Free invoice generator and tax tools for South Korea

A Korean small business meets three layers of tax. The National Tax Service (NTS, 국세청) collects the individual's comprehensive income tax (종합소득세) on business profit. For income years 2023 to 2025 the NTS table runs in eight bands from 6% on taxable income up to KRW 14 million to 45% above KRW 1 billion. The return is filed on Hometax in May of the following year.

VAT is the second layer, and the regime depends on size. A general taxpayer charges VAT and deducts input VAT; a simplified taxpayer (간이과세자) pays on a sector ratio instead. Companies pay corporate tax rather than income tax, and exempt supplies such as unprocessed food, books and medical services sit outside VAT altogether.

Payroll is the third layer and is collected by separate bodies: the National Pension Service for pension, the National Health Insurance Service for health and long-term care insurance, plus employment and industrial accident insurance. The most recent change is the 2026 round of rate increases: pension is 9.5% of standard monthly income from 1 January 2026, and the health insurance rate for 2026 is 7.19%.

Simplified VAT (간이과세) is open to individual businesses whose supplies in the previous year were below KRW 104 million. A simplified taxpayer does not charge 10% on the sale and deduct input VAT in full. Tax is sales (supply price including VAT) multiplied by a sector value-added ratio, multiplied by 10%, less a credit of 0.5% of purchases. Since 1 July 2021 the ratios are 15% for retail and food service, 20% for manufacturing and agriculture, 25% for lodging, 30% for construction and transport, and 40% for finance and real-estate services. The NTS describes the resulting effective rate as between 1.5% and 4%. The trade-off is that only 0.5% of purchases is creditable, however much VAT the supplier charged.