National Tax Service's Announcement on VAT Filing and Refund for H1

According to the National Tax Service (NTS), there are 1.28 million corporate businesses and 5.43 million individual general taxpayers(Sole-proprietors) required to submit their VAT returns for the first half of this year. To support business liquidity and promote exports and investments, the NTS has announced that small and medium-sized exporting enterprises that apply for a VAT refund by July 25 will receive their refunds by August 2.

Important Considerations for VAT Filing

The NTS has highlighted several key areas where taxpayers need to exercise caution to avoid errors in their VAT filings:

Unreported or Underreported VAT on Taxable Supplies: Businesses supplying taxable goods or services and issuing tax invoices must ensure they report the VAT even if the payment has not been received. Failing to report or underreporting can lead to penalties.
Incorrect Input Tax Deductions: When purchasing goods or services from exempt businesses or simplified taxpayers (who issue receipts rather than tax invoices), ensure that these transactions are properly reported. If paid using a business credit card, do not mistakenly claim these as deductible input taxes.
Errors in Credit Card Sales Tax Deductions: Individual businesses with annual sales exceeding 1 billion KRW must be particularly careful when claiming deductions for sales tax from credit card transactions. Misapplying these deductions can result in significant penalties.

NTS's Emphasis on Compliance

The NTS emphasizes the importance of accurate reporting to avoid penalties and ensure compliance with VAT regulations. By maintaining meticulous records and verifying all transactions, businesses can minimize the risk of errors. The NTS also provides resources and guidance to assist taxpayers in correctly filing their VAT returns.

Conclusion

Timely and accurate VAT filing is crucial for maintaining compliance and ensuring smooth business operations. The NTS's initiative to expedite VAT refunds for small and medium-sized exporters is a positive step towards supporting business liquidity and fostering a favorable business environment. Businesses are advised to heed the NTS's warnings and ensure their VAT filings are error-free to avoid potential penalties and optimize their tax processes.

For any further assistance or detailed guidance on VAT compliance, it is advisable to consult with a tax professional who can provide tailored advice based on specific business needs.