Guide to South Korea VAT Taxability and Rates
Updated 2 months ago
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South Korea applies a standard VAT rate of 10% on most taxable supplies, including SaaS and digital services. How that rate is applied depends on the type of customer you are selling to and whether you are a resident or non-resident business.
Standard VAT Rate
Jurisdiction | Base Rate |
|---|---|
South Korea | 10% |
There is no reduced rate or special rate for SaaS or digital services in South Korea.
Taxability by Transaction Type
Transaction Type | Applicable Rate | Who Collects the Tax |
|---|---|---|
B2B SaaS — resident seller | 10% | Seller charges VAT on the invoice |
B2C SaaS — resident seller | 10% | Seller charges VAT on the invoice |
B2B SaaS — non-resident seller | 0% (reverse charge) | Korean buyer self-assesses VAT |
B2C SaaS — non-resident seller | 10% | Non-resident seller collects and remits |
Exports (B2B or B2C) — seller in Korea | 0% (zero-rated) | N/A |
Resident Businesses
If your business is based in South Korea (or has a permanent establishment there), you charge 10% VAT on all B2B and B2C SaaS sales. No exceptions apply based on the customer type.
Non-Resident Businesses
Non-resident businesses selling into South Korea follow different rules depending on who they sell to.
Selling to B2C customers (Korean consumers): You must register under the simplified scheme and charge 10% VAT directly on each transaction. This applies from your very first sale — there is no minimum revenue threshold.
Selling to B2B customers (VAT-registered Korean businesses): You do not charge Korean VAT. Instead, the Korean business customer self-assesses VAT through the reverse charge mechanism. As the foreign seller, you do not register in Korea for these sales only. Your invoice should include a note such as: "Reverse charge applies; VAT to be self-assessed by buyer under the Korean VAT Act."
What Is Reverse Charge?
Reverse charge is a VAT mechanism where the buyer — not the seller — is responsible for calculating and remitting the tax. The seller issues an invoice without charging VAT, and the buyer reports the tax on their own VAT return.
This is commonly used for cross-border B2B transactions involving digital services. It protects the buyer's ability to claim input tax credits while keeping the obligation off the non-resident seller.
What Counts as a Digital or Electronic Service?
South Korea defines electronic services broadly. Examples include:
Gaming services
Audio or video file delivery
Electronic documents
Software and SaaS
Online advertising placement
Cloud computing services
Brokerage or marketplace services facilitating Korean transactions
Input Tax Credit
Resident businesses registered under the standard scheme can recover input VAT on eligible business expenses, provided they hold valid tax invoices.
Non-resident businesses registered under the simplified scheme cannot claim input VAT credits. This is a key limitation of the simplified registration.
Input credits are denied even for resident businesses when expenses relate to VAT-exempt activities (such as financial, educational, or medical services), non-business passenger vehicles, or entertainment costs. Mixed-use expenses require proportional allocation.
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