MyAIDevelopment · Product · Operations notes

VAT · Zero Rate · Tax Invoices

This is general information, not legal or tax advice. Rules change often, so verify with the official source or a licensed tax accountant (semusa) or lawyer before acting.

Value-added tax (VAT, bugagachise) is paid as the tax collected on sales minus the tax paid on purchases. For software businesses, overseas revenue (zero rating) and how app-store revenue is recorded matter most.

Tax Periods and Filing Times

Business Yearly flow (January to December periods)
Individual general taxpayer January final return (previous 2nd period), April preliminary notice payment, July final return (1st period), October preliminary notice payment
Corporation Four filings a year in January, April, July and October in principle. Small corporations with prior-period supply below KRW 150 million get April and October preliminary notices
Simplified taxpayer January final return (previous January to December). July: the tax office issues a preliminary assessment notice for January to June, payable by July 25. But a simplified taxpayer who issued tax invoices in January to June must file a preliminary return by July 25 (VAT Act Article 66(3)) 
flowchart LR
    J[January final return] --> A[April preliminary]
    A --> L[July final return]
    L --> O[October preliminary]
    O --> J

Recording Revenue Correctly

Zero Rate: Overseas Revenue

Zero rating applies a 0% rate. Output VAT is zero, but input VAT can still be credited and refunded.

Situation Basis to review Key point
Services supplied to a foreign corporation or non-resident with no domestic place of business VAT Act Enforcement Decree Article 33 (foreign-currency earning services, etc.) Requirements such as receiving payment through a foreign exchange bank
Overseas consumers buying an app on an app store Tax professionals explain overseas-consumer sales as zero-rated and domestic-consumer sales as taxed at 10% Official interpretation and transaction structure need verification
SaaS subscriptions collected through an overseas payment processor (Stripe, etc.) Depends on who receives the service and how payment arrives Confirm with a tax accountant

Worked Example: One Tax Period for a Solo Developer (illustration only)

Assumes an individual general taxpayer in the 1st period of 2026 (January to June). The amounts are made up for illustration, and the treatment of app-store revenue depends on the "needs verification" point below.

Transaction Amount (supply value) Treatment Tax
Contract development for a Korean B2B client (electronic tax invoice issued) KRW 20 million Taxed at 10% Output VAT KRW 2 million
App-store sales to overseas consumers KRW 10 million Assumed zero-rated (needs verification) KRW 0
App-store sales to domestic consumers (gross KRW 5.5 million, assumed VAT-inclusive) KRW 5 million Assumed taxed at 10% (needs verification) Output VAT KRW 0.5 million
Development equipment bought from a Korean seller (tax invoice received) KRW 3 million Input VAT credit Input VAT KRW 0.3 million
Overseas cloud invoice (assumed billed without VAT) Paid in foreign currency No input VAT to credit KRW 0 
Output VAT = 2,000,000 + 0 + 500,000 = KRW 2,500,000
Input VAT = KRW 300,000
VAT payable = 2,500,000 - 300,000 = KRW 2,200,000 (before credits such as the e-filing credit)

Bad example:

We reported all app-store deposits as a single line of "overseas revenue." Domestic consumer sales were mixed in.

Good example:

Every month we downloaded settlement reports by country, split domestic and overseas amounts, and kept them with the zero-rate evidence.

Tax Invoices and Electronic Tax Invoices

Business Issuing duty
Corporation Must issue electronic tax invoices
Individual general taxpayer Must issue electronically if prior-year supply per place of business (including exempt supply) is KRW 80 million or more (expanded from 2024-07-01)
Simplified taxpayer Must issue tax invoices if prior-year gross supply is KRW 48 million or more (supplies from 2021-07-01). New or smaller businesses issue receipts

Penalty Tax Rates

Penalty Rate Basis Situation
Not registered 1% of supply value from business start to the day before applying (0.5% of gross supply for simplified taxpayers) VAT Act Article 60(1); Article 68-2 for simplified taxpayers Contract revenue started in March but you applied for registration only in June
Tax invoice not issued 2% of supply value VAT Act Article 60(2) Past the issuing deadline and still not issued by that period's final return deadline
Tax invoice issued late 1% of supply value VAT Act Article 60(2) A March service was invoiced after April 10 but before July 25
Electronic invoice transmitted late 0.3% of supply value VAT Act Article 60(2) Missed the transmission deadline but transmitted by the final return deadline
Electronic invoice not transmitted 0.5% of supply value VAT Act Article 60(2) Still not transmitted to the NTS by the final return deadline
Failure to file (general) 20% of tax payable Framework Act on National Taxes Article 47-2 You forgot the July final return (40% for fraudulent acts)
Late payment Unpaid tax × days late × 0.022% Framework Act on National Taxes Article 47-4 You filed but paid 30 days late (22/100,000 per day since 2022-02-15) 
Sign a B2B contract
→ Confirm the supply time (service completion date / payment date, etc.)
→ Issue the electronic tax invoice on Hometax or your ERP
→ Confirm transmission to the NTS (check the NTS guide for the deadline)
→ Confirm it flows into the summary table at VAT filing

References