Korean VAT Filing for Self-Employed: 2026 Practical Guide

Individual general taxpayers usually make two final VAT filings a year, while simplified taxpayers usually file once. The general-tax structure subtracts input VAT from output VAT, but simplified-tax vs. general-tax status, deductible vs. non-deductible purchases, and timing rules complicate practice. Here's the 2026 practitioner's checklist.

1. Simplified vs. General VAT Status

From July 1, 2024, the simplified-tax threshold is generally prior-year gross supplies under KRW 104M, maintained through 2026.

• Simplified: applies the 10% VAT rate after an industry-specific value-added ratio (15–40%), then subtracts eligible credits. Input credits, invoicing and refunds are restricted. Files annually (January).
• General: 10% VAT. Input VAT is creditable when the purchase relates to the taxable business, has qualifying evidence, and is not statutorily blocked; a refund may arise when eligible input VAT exceeds output VAT. Files twice (January and July).

A business with substantial taxable startup purchases may receive a refund under general status, while the simplified formula may produce less tax for some businesses with few purchases. Industry ratios, invoice needs, eligible purchase amounts, and simplified-status exclusions all matter, so the business label alone does not determine which status is better.

2. Deductible vs. Non-Deductible Purchases

Examples of Potentially Deductible Purchases

These purchases must be directly connected to a taxable business, supported by qualifying evidence such as a tax invoice, expense-qualified cash receipt, or card slip, and outside statutory exclusions. Actual treatment depends on business and use.

• Business materials and inventory
• Business rent and utilities
• Fuel for commercial vehicles (trucks, taxis)
• Marketing and outsourced services

Non-deductible

• Entertainment expenses — even on business cards
• Personal items without clear business nexus
• Non-business small passenger-car input VAT — purchase, lease, and maintenance VAT is generally blocked, subject to vehicle-class and direct-business-use exceptions
• Input VAT related to exempt business — mixed taxable/exempt use can require allocation of common input tax

3. Pre-Filing Checklist

1. Review the sales and purchase data available in Hometax, then reconcile e-invoices, cash receipts, and card records against the books and evidence; retrieved data is not automatically complete or deductible.
2. For missing purchase evidence, check the invoice date and the rules for amended returns or refund claims. A credit does not automatically disappear after one named filing date, but late receipt can change the treatment and penalties.
3. Individual general taxpayers are generally billed 50% of the prior tax period's payable VAT in April/October and deduct it at final filing; exemptions depend on the amount and business status, so check the actual notice.
4. Non-filing, underreporting and late-payment additions vary with misconduct, relief and the applicable period. Confirm the current NTS guidance when filing.

4. Worked Example

For a simplified one-tax-period example under general status, assume sales of KRW 22M (VAT-incl.) and eligible purchases of KRW 7.7M (VAT-incl.):

• Output VAT: 22M / 11 = KRW 2.0M
• Input credit: 7.7M / 11 = KRW 0.7M
• Payable: KRW 1.3M

5. Links to Comprehensive Income Tax

VAT-reported sales flow into May's comprehensive income tax filing. Errors in VAT cascade into income tax. Accuracy once is cheaper than corrections twice.

6. Calculators

• VAT Calculator
• Freelancer 3.3% Calculator
• Salary Calculator