VAT is levied on sales in Korea. The VAT amount is posted when products are sold. When buying goods, the VAT amount charged for the purchase can be deducted from the total VAT obligation. At the end of a three month period, every company is required to file several reports to the tax authorities. These reports state the total number of taxable transactions with each customer and vendor, the total amount of these transactions and the amount of posted VAT resulting from these transactions. This tax declaration must be made on business place level.

For VAT purposes, the business place information must be stored for your own company and for all domestic companies in which you are doing business.

When posting a document, it is important to indicate not only the tax rate (currently the tax types 10% and 0% exist) but also if the transaction was documented by a tax invoice, cash register receipt (in case of smaller amounts) or based on a credit card receipt from an employee who entered it into the system to get a refund for expenses. Additionally, it has to be indicated whether or not the input VAT amount posted is deductible. All of this information is necessary for an accurate tax reporting.

The input and output VAT is presented separately in two different forms. The first form states the business place information of the reporting business place in the header and the second lists the totals of tax invoices, base amount and tax amounts. Next, this information has to be detailed for every business place of the customers and vendors with taxable transactions. Regarding the output VAT statement, we have to distinguish between VAT transactions and ID transactions. In some cases, the customers are new companies and have not yet received a VAT registration number. In other cases, our customers are individuals and do not have VAT registration numbers. If there is no available VAT registration number, then the social ID number of the representative of this business partner is printed in the report. Therefore, when posting a document, differentiate between posting a VAT transaction or an ID transaction. Tax authorities also permit reporting the VAT as an electronic file. An official format exists. The file can be produced on a diskette or on a tape.