Korea Company Post-Formation: VAT Registration and Bookkeeping Requirements 2026

Table of Contents

Introduction: The Critical Post-Formation Period

Congratulations—you’ve successfully incorporated your Korean company. You have your business registration certificate, corporate seal, and bank account. But your compliance journey is just beginning.

Many foreign investors underestimate the rigor of Korea’s post-formation tax and accounting requirements. Unlike some jurisdictions where compliance is relatively passive until year-end, Korea requires active, ongoing compliance starting immediately after incorporation. Failure to meet these obligations can result in penalties, disqualification from tax incentives, and even operational disruptions.

This guide walks you through the essential post-formation compliance tasks every foreign investor must complete, with a focus on VAT registration, monthly bookkeeping, and common pitfalls to avoid in 2026.

The Post-Formation Compliance Timeline

Here’s what you need to do—and when—after incorporating your Korean company:

Key Insight: The first 90 days after incorporation are the most compliance-intensive period. Missing deadlines during this window can set off a chain reaction of penalties and administrative headaches.

VAT Registration: Your First Major Obligation

What Is VAT in Korea?

Value Added Tax (VAT) is a consumption tax levied on the sale of goods and services in Korea. The standard VAT rate is 10%, and it applies to most domestic transactions.

Key Concepts:

• Input VAT: VAT you pay when purchasing goods/services for your business (e.g., office supplies, equipment)
• Output VAT: VAT you collect when selling goods/services to customers
• VAT Refund/Payment: Quarterly, you file a VAT return calculating: (Output VAT - Input VAT)
  • If Output VAT > Input VAT → You pay the difference to the tax authorities
  • If Input VAT > Output VAT → You receive a refund (common in early startup stages)

Do You Need to Register for VAT?

Mandatory VAT Registration:

You must register for VAT if you engage in any of the following activities:

• Selling goods or services to Korean customers (B2C or B2B domestic sales)
• Importing goods into Korea
• Operating a brick-and-mortar retail location

Exempt from VAT Registration (but may voluntarily register):

• Export-only businesses (sales to foreign customers outside Korea)
• Providing certain exempt services (e.g., educational services, residential leasing)

Strategic Consideration for Startups:

Even if your primary revenue is from exports (which are zero-rated for VAT), voluntary VAT registration may be beneficial because it allows you to claim refunds on input VAT (e.g., VAT paid on office rent, equipment, software subscriptions).

How to Register for VAT

Step 1: Determine Your VAT Registration Deadline

You must register for VAT within 20 days of commencing business activities. “Commencing business activities” means:

• Your first sale to a Korean customer
• Signing a lease for office space
• Purchasing equipment or inventory
• Hiring employees

Important: The 20-day clock starts from your first business activity, not your incorporation date. Many foreign founders mistakenly believe they have 20 days from incorporation, but if you incorporate and immediately sign an office lease, the clock starts that day.

Step 2: Prepare Required Documents

• Business registration certificate (사업자등록증)
• Corporate seal (법인인감)
• Proof of business location (lease agreement or property ownership certificate)
• Passport and Alien Registration Card (ARC) of the representative director
• Bank account opening confirmation

Step 3: File VAT Registration Application

Option A: In-Person Filing

• Visit your local tax office (세무서)
• Submit Form 102 (사업자등록신청서) and supporting documents
• Receive VAT registration certificate (typically issued on the spot)

Option B: Online Filing (via Hometax)

• Register on the National Tax Service’s Hometax platform (https://www.hometax.go.kr)
• Upload required documents
• Receive electronic VAT registration certificate (within 3-5 business days)

Option C: Engage a Tax Agent

• Hire a Korean accounting firm or tax agent (세무사)
• They handle the entire filing process on your behalf
• Recommended for foreign investors who lack Korean language skills or familiarity with the tax system

Cost: If using a tax agent, expect to pay KRW 300,000 - 500,000 for VAT registration assistance.

VAT Filing Obligations

Once registered, you must file quarterly VAT returns:

What You Must File:

• VAT Return Form (부가가치세 신고서): Summary of output VAT and input VAT
• Tax Invoice Register (세금계산서 합계표): Detailed list of all issued and received tax invoices
• Credit Card Sales Report (if applicable)
• Bank Statements showing VAT-related transactions

Late Filing Penalty: 20% of unpaid VAT + daily interest

Tip: Many Korean businesses front-load their input VAT (purchasing equipment, inventory) in Q1 to generate VAT refunds, improving cash flow in the startup phase.

