Korean VAT for a Foreign-Owned Company: Four Filings a Year, and What Kills Input VAT

What Korean VAT costs you, and when you file it

The rate is 10%, it applies to almost everything sold domestically, and a Korean corporation files it four times a year rather than twice. That last point is the one that surprises head offices, and it is the reason a Korean subsidiary’s finance calendar has a filing in it every single quarter.

Article 30 of the Value-Added Tax Act is one sentence long: the value-added tax rate shall be 10 percent. There is no reduced band. What Korea has instead is a zero rate for exports and certain cross-border supplies, and an exemption list for basic food, medical care, education and financial services. The difference between those two matters more than it sounds. A zero-rated supplier charges nothing and still recovers the VAT on everything it bought. An exempt supplier charges nothing and recovers none of it.

Why a corporation files four times a year, not two

VAT runs on two six-month taxable periods: 1 January to 30 June, and 1 July to 31 December. Each of those periods is cut in half again by a preliminary return covering its first three months. The result is a filing due within 25 days of the end of every quarter.

The statutory date and the real date come apart whenever the 25th lands on a weekend or a public holiday, and in 2026 that happened to all three of the first deadlines. This is not a courtesy extension you have to apply for — the deadline is simply the next business day. It is still worth putting the real date in the calendar rather than the statutory one, because a payment instructed on the 25th for value on the 27th is a payment that has already been late for two days if the rule ever changes.

The assessment that arrives instead of a return

Not every corporation files all four. A company whose total supplies in the immediately preceding six-month taxable period came to less than KRW 150 million has no preliminary filing obligation. Instead, the district tax office issues a preliminary notice in April and October assessing 50% of the tax paid for the preceding period, and paying it discharges the obligation. If the assessed amount would come to less than KRW 500,000, no notice is issued at all and the whole thing rolls into the next final return.

This trips up foreign-owned companies in a specific way. A small Korean subsidiary receives a Korean-language assessment for a number nobody at head office recognises, in a month when no return was filed, and either pays it without understanding it or queries it as an error. It is neither. It is a payment on account, and it is credited against the final return in July or January.

It also has a consequence worth knowing: the assessed figure is 50% of last period’s tax, not an estimate of this one. A company whose sales have collapsed since the previous period is being asked to fund tax it will not owe. Where the drop is severe, a preliminary return can be filed voluntarily on the actual figures instead of accepting the notice — which is the sort of decision our Korean tax and VAT compliance service makes deliberately rather than by default.

Can you zero-rate what you invoice the parent?

This is the question that produces the largest single assessments against foreign-owned subsidiaries, because the amounts are recurring and the reassessment reaches back across years.

A Korean subsidiary that performs marketing support, R&D or back-office work for its overseas parent and invoices a cost-plus fee wants that invoice zero-rated. Sometimes it is. Article 24 of the Value-Added Tax Act, read with Article 33 of the Enforcement Decree, zero-rates services supplied in Korea to a non-resident or foreign corporation that has no place of business in Korea, where the service falls in a listed category and the fee is received in won through a foreign exchange bank or by another prescribed route. For the professional and business-support categories — legal, accounting, advertising, market research, management consulting, office support and their relatives — there is a further condition of reciprocity: the parent’s country must extend the same treatment to Korean suppliers.

Three things break it in practice. The parent turns out to have a Korean place of business, so the “no domestic place of business” test fails. The money arrives by a route that does not satisfy the foreign-currency condition — netted off against an intercompany balance, for instance, rather than settled through a foreign exchange bank. Or the service is nominally supplied to the parent but consumed by a Korean affiliate or by Korean customers, which is a question of fact and not of who the invoice names.

Three things that quietly kill input VAT recovery

Output VAT is arithmetic. Input VAT is where money is actually lost, and Article 39 is the list of ways to lose it. Eight categories are denied outright; these are the three that show up in a Korean subsidiary’s ledger every month.

The fourth line is the one worth engineering against, because it is the only one that is a process failure rather than a rule. Corporations must issue tax invoices electronically. Where a supplier bills monthly in aggregate, the invoice must be issued by the 10th of the month following supply, and it must be transmitted to the National Tax Service by the day after issuance. Miss the issuance deadline and the seller pays 1% of the supply value; never issue it and the seller pays 2%. Late transmission costs 0.3% and non-transmission 0.5%.

Those are the seller’s penalties. The buyer’s exposure is worse and less visible: without a valid invoice the input VAT is simply not deductible, so a supplier’s administrative failure lands on your return. The defence is unglamorous — reconcile the issued and received invoice lists on Hometax against the purchase ledger before each filing, not after — and it is a large part of what routine bookkeeping for a Korean entity is actually for.

When the refund arrives

A company in a net input position — an exporter, or one halfway through fitting out an office — gets its money back on a schedule, not on request.

An ordinary refund is paid within 30 days of the filing deadline for the return that claimed it. The early refund route pays within 15 days and can be claimed monthly instead of quarterly, but only where the credit arises from zero-rated supplies, from acquiring, building or extending business facilities, or from an approved financial restructuring plan. A subsidiary that exports, or that has just signed a fit-out contract, is usually leaving cash on the table by staying on the ordinary cycle.

Korean VAT is not a complicated tax. It is an unforgiving one: the rate never moves, the deadlines never slip, and almost everything that goes wrong goes wrong in the documentation rather than the computation. The company that reconciles its invoice lists every month has a boring VAT year. The one that reconciles in July finds out in July. If you are also planning cash around the corporate tax year, the interim corporate tax payment due 31 August lands in the same quarter and on the same bank account.

Figures current as at 18 August 2026. Korean rates, thresholds and filing dates are revised regularly — each figure above is linked to the authority it was read from.