The formula in one line
Online stores (retail) have a 15% value-added rate, so it is roughly 1.5% of sales minus the purchase credit.
General taxpayers pay 10% of sales and recover all input VAT, while simplified taxpayers pay only a set share by industry and get a small 0.5% purchase credit. That is why it suits early sellers without large purchases.
Value-added rates by industry
| Industry | Value-added rate | Effective rate |
|---|---|---|
| Retail, recyclables collection and sales, restaurants | 15% | 1.5% |
| Manufacturing, agriculture, forestry, fishing, parcel delivery | 20% | 2.0% |
| Accommodation | 25% | 2.5% |
| Construction, transport and storage, information and communications, other services | 30% | 3.0% |
| Finance and insurance, professional, scientific and technical, business support and rental, real estate | 40% | 4.0% |
E-commerce retail (mail-order business) counts as retail, so 15% applies.
Three thresholds to know
- Under 48,000,000 KRW: payment waived. If sales for the tax period are below this, you pay no VAT, but you still have to file.
- 48 million KRW or more: tax invoices required. Simplified taxpayers with prior-year sales of 48 million KRW or more must issue tax invoices; below that, receipts only.
- 104,000,000 KRW or more: switch to general. If prior-year sales exceed this, you become a general taxpayer from July 1 of the next year.
Calculate with the VAT estimator →
Worked example
An online seller with annual sales of 50 million KRW and 10 million KRW of creditable purchases (stock, courier fees, marketplace fees, etc.):
| Item | Calculation | Amount |
|---|---|---|
| Tax | 50,000,000 × 15% × 10% | 750,000 KRW |
| Purchase credit | 10,000,000 × 0.5% | − 50,000 KRW |
| VAT to pay | 700,000 KRW |
A general taxpayer in the same situation would pay (50,000,000 − 10,000,000) ÷ 11 ≈ 3.64 million KRW, so simplified taxation is much lighter. And if sales were 45 million KRW, they would be under 48 million and the payment would be waived.
When do I file?
- Simplified taxpayers: file and pay for the whole year (January to December) once, by January 25 of the next year.
- July interim notice: you may receive a July bill for half of your previous tax. It is settled in the January final return.
- General taxpayers: file twice a year, by July 25 for January to June and by January 25 for July to December.
Sales means what customers paid, not your settlement
This is what new sellers confuse most. Sales for VAT are what customers paid, before marketplace fees. Marketplace fees are recorded separately as purchases and credited. Smart Store and Coupang seller centers let you download sales data for VAT filing, which is the most accurate source.
Is simplified taxation always better?
For most early sellers, yes, but not if you buy a lot of equipment or stock in the first year. Simplified taxpayers get no refunds, so in a year with large input VAT a general taxpayer may come out ahead with a refund. If you give up simplified status, you cannot return for a set period, so talk to a tax accountant before switching.
Frequently asked questions
How much VAT does a simplified taxpayer pay?
For retail, about 1.5% of sales minus 0.5% of purchases. With 30 million KRW sales and 15 million KRW purchases it works out to 450,000 − 75,000 KRW, but because sales are under 48 million KRW the payment is actually waived.
If payment is waived, do I still need to file?
Yes. Only the payment is waived; you still have to file, or penalties may apply.
Can I get the credit card sales tax credit?
Individual businesses with prior-year supply value of 1 billion KRW or less in consumer-facing industries get a tax credit on card sales (1.3% until end of 2026, capped at 10 million KRW a year). The 2026 tax reform proposal would change the rate and cap, so check the rules at filing time.
When do I switch if sales exceed 104 million KRW?
Based on prior-year sales, you become a general taxpayer from July 1 of the following year.
Estimate my VAT → Split out 10% VAT →
Reference date: 2026-10-08 · Sources (Korean): WikiDocs, simplified vs general taxpayers (2026), Kyunghyang Shinmun (2026-01-07), enjoytax on the card sales credit reform. For actual filing, check with Hometax or a tax accountant.