Korea Simplified Taxpayer 2026: Sole Proprietors Only

Quick answer

Simplified taxpayer status (간이과세자) is a reduced VAT regime for individual business owners whose annual sales (VAT included) are under KRW 104 million. A corporation, including a foreign founder’s Korean 주식회사 or 유한회사, can never be a simplified taxpayer. If you plan to incorporate, budget for standard 10% VAT; simplified status matters only if you start as a sole proprietor.

Correction (5 October 2026): an earlier version of this guide presented simplified taxpayer status as a VAT strategy for foreign-owned corporations and listed incorrect rates and filing rules. The article has been rewritten against the current Value-Added Tax Act and its Enforcement Decree.

Who can use simplified taxpayer status

Article 61(1) of the Value-Added Tax Act applies the simplified regime only to an 개인사업자 (individual business owner) whose total supply price in the previous year, VAT included, is below the amount set by Presidential Decree. Article 109(1) of the Enforcement Decree sets that amount at KRW 104 million.

This has a direct consequence for foreign founders:

If you are still choosing between the two, our comparison of a sole proprietorship and a corporation covers liability, visas and tax beyond VAT. Most foreign investors incorporate, because the D-8 investor visa and FDI registration are built around a company, so for them this regime is simply not available.

Businesses excluded even below the threshold

Article 109(2) of the Enforcement Decree excludes several business types regardless of sales, including:

• Mining, most manufacturing, wholesale and goods brokerage
• Real estate sales, and certain real estate leasing
• Licensed professions such as lawyers, patent attorneys, accountants, tax accountants, architects, doctors and pharmacists
• Electricity, gas and water supply, and most construction
• Professional, scientific and technical services, and business support and rental services, unless supplied mainly to final consumers
• Businesses taken over from a general taxpayer, and businesses of owners who were required to keep double-entry books

The list matters for foreign founders because consulting, design, IT development for corporate clients and similar B2B services frequently fall into the excluded categories.

How the VAT is calculated

A general taxpayer pays output VAT of 10% on sales minus input VAT on purchases. A simplified taxpayer instead pays:

Sales (VAT included) × industry value-added ratio × 10% (Article 63(2) of the Act)

The value-added ratios in Article 111(2) of the Enforcement Decree are:

On purchases backed by tax invoices or card slips, a simplified taxpayer deducts only 0.5% of the purchase amount, not the full input VAT (Article 63(3)). That is why simplified status helps low-input businesses such as small cafés or retail shops and helps much less when inputs are heavy.

Two further thresholds apply:

• Below KRW 48 million of annual sales: the VAT payment obligation is exempt, although filing is still required.
• Tax invoices: a simplified taxpayer with sales of KRW 48 million or more can issue tax invoices (세금계산서); below that, it issues receipts only (Article 36-2).

Filing calendar

The taxable period for a simplified taxpayer is the full calendar year. The final return and payment are due by 25 January of the following year (Article 67). The tax office issues a provisional assessment in July for half of the prior year’s tax, which is paid by 25 July (Article 66). This is different from a general taxpayer, which files every six months with interim prepayments.

A new sole proprietor chooses simplified status when applying for business registration by stating expected annual sales (Article 61(3) and Decree Article 109(4)). If sales later reach KRW 104 million, the business is converted to a general taxpayer from 1 July of the following year.

What this means if you incorporate

If you form a Korean company, plan on these instead:

• Standard VAT at 10% with full input VAT credit, filed in January and July, with interim filings or assessments in April and October. Our post-formation VAT and bookkeeping guide sets out the calendar.
• Tax invoices for every B2B sale, issued electronically; Korean corporate clients will expect them.
• Zero-rating for qualifying exports of services to your overseas parent, which can produce VAT refunds; see zero-rated VAT for services to an overseas HQ.
• Qualified evidence (tax invoices, card slips, cash receipts) for expenses so they are deductible; see qualified evidence rules.

Corporate income tax is a separate matter from VAT and applies to every corporation regardless of size.

When a sole proprietorship makes sense

A foreign national holding a visa that permits business activity, such as F-2, F-5 or F-6, can register as a sole proprietor. Simplified status can then reduce VAT in the first years for a small consumer-facing business such as a café, retail shop or guesthouse. It is rarely the right structure for a founder who intends to raise investment, sponsor a D-8 visa or sign contracts with large Korean companies, all of which point to a corporation. If you are weighing that choice, our incorporation service starts with an entity review.

FAQ

Can a foreign-owned Korean corporation be a simplified taxpayer?

No. Article 61 of the VAT Act limits the regime to individual business owners. Every corporation is a general taxpayer.

What is the simplified taxpayer threshold in 2026?

Annual sales of less than KRW 104 million, VAT included (Enforcement Decree Article 109(1)). Certain business types are excluded regardless of sales.

How much VAT does a simplified taxpayer pay?

Sales × the industry’s value-added ratio (15% to 40%) × 10%, so 1.5% to 4% of sales, minus a credit of 0.5% of invoiced purchases. Businesses under KRW 48 million of annual sales are exempt from payment.

How often does a simplified taxpayer file VAT?

Once a year, by 25 January, with a provisional assessment paid in July.