Tax Invoices: Korea’s Critical Compliance Mechanism

What Are Tax Invoices (세금계산서)?

In Korea, tax invoices are legally mandated documents that must be issued for every VAT-able transaction between businesses (B2B). A tax invoice serves as proof of the transaction and is required for both the seller (to report output VAT) and the buyer (to claim input VAT).

Key Features:

• Must include: Supplier name/registration number, buyer name/registration number, date, description of goods/services, amount (excluding VAT), VAT amount (10%), total amount
• Must be issued within 1 day of the transaction (electronically via the National Tax Service system)
• Both parties must retain tax invoices for at least 5 years

Electronic Tax Invoices (전자세금계산서):

Since 2011, most businesses are required to issue electronic tax invoices (e-Tax Invoices) through the National Tax Service’s system. This ensures real-time reporting and reduces tax evasion.

How to Issue Electronic Tax Invoices:

1. Register for e-Tax Invoice service on Hometax (https://www.hometax.go.kr)
2. Obtain an authorized certificate (공인인증서) from a Korean bank
3. Issue invoices directly through Hometax or integrate with Korean accounting software (e.g., Wehago, DouZone)

Foreign Investor Challenges:

• Korean language interface (Hometax has limited English support)
• Authorized certificate process requires Korean bank account and in-person bank visit
• Accounting software is typically Korean-language only

Solution: Engage a Korean accounting firm to handle tax invoice issuance and management on your behalf, especially in the first year.

What Happens If You Don’t Issue Tax Invoices?

Consequences for the Seller:

• Output VAT is still owed, but you cannot prove legitimate sales
• Risk of penalties for underreporting
• Customer dissatisfaction (they cannot claim input VAT without a tax invoice)

Consequences for the Buyer:

• Cannot claim input VAT refund
• Effectively pays 10% higher price for goods/services

Real-World Example:

A foreign startup purchases KRW 100 million in server equipment from a Korean supplier. The supplier fails to issue a tax invoice. The startup cannot claim the KRW 10 million input VAT refund, resulting in a KRW 10 million cash flow loss.

Monthly Bookkeeping Requirements

Unlike some countries where small businesses can operate with minimal bookkeeping until tax season, Korea requires monthly bookkeeping for all companies, regardless of size.

What Is Monthly Bookkeeping?

Monthly bookkeeping involves:

1. Recording all financial transactions: Sales, purchases, expenses, payroll, bank transfers
2. Reconciling bank accounts: Ensuring bank statements match your accounting records
3. Issuing and receiving tax invoices: Tracking all VAT-able transactions
4. Withholding tax on employee salaries: Calculating and remitting monthly withholding tax
5. Preparing financial statements: Monthly income statement and balance sheet

Why Monthly Bookkeeping Is Non-Negotiable

1. Quarterly VAT Returns Require Monthly Data

Your quarterly VAT return aggregates three months of transaction data. If you don’t maintain monthly records, preparing the VAT return becomes chaotic and error-prone.

2. Withholding Tax Is Due Monthly

If you have employees, you must file a withholding tax return and remit payroll taxes by the 10th of the following month. This requires accurate monthly payroll records.

3. Corporate Tax Return Requires Annual Financial Statements

Your annual corporate tax return (due March 31) requires audited (or at least prepared) financial statements. If you don’t maintain monthly bookkeeping, creating year-end financial statements becomes prohibitively expensive and time-consuming.

4. Bank Account Monitoring

Korean banks and the Financial Intelligence Unit (FIU) monitor corporate accounts for suspicious activity. Inconsistent or unexplained transactions can trigger investigations, freezing your account until resolved.

DIY vs. Outsourced Bookkeeping

Option 1: DIY Bookkeeping

Tools:

• Korean accounting software: Wehago (위하고), DouZone (더존), Saramin (사람인)
• International software with Korean localization: Xero, QuickBooks (limited Korean tax compliance features)

Pros:

• Lower cost (software subscription: KRW 30,000 - 100,000/month)
• Full control over financial data

Cons:

• Steep learning curve (Korean tax rules are complex)
• Language barrier (most Korean software is Korean-only)
• Time-intensive (diverts founder attention from core business)

Best For: Founders with accounting background, Korean language proficiency, and simple business models (e.g., service businesses with few transactions).

