tax Service will also provide guidance on extensions for tax payment due dates and deferral of collection, tax support measures, and immediate tax return systems.

Corporations should make sure to receive all tax benefits by pre-preparing necessary documents and items for deductions and exemptions.

The National Tax Service extends its thanks to taxpayers who conscientiously fulfill their tax obligations.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Corporate Tax Reporting and Payment for Approximately 1.15 Million Corporations in December 2024 Scheduled for March 2025 appeared first on Ara Tax.

Marriage Tax Deduction for Newlyweds

One of the most common questions is, “We got married this year. Does the marriage tax deduction apply to us?”

The answer is yes. The Marriage Tax Deduction applies from 2024 to 2026. A fixed amount of tax deduction of 500,000 KRW is allowed per person. Keep in mind that you can only apply this deduction once in a lifetime, for the year of the marriage registration.

Please note that this marriage tax deduction is not yet confirmed and therefore not reflected in the ‘Year-End Tax Adjustment Preview Service’. (연말정산 미리보기)

Elderly Care Deduction

Another frequently asked question is, “My mother, who is in my care, turns 65 this year. Can I receive the Elderly Care Deduction?”

Unfortunately, the answer is no. The Elderly Care Deduction only starts to apply when the person turns 70. Hence, if the age criterion is not fulfilled, the elderly care deduction cannot be granted.

Should the person be 70 years or older (born on or before December 31, 1954), they would be eligible for an additional deduction for elderly dependents under the Personal Deduction category.

For those who are aged 65 and above, they could get the Elderly Deduction in Medical Expenses, so please keep this in mind.

Personal Deductions for Spouse who has closed business during the year.

“My spouse closed her business in November. Can I still claim her as basic deductions?”

The answer depends on the combined annual comprehensive income, retirement income, and transfer income of the spouse, which should be less than 1 million KRW.

It is important to note that those who have business income must declare comprehensive income tax in May. The comprehensive income tax declared will depend on the income type, the amount of income, necessary expenses, and declaration methods.

If you’re unsure about your spouse’s business earnings, it’s best to wait until May when they complete their personal comprehensive tax filing. This will allow you to verify their final income and determine if they qualify as your dependent for deduction purposes. Keep in mind that you can refile your year-end salary tax settlement in May if you become eligible for a larger tax refund.

Education Expenses Deduction

Another question frequently raised by parents is, “My child is in elementary school, and I pay for extracurricular activities like academies and taekwondo. Can these be deducted?”

The answer, once again, depends on a number of specifics. If your child has not yet started school (including January – February of the Elementary school entrance year), these academies and taekwondo expenses would be deductible. Once a child is in Elementary school, fees directed towards academies or physical education are not deductible.

Insurance Premium Deduction

“I have paid for an insurance premium for my spouse, who is a basic deduction subject. Can I deduct this?”

Employees with salary income can deduct private insurance premiums paid for themselves or their eligible family dependents. If your spouse qualifies as a family dependent for personal deduction, any private insurance premiums paid for their coverage are also deductible.

Be sure to verify that both you (as the policyholder) and the insured person meet all deduction requirements by reviewing your insurance contract details.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Newlywed Couples and Tax Breaks: Frequently Asked Cases for Year-End Tax Settlement appeared first on Ara Tax.

How does post-resignation job transfers affect your year-end tax settlement?

If you changed jobs in 2024 after resigning from your previous position, your current employer must include your previous workplace’s income when processing your year-end tax adjustment.

For your year-end tax settlement, you’ll need to submit a Certificate of Income Withholding Receipt (근로소득 원천징수영수증) from your former employer to your current company. If you don’t combine both incomes during the February tax adjustment period, you’ll need to file voluntarily a comprehensive income tax declaration in May. Failure to file in May will result in an under-reporting tax penalty.

After resigning this year, what if I’m not currently working at another company?

If you resigned during the year, your year-end tax adjustment will be processed when you receive your final salary payment. The company can only include basic personal deductions, as other deduction items won’t be available through Hometax until January of the following year. Therefore, the settlement processed by your last employer is preliminary rather than final. You can maximize your tax refund by voluntarily filing additional deduction items in May.
The income tax deduction for credit card expenses only covers spending during your employment period—any expenses after retirement are not eligible for deduction.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post Year-End Settlement FAQs: Post-Resignation Job Transfers appeared first on Ara Tax.

