Document preparation for VAT recovery

Are you aware that foreigners on a business trip to Korea
can recover the paid Value Added Tax for certain business
expenses?

In Korea for many business-related expenses the VAT of currently 10% can be recovered by a foreign enterprise by applying for VAT recovery. It's essential to first understand that the purpose of the expense must be in line with the VAT refund requirements, and that for a successful application the proper evidence for submission is needed.

 

What kind of goods and services are eligible for a refund?

  • Expenses for office equipment and supplies
  • Telecommunication costs
  • Advertising expenses
  • Accommodation, restaurant, and hotel expenses
  • Maintenance and rental expenses for local representatives and warehousing
  • Costs of renting real estate

A typical expense which can be not included are expenses related to rental car and fuel expenses in Korea.

 

What are the requirements for a refund?

  • Reciprocity Requirements in line with the relevant double taxation agreement.
  • Refund amount exceeding KRW 300,000 for one calendar year can be claimed.
  • Submitting original credit card receipts.
  • Requesting and submitting an official tax invoices from the service providers.

 

Once an expense is deemed eligible, the next step is to prepare the appropriate documentation for submission. The key documents include credit card receipts and tax invoices. It's important to note that for payments made by credit card, retaining the original receipt is crucial. In the case of cash payments, obtaining a tax invoice is necessary.

How does a tax invoice for foreign companies look like?

A tax invoice must contain the following basic elements:

  • Name of Supplier
  • Business Registration Number of Supplier
  • Date of Issuance
  • Designation of item/service
  • Quantity of item/service provided.
  • Unit price
  • VAT amount
  • Total amount

Please inform your VAT number (from the home country) so the supplier can note it at remark on VAT invoice.

 

 

What ABK needs from you for VAT recovery services:

 

  • Original receipts and expense purpose details
  • Company business license
  • Signed PoA and signed application for VAT recovery

 

What is the timeline / application deadline?

The application for VAT recovery can only be submitted after the end of a calendar year. The signed application and related documents must be submitted by June 30th of the following year.

 


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