Option 2: Outsourced Bookkeeping

Service Providers:

• Korean accounting firms (회계법인)
• Tax agent offices (세무사 사무소)
• Bookkeeping outsourcing companies (e.g., AceCounter, Saramin Accounting)

Pros:

• Expert handling of Korean tax compliance
• Time savings for founders
• Reduces risk of costly errors

Cons:

• Monthly cost: KRW 300,000 - 1,000,000 (depending on transaction volume and complexity)
• Less direct control over financial data

Best For: Most foreign investors, especially those without accounting expertise or Korean language skills.

Typical Outsourced Bookkeeping Pricing (2026):

Pro Tip: Many Korean accounting firms offer discounted packages for startups (first 6-12 months at reduced rates). Negotiate during incorporation.

Common Post-Formation Compliance Pitfalls

Pitfall 1: Missing the 20-Day VAT Registration Deadline

Scenario: A foreign founder incorporates on January 1, signs an office lease on January 5, but doesn’t register for VAT until February 1.

Consequence: Late registration penalty + retroactive VAT liability on any sales made before registration.

How to Avoid: Register for VAT within 20 days of your first business activity (lease signing, equipment purchase, first sale)—not 20 days after incorporation.

Pitfall 2: Not Issuing Tax Invoices

Scenario: A foreign startup provides consulting services to a Korean client for KRW 50 million but issues a simple invoice instead of an official tax invoice.

Consequence: Client cannot claim input VAT, demands a tax invoice or price reduction. Startup faces administrative burden of retroactively issuing tax invoices and risks penalties.

How to Avoid: Issue electronic tax invoices for all B2B transactions within 1 day of the transaction. Engage a Korean accounting firm to handle this if you lack the technical setup.

Pitfall 3: Commingling Personal and Business Finances

Scenario: A founder uses the corporate bank account for personal expenses, or vice versa, making it difficult to track legitimate business expenses.

Consequence: Tax authorities disallow personal expenses as business deductions, increasing taxable income. Risk of audit and penalties.

How to Avoid: Maintain strict separation between personal and corporate finances. Use corporate bank accounts exclusively for business transactions.

Pitfall 4: Ignoring Withholding Tax Obligations

Scenario: A company hires its first employee in March but doesn’t file withholding tax returns or remit payroll taxes until December.

Consequence: Cumulative penalties for 9 months of late filings + interest + potential investigation by the National Tax Service.

How to Avoid: File withholding tax returns by the 10th of the following month after hiring employees. Engage a payroll service or accounting firm to handle this.

Pitfall 5: Failing to Maintain Korean-Language Records

Scenario: A foreign company maintains all accounting records in English, with invoices and receipts in English or other foreign languages.

Consequence: Tax authorities may disallow deductions for expenses not supported by Korean-language documentation.

How to Avoid: While Korean law does not strictly require all records to be in Korean, practical compliance is easier if records are in Korean or bilingual. Key documents (tax invoices, financial statements, tax returns) must be in Korean. Work with a bilingual accounting firm.

Pitfall 6: Not Preparing for Annual Corporate Tax Return

Scenario: A company maintains sporadic bookkeeping throughout the year, then scrambles to prepare financial statements in March (tax return deadline).

Consequence: Rushed, error-prone tax return. Risk of disallowed deductions. High accounting fees for emergency year-end close.

How to Avoid: Maintain monthly bookkeeping consistently. Start corporate tax return preparation in January (before the March 31 deadline).

