It’s time to talk about VAT.
You need to file and pay your company's VAT for the first half of the 2016 fiscal year by the 25th of July. This means tallying your electronic tax invoices or, if you're a smaller entity, totalling your paper tax invoices.
So what's the difference?
Who needs to issue tax invoices electronically and who can issue just a manual, paper tax invoice?
The electronic tax invoice system started in 2011 for every Korean corporation and in 2012 for sole proprietors whose previous year’s sales totaled more than 1 billion won. Since July of 2014, all sole proprietors whose sales exceed 300 million won per year must issue their VAT invoices electronically.
There are a lot of websites you can go to who will issue tax invoices electronically for you, with each invoice typically costing you between 100 and 800 won. A better proposition, however, is issuing them yourself for free at the National Tax Service web site (http://www.esero.go.kr/).
To issue these VAT invoices electronically, unfortunately, you will need the notorious digital certificate!
I know most expats dread installing this certificate and fear installing Active X on their computers... and God forbid you have a Mac, where this is not even an option unless you're running Windows on it!
But, if you've already been issued an electronic certificate for internet banking, you can easily get the other electronic certificate you need for issuing VAT invoices either by yourself or via your accountant.
The digital certificate is a kind of document the Korean government uses for confirming the identity of people on the internet, instead of showing physical proof of ID. Unfortunately, it is also one of the greatest impediments expats face when trying to do something through the internet – from online banking, to shopping, to a whole host of other activities. It is almost impossible to get anything done online without it. My advice: make your peace with it.
So if you find yourself ready for this digital certificate, you must remember to issue your tax invoices by the 10th day of the following month for a previous month's transactions. So, for September, you will need to issue your tax invoices by the 10th of October, or you will incur a penalty for both you and your counterparts (buyer and seller). Practically, however, you can issue a tax invoice at any time during the month.
If you would like help navigating Korea's complex digital certificate program or would like us to manage your tax invoices for you, please feel free to get in touch to firstname.lastname@example.org.