Value-Added Tax Act (Buga Gachise Beop)
The Value-Added Tax Act (Buga Gachise Beop) governs the value-added tax (VAT) system in South Korea. Enacted in 1976, the Act established a broad-based indirect tax on the transfer of goods and provision of services. The current standard VAT rate is 10%, one of the lowest among OECD countries. The Act establishes the framework for tax calculation, input tax credits, invoicing, and filing requirements.
Legal area: Law governing the assessment and collection of taxes.
Year enacted: 1976
Full text: https://elaw.klri.re.kr/eng_service/law_view.do?hseq=south-korea-value-added-tax-act
Key Provisions
- Part I: General provisions (taxable persons, taxable transactions)
- Part II: Tax calculation (output tax, input tax credit)
- Part III: Tax period and filing
- Part IV: Special provisions (small business, exports)
- Part V: Invoicing and record-keeping requirements
- Part VI: Collection and enforcement
Significance
The VAT is a major source of government revenue in South Korea. The 10% rate has remained stable for many years, providing predictability for businesses and consumers. The Act’s input tax credit mechanism prevents cascading taxation. South Korea has been working to improve VAT compliance, particularly for the digital economy and cross-border transactions. The Act has been amended to address e-commerce and digital services, including the taxation of imported digital services.