Anticipate Your Year-End Tax Settlement

Using this service, you can calculate your expected tax for the next year based on the result of the previous year’s tax settlement and this year’s credit card usage from January to September.

You can also check for any changes in personal deductions due to changes in income and dependents, as well as increases or decreases in credit card and medical expense deductions. The service provides key tips on saving tax and avoiding excessive deductions.

Major Tax Saving Tips

Below are some key tips provided by the service:

1. Calculate Income Deductions from Credit Card Usage: If total credit card usage exceeds 25% of your salary, you are encouraged to actively use debit cards or cash receipts when paying in cash. You can also increase your tax deduction benefits by increasing your spending in traditional markets.

2. Calculate Estimated Amount: You can strategize your tax savings by inputting planned amounts for tax deduction items such as housing subscription, pension savings, and calculating the deduction amount in advance.

3. Tax Saving Tips and Cautions: Check the trends of total wages, deduction amounts, and tax determined over the past three years and the savings tips for each deduction item, and take note of cautionary points to prevent excessive deductions.

Custom Service for Difficult Year-End Tax Settlement

The NTS also provides a personalized guide for those who find it challenging to make a year-end tax settlement. Through an analysis of the tax settlement history and data, the NTS pre-selected about 430,000 workers who have never received deductions but are highly likely to meet the dedication requirements. They will then provide an advance guide on the necessary proof documents for each condition and benefit.

Frequently Asked Questions (FAQ)

Here are some of the common questions about the Year-End Tax Settlement Preview Service:

• Q1: Why isn’t the marriage tax deduction applied in the preview, although it was introduced this year?

  • A1: The marriage tax deduction, increased deductions for increased credit card consumption and traditional market usage are not reflected in this service as the revision has not been finalized yet.

• Q2: Can it be refunded at the end of next year according to the calculated preview results?

  • A2: The preview service is based on the deducted amount reported in last year’s tax settlement. The actual result may vary depending on the expenditure at the end of November and changes in wages.

• Q3: Is it possible to deduct income and tax deduction items that received personalized guidance when making a year-end tax settlement?

  • A3: Although personalized guidance targets are selected through detailed data analysis, there is a time difference between the analysis and the time of the year-end tax settlement. So, you should carefully check whether the requirements are met at the end of the year (December 31) for the actual year-end tax settlement, and apply for income deduction and tax deduction.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post National Tax Service Launches Year-End Tax Settlement Preview Service appeared first on Ara Tax.

Understanding VAT Issue Timing

When a business does not receive its e-tax invoice in time, it risks not being able to deduct the intended input VAT tax amount from its output VAT tax payables.

Assume a business made a construction contract worth KRW 1.1 billion with a construction contractor. When the construction is completed, and final inspections are passed around April 2023, the business owner could only be able to pay the construction cost in February 2024 due to his financial constraints and at this point, the e-tax invoice was issued. The business owner then claims for KRW 100 million of input VAT refund but he gets rejected. The tax office deems the e-tax invoice issued by the contractor to be inconsistent with the actual completion of the work which was April 2023. Worse still, he was taxed an additional 1.5 million won for penalty.

In the case above, if the business owner received the tax bill in April 2023 when the construction was completed, no extra penalties would have occurred. Thus, it’s essential to always receive and give e-tax invoices at the time of supplying goods or services, regardless of whether the goods or services have been paid for or not.

VAT Deduction on Credit Card Sales Slip

A business owner can deduct Output VAT payables based on a credit card sales slip or a cash receipt separately listed with VAT. The introduction of the credit card sales slip and cash receipt system encourages businesses to use a business credit card registered with Hometax.

Using a registered business credit card for all business-related transactions ensures that VAT specified in the transaction can be correctly accounted for as an input VAT for deduction. Remember, to get VAT deductions on transactions through the credit card of an employee or family member, the transaction must be objectively verified as a business expense.

In conclusion, managing and understanding VAT can be complicated. However, this detailed guidance from the National Tax Service provides some clear direction on saving points about VAT, specifically on purchase-related transactions, to support businesses in avoiding unintended penalties while maximizing VAT deductions.

Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.

The post S.Korea’s Value-Added Tax: Focus on Purchases (Part 3) appeared first on Ara Tax.