Understanding Zero-Rate VAT in Korea

In Korea, the standard VAT rate is 10%. Similar to other countries, Korea exempts certain transactions from VAT. Specifically, when a Korean resident company provides services to a foreign entity, VAT can be exempted under the following conditions. It is crucial for foreign corporations engaged in frequent international transactions to understand these criteria, as it can be highly beneficial.


To qualify for zero-rate VAT on services in Korea, all of the following conditions must be met; otherwise, a 10% VAT will apply:

  1. Services Provided to Non-Residents or Foreign Companies: The service must be provided to non-residents or foreign companies with whom Korea has a mutual agreement.
  2. Foreign Currency Payment: Payment for the service must be received in a foreign currency, such as USD.
  3. Qualifying Services: The service provided must be listed in the law, specifically under Article 33 (2) 1 (a)-(k).




Article 33 (Scope of Goods or Services Supplied for Acquisition of Foreign Currencies

(2) “Which is prescribed by Presidential Decree” in Article 24 (1) 3 of the Act means the supply of any of the following: <Amended by Presidential Decree No. 26071, Feb. 3, 2015; Presidential Decree No. 26983, Feb. 17, 2016; Presidential Decree No. 27838, Feb. 7, 2017; Presidential Decree No. 30397, Feb. 11, 2020>

1.  Any of the following goods or business services that are supplied in the territory of Korea to a nonresident (excluding an individual having his or her residence in the Republic of Korea, an employee of a diplomatic office, etc. provided for in Article 24 (1) 1 of the Act, and a service person or civilian employee of United Nations Armed Forces or United States Armed Forces permanently stationed in the Republic of Korea; hereafter the same shall apply in this paragraph) or foreign corporation having no domestic place of business, the price of which is paid in Korean won at a foreign exchange bank or in a manner prescribed by Ordinance of the Ministry of Economy and Finance: Provided, That the professional activities referred to in item (b) and the services referred to in items (h) and (i) shall be limited to where the relevant foreign country grants the identical tax exemption as provided for herein to Korean residents or corporations (referring to where the relevant foreign country has no provisions governing taxes equivalent to the value-added tax or other similar taxes of the Republic of Korea or exempts Korean residents or corporations from those taxes; hereafter the same shall apply in this paragraph):

(a)  Goods delivered to a domestic entrepreneur designated by a nonresident or foreign corporation for the entrepreneur’s taxable business;

(b)  Professional, scientific, and technical activities (excluding veterinary activities, activities of head offices for manufacturing, and activities of head offices for other industries);

(c)  Leasing of intangible property rights among business support and leasing services;

(d)  Communications services;

(e)  Repair of containers; storage and warehousing within bonded areas; and the shipping agency services, marine transportation brokerage business, and vessel management services under the Marine Transportation Act;

(f)  News agency activities, video and audio records production and distribution services (excluding operating a theater or a video-viewing establishment), software development, computer programming, system integration and management, data processing, hosting, portals and other Internet information media service activities, and other information service activities, which all belong to the category of information and communications services;

(g)  Brokerage of commodities;

(h)  Business facilities management and business support service activities (excluding landscape care and maintenance service activities, activities of travel agencies and tour operators, and other tourist assistance activities);

(i)  Investment advisory services under Article 6 (1) 4 of the Financial Investment Services and Capital Markets Act;

(j)  Educational services (limited to educational support activities);

(k)  Human health activities (limited to cases of supplying clinical trial services);

(l)  Goods or services similar to those provided for in items (a) through (j), which are prescribed by Ordinance of the Ministry of Economy and Finance;


25-0-1 【상호면세국의 범위】

Examples of countries having mutual agreement for VAT exemption

1. 그리스 (1998. 8. 1. 개정)

2. 남아공화국 (1998. 8. 1. 개정)

3. 네덜란드 (1998. 8. 1. 개정)

4. 노르웨이 (1998. 8. 1. 개정)

5. 뉴질랜드 (1998. 8. 1. 개정)

6. 덴마크 (1998. 8. 1. 개정)

7. 레바논 (1998. 8. 1. 개정)

8. 리베리아 (1998. 8. 1. 개정)

9. 말레지아 (1998. 8. 1. 개정)

10. 미국 (1998. 8. 1. 개정)

11. 베네주엘라 (1998. 8. 1. 개정)

12. 벨지움 (1998. 8. 1. 개정)

13. 사우디아라비아 (1998. 8. 1. 개정)

14. 독일 (1998. 8. 1. 개정)

15. 스웨덴 (1998. 8. 1. 개정)

16. 스위스 (1998. 8. 1. 개정)

17. 싱가포르 (1998. 8. 1. 개정)

18. 영국 (1998. 8. 1. 개정)

19. 이란 (1998. 8. 1. 개정)

20. 이태리 (1998. 8. 1. 개정)

21. 인도 (1998. 8. 1. 개정)

22. 인도네시아 (1998. 8. 1. 개정)

23. 일본 (1998. 8. 1. 개정)

24. 대만 (1998. 8. 1. 개정)

25. 칠레 (1998. 8. 1. 개정)

26. 카나다 (1998. 8. 1. 개정)

27. 태국 (1998. 8. 1. 개정)

28. 파나마 (1998. 8. 1. 개정)

29. 파키스탄 (1998. 8. 1. 개정)

30. 핀랜드 (1998. 8. 1. 개정)

31. 호주 (1998. 8. 1. 개정)

32. 홍콩 (1998. 8. 1. 개정)

33. 프랑스 (1998. 8. 1. 개정)




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