South Korea is one of the world's leading digital economies. But it’s also one of the strictest when it comes to value added tax (VAT) compliance. If you’re selling software or digital goods to consumers in South Korea, chances are good that you need to register for and collect VAT starting with your first sale.
Access to the lucrative South Korean market is worth the compliance hassle. This guide will cover who needs to register for VAT and when, how to handle VAT on B2B sales, and when and how to file.
South Korea VAT Overview for SaaS & Digital Services
South Korea has a 10% standard VAT rate. This applies to most goods and services, including software as a service (SAAS) and other digital goods. South Korea has no reduced VAT rate and few or no exemptions or zero-rated items when it comes to selling SaaS or digital services.
VAT in South Korea is administered by the National Tax Service (NTS), and the country has two separate VAT schemes. Businesses with physical presence or selling physical goods in the country are subject to the General VAT scheme. Nonresident businesses selling electronic services can take advantage of the Simplified Business Registration.
Non-resident digital service providers must register for South Korea's 10% VAT immediately upon their first sale. Consumer purchases (B2C) require the provider to charge VAT directly. Business-to-business sales (B2B) use reverse charge, where the purchasing business handles VAT obligations.
Who Needs to Register for South Korean VAT?
Any business selling taxable goods or services to consumers in South Korea must register for VAT. Unlike some other countries, there is no minimum sales threshold required before registration.
This includes digital service providers (such as SaaS companies), even if you have no physical presence in the country. South Korea requires that any digital business selling into the country register for VAT before their first B2C sale.
Businesses can register for South Korean VAT at the NTS HOMETAX portal. Unlike some jurisdictions, no local entity or fiscal representative is required.
For B2B only sellers, VAT registration may not be required. This is if your business only sells to other businesses that are VAT-registered in South Korea, then the “reverse charge” mechanism may apply. (See “B2B Sales – Reverse Charge Mechanism” below.)
South Korea VAT Rates and Taxable Transactions
The standard South Korean tax rate is 10% for all taxable transactions. This includes but is not limited to digital goods and services like SaaS subscriptions, cloud software, apps, e-books, and digital ads.
South Korea also exempts some sectors–like health, education, and financial services–from VAT. However, these generally don’t apply to software and other digital businesses.
In general, if selling to consumers in South Korea, your business is required to charge VAT. But if you only sell to VAT-registered South Korean businesses, you may not be required to charge VAT. (See below).
South Korea VAT Registration Process
Nonresident vendors who only sell electronic services into South Korea can generally register under the simplified registration scheme.
- Visit the NTS HOMETAX portal
- Create an account
- Click on “Simplified Business Operator Registration" (or equivalent wording)
- Fill in your business details. This will include:
- Business name, overseas address and contact info
- Tax identification number (TIN)
- Business type
- Business start date
- Click “Submit”
You should hear back from the NTS in approximately five business days.
It’s important to note that companies registered under the simplified scheme can not reclaim input VAT (i.e., VAT paid). Companies registered under the general scheme can, however, that scheme is reserved for businesses with physical presence or who sell physical goods.
[[ctaDark]]
South Korea VAT Registration ProcessH2: Charging VAT on B2C vs B2B Sales
How digital businesses charge VAT in South Korea depends on if the sale is B2C or B2B.
B2C Sales - Charge 10% VAT
For B2C sales, VAT must be charged on every sale. There is no minimum threshold, and South Korea requires digital businesses to charge this tax rate from the very first sale. Be sure to show VAT charged on every invoice.
How do you know if your customer is in South Korea? You can identify South Korean customers by their billing information, payment method, or by IP address.
B2B Sales – Reverse Charge Mechanism
For B2B sales, you may not be required to collect VAT as long as your business customer is, themselves, registered for South Korean VAT. If they are registered, you can apply the “reverse charge mechanism” to sales.
In this case, rather than you collecting VAT and remitting it to South Korean taxing authorities, the buyer self-assesses how much VAT they would have paid and then includes that in their VAT calculations at filing time.
As the seller, if applying the reverse charge, it’s your responsibility to verify that your customer has a valid VAT registration number. If they have no valid South Korean VAT number, then you’re still required to collect the standard 10% VAT on taxable goods and services.
VAT Invoicing and Recordkeeping
When invoicing your customers in South Korea, be sure to include the following on the invoice:
- Your business name
- Your VAT number
- Buyer name/contact info
- Invoice number
- VAT rate charged
- Total VAT charged
E-invoicing is not mandatory for nonresidents, but digital recordkeeping is required for your accounting purposes and in case of an audit.
Also, for audit purposes, be sure to retain all invoices and other sales records for 5 years. Keeping track of your billing and tax obligations via a service like Sphere will save time and keep your books audit-ready.
Filing South Korea VAT Returns and Payments
In South Korea, tax returns are generally filed quarterly on the 25th day of the month following the end of the quarterly taxable period.
If filing under the simplified scheme, filers are only required to declare how much VAT they collected. It’s important to note that tax filers are not allowed to claim input VAT credits (tax refunds on VAT paid) if registered under the simplified scheme.
Payment Instructions for South Korean VAT
After logging into the NTS website and completing your return, you’ll be asked to pay via credit card or wire. You can also pay via one of South Korea’s major banks, Woori Bank. When wiring Korean Won (KRW), ensure you include your business registration number in the transfer details so the payment is properly credited to your VAT account.
Late filing or paying? Late VAT accrues a penalty of 0.02% interest per day. A service like Sphere handles VAT remittance in South Korea and around the world, ensuring you never pay fines or penalties.
Penalties and Risks of VAT Non-Compliance
When expanding into the South Korean market, dealing with indirect taxes and VAT compliance should be one of your first concerns. If you sell B2C, you’re required to register for VAT before your first sale.
Further, South Korea has recently cracked down on tax law enforcement, increasing audit risk for nonresident businesses. If discovered doing business in the country outside of the VAT system, this can trigger an audit, paying all VAT due out of pocket, extensive penalties and interest, and even reputational damage in the country’s business ecosystem.
Best Practices for Smooth VAT Compliance
The key to smooth South Korean VAT compliance is proactive monitoring and automation. Don't wait until you've already triggered registration requirements - track your sales into South Korea so you can register before your first transaction, not after you've been selling for months.
Late registration can result in penalties and back-taxes that eat into your profits.
Integrate VAT calculations directly into your checkout flow or billing system, and use VAT ID logic to determine whether to apply reverse charge (B2B with valid South Korean VAT ID) or direct VAT collection (B2C or B2B without valid VAT registration). This removes the guesswork and ensures consistent South Korean VAT compliance across all transactions.
.png)
Managing South Korean VAT alongside other global tax obligations can quickly become overwhelming, which is why platforms like Sphere handle the entire compliance workflow - from monitoring sales thresholds and triggering registrations to calculating taxes, generating compliant invoices, and filing returns.
When it comes to payment, VAT can be remitted via wire transfer through Woori Bank - just ensure you include your business registration number when wiring Korean Won (KRW) so the payment is properly credited to your account. The bottom line is that South Korean VAT compliance for digital services is manageable when you have the right systems and awareness. With proper automation and proactive monitoring, what seems like a complex compliance burden becomes a straightforward part of doing business in one of Asia's largest digital markets.
Before You Sell Into South Korea
South Korea's VAT requirements are strict but absolutely manageable when you understand the rules: register immediately upon your first sale, apply reverse charge correctly for VAT-registered business customers, and file quarterly returns on time. With the right automation tools like Sphere handling the calculations, registrations, and filings, you can focus on growing your business in South Korea's lucrative digital market rather than wrestling with tax compliance.
.png)
