Korean VAT Filing for Self-Employed: 2026 Practical Guide

Korea's VAT filing hits self-employed owners twice a year. The formula — 10% of (sales − purchases) — is simple, 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

2024's reform raised the simplified threshold to annual revenue under KRW 80M, maintained through 2026.

• Simplified: 1.5–4% effective VAT (by industry), limited tax-invoice issuance, no refunds. Files annually (January).
• General: 10% VAT, full input credit, refunds possible. Files twice (January and July).

Capital-intensive startups (cafes, salons) often prefer general status for input refunds. Service businesses with low purchases lean simplified.

2. Deductible vs. Non-Deductible Purchases

Deductible (with e-tax-invoice)

• 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
• Passenger-car costs (under 9 seats) — fuel, repairs mostly non-deductible
• VAT-exempt categories — education, medical, etc.

3. Pre-Filing Checklist

1. Pull sales/purchase data from Hometax — e-tax-invoices, cash receipts, card sales auto-populate.
2. Missing input invoices can still be amended through the July 2026 filing. Past that, the credit is lost.
3. Check the pre-assessment (50% of prior filing) paid in April/October — deducted at final filing.
4. Penalty risk: 20% for non-filing, 10% for underfiling, 0.022%/day for late payment.

4. Worked Example

General status, Q2 (Apr–Jun) sales KRW 22M (VAT-incl.), deductible purchases 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