Post-Formation Compliance Checklist

Use this checklist to stay on track after incorporating your Korean company:

Immediate (Within 30 Days of Incorporation)

• Open corporate bank account
• Register for VAT (within 20 days of first business activity)
• Register for social insurance (National Pension, Health Insurance, Employment Insurance)
• Set up electronic tax invoice system (via Hometax or accounting software)
• Engage accounting firm or tax agent (if not handling in-house)
• Establish monthly bookkeeping procedures

Monthly (Ongoing)

• Record all financial transactions (sales, purchases, expenses, payroll)
• Reconcile bank accounts
• Issue/receive tax invoices
• File withholding tax return (if employees) by the 10th
• Prepare monthly financial statements (income statement, balance sheet)

Quarterly (Q1, Q2, Q3, Q4)

• File VAT return by the 25th of the month following quarter-end
• Pay VAT liability or claim refund
• Review financial performance and adjust budget/strategy

Annually (Year-End)

• Close books for the fiscal year (typically December 31)
• Prepare audited or reviewed financial statements (if required)
• File corporate tax return by March 31
• File Foreign Direct Investment (FDI) report by April 30
• Review tax incentives and plan for the next year

How Technology Can Simplify Compliance

Korean Accounting Software Options

Wehago (위하고)

• Cloud-based accounting software
• Electronic tax invoice integration
• Korean-language interface (no English version)
• Pricing: KRW 30,000 - 100,000/month

DouZone (더존)

• Comprehensive ERP system for accounting, HR, and payroll
• Widely used by Korean SMEs
• Complex setup, requires professional implementation
• Pricing: KRW 500,000+ one-time + monthly subscription

Saramin Accounting (사람인 회계)

• Bookkeeping outsourcing platform
• Connects companies with certified accountants
• Pricing: Variable (based on transaction volume)

International Software with Korean Features

Xero

• English-language interface
• Limited Korean tax compliance features (no native e-Tax Invoice integration)
• Best for foreign founders who prioritize English interface and plan to outsource Korean tax filing

QuickBooks

• Similar to Xero (English interface, limited Korean localization)
• Not widely adopted in Korea

Recommendation for Foreign Investors:

Use Korean accounting software (Wehago) for VAT and tax invoice compliance, and export data to Xero/QuickBooks for English-language financial reporting and investor relations.

When to Hire Professional Help

Scenarios Where Professional Help Is Essential

1. You don’t speak Korean: Korean tax compliance is largely conducted in Korean, from Hometax to tax office communications.
2. You have employees: Payroll tax compliance is complex and requires monthly filings.
3. You operate in a regulated sector: Industries like biotech, finance, and AI have additional reporting requirements.
4. You’re raising venture capital: Investors will demand audited financial statements and clean tax compliance history.

How to Choose an Accounting Firm

Questions to Ask:

• Do you have experience with foreign-invested companies?
• Can you provide English-language financial reports alongside Korean tax filings?
• What is your fee structure (monthly retainer vs. transaction-based)?
• Who will be my main point of contact, and do they speak English?
• Can you assist with corporate tax planning (not just compliance)?

Red Flags:

• Unwillingness to provide references from other foreign clients
• Prices significantly below market rate (may indicate lack of expertise)
• Poor responsiveness or communication

How SMA Lawfirm Can Help

At SMA Lawfirm, we don’t just handle company formation—we provide ongoing compliance support to ensure your Korean business stays on track. Our services include:

• VAT registration and compliance: We handle your VAT registration, quarterly filings, and tax invoice management.
• Bookkeeping coordination: We work with trusted Korean accounting firms to ensure seamless monthly bookkeeping.
• Corporate tax planning: We help you optimize deductions and take advantage of tax incentives.
• Annual compliance: Corporate tax returns, FDI reporting, and audit preparation.
• Bilingual support: All communications available in English, with Korean-language official filings handled seamlessly.

📩 Contact us at sma@saemunan.com to schedule a post-formation compliance consultation and ensure your Korean company thrives from day one.

Conclusion: Compliance as a Competitive Advantage

Post-formation compliance may seem like bureaucratic overhead, but it’s actually a strategic investment. Companies that maintain rigorous bookkeeping and tax compliance:

• Avoid costly penalties that drain cash reserves
• Qualify for tax incentives like R&D credits and accelerated depreciation
• Build investor confidence with clean financials and audit-ready records
• Scale more easily because compliance infrastructure is already in place

For foreign investors, Korea’s compliance requirements can feel overwhelming at first. But with the right systems, advisors, and discipline, compliance becomes routine—and your business can focus on what really matters: growth.

This article is for informational purposes only and does not constitute tax or legal advice. Consult with qualified professionals for guidance specific to your situation.