Zero-rate Sales in Korea

Under the relevant Korean VAT Laws, 10% VAT may be exempt in Korea for certain sales. Here, I’d like to describe zero-rate sales conditions for services provided to foreign clients.

In order to be VAT exempt (zero-rate sales), all of the following conditions shall be met:

  • Services provided to non-resident or foreign companies in Korea;
  • Foreign currency received (i.e. USD);
  • Service being provided is listed in the law (see below Article 33 (2) 1 (a)-(k)); and
  • In case service type (b), the relevant foreign country (the CLIENT country) shall have the mutual tax exemption policy for Korean tax residents.

In order to review 4) above, we have to first see the relevant country is listed in Korean VAT Laws. For example, Singapore has the agreement with Korea but China does not. Thus, if a Korean company is providing services to Singaporean clients and the above all met, that service fee shall be VAT exempt in Korea. Since Korea does not have the mutual agreement with China, when a Korean company provides services to Chinese clients, there shall be 10% VAT unless the Chinese tax authority provides official documents for tax exemption in Korea.


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