What is a Tax Invoice?
Tax invoices play a crucial part of accounting and income tax reporting in Korea.
A tax invoice has a specific format required by tax law, whereas an invoice has relevantly freestyle.
There are two kinds of tax invoices, one is a paper tax invoice and the other is an E-tax invoice (or electronic tax invoice). For all corporations and individual business owners with a certain level of sales volume — it is mandatory to issue an E-tax invoice via Hometax for every number of sales.
Issuing a proper E-tax invoice is important, as the E-tax invoiced amount becomes the very basic data of taxable income for VAT filing and Corporate Income Tax filing. You can say that the National Tax Service is collecting real-time data on your sales and revenue by the E-tax invoice system.
Why an E-tax invoice?
- Receiving a proper E-tax invoice is important, as expenses with no legal receipts lead to an increase of your taxable income by not being able to report such expenses.
- Timing of receiving an E-tax invoice on your purchases also matters; if your vendor issues any day later than the actual supply date - then you would be liable for a ‘late collection’ penalty.
Many international clients are not familiar with the E-tax invoice system of Korea — as it’s a very unique system - and I usually spend most of our time on explaining the system.
Reach out to me if you have any questions about issuing an E-tax invoice in South Korea.
Written by Ara Jung (CTA)
All information provided is of limited scope and not exhaustive or comprehensive of any subject. It is not intended to be legal advice, and should not be used in place of consultation with appropriate professionals.
