In South Korea, the National Tax Service only recognizes VAT transactions that you can substantiate with a tax invoice. That means that you have to prepare tax invoices for all sales and other transactions involving output tax, and record incoming tax invoices for all purchases or other transactions involving input tax.

The system allows you to print tax invoices and prepare the appropriate statutory reports.

You customize the tax invoice functions in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings ® Taxes on Sales/Purchases ® Basic Settings ® South Korea.

The normal commercial invoices that you create in Accounts Receivable (FI-AR) or Sales and Distribution (SD) are not recognized as tax invoices by the National Tax Service. For this reason, although you still enter commercial invoices in the system, you also have to print a tax invoice based on them. So when you want to send a customer a tax invoice, you specify which commercial invoices you want to create a tax invoice for, and the system prints out a tax invoice that is based on them.

The system also allows you to reprint and cancel tax invoices. You can also print tax invoice details, that is, lists of all the items covered by a tax invoice.

Finally, you can also create tax invoices for intrabusiness transactions.

The National Tax Service requires you to submit VAT summary lists at the end of every quarter. First, you time-stamp all of the tax invoices, to show that they must be included in the report. You then run the VAT Summary Report, specifying that it must include all of the time-stamped invoices.