A business operator must apply to the district tax office for registration of each place of business within 20 days from the start of business, and a new operator may apply before that date (VAT Act Art. 8(1)). After registration, a general taxpayer files a final return within 25 days after each taxable period ends — first period January to June, second July to December (Arts. 5(1) and 49(1)).
Registration is due within 20 days of starting
Article 8(1) of the VAT Act requires a business operator to apply to the district tax office with jurisdiction for registration of each place of business within 20 days from the date business commences. Nothing in the provision varies the deadline by nationality, so a foreign sole trader should plan on the same timetable. The unit is “each place of business”: where you run two shops, or keep a warehouse or workshop apart from the office, check whether each location needs registering. The proviso to the same paragraph lets a person about to start a new business apply before the start date. In trades where purchases such as fit-out work or equipment come before any sales, having a registration number early can make it easier to exchange invoices and records with suppliers. The VAT Act also treats an application filed with a different tax office as filed with the competent one. Once registered, you receive a registration certificate bearing your number, and any suspension, closure or change in registered details must then be reported without delay — as must the case where someone registered in advance does not in fact start trading.
Settle three things before applying: premises, trade and taxpayer type
The application looks simple, but some things need deciding first. The first is the premises. Because registration is by place of business, the actual location must be fixed, and for rented premises you are often asked for material such as the lease to confirm it. The documents required vary by trade and case, so check with the district tax office before applying. The second is the trade: what goods or services you supply can affect whether VAT applies and whether licences are needed under other laws. The third is whether you start as a general or a simplified taxpayer. Article 5(1) of the VAT Act sets the simplified taxpayer’s taxable period as 1 January to 31 December, and splits the general taxpayer’s year into a first period from 1 January to 30 June and a second from 1 July to 31 December. The number and form of returns differ by type, so the choice should be weighed against expected turnover and the nature of your customers; the criteria for simplified status are in separate provisions. Requirements linked to immigration status lie outside tax law and need to be checked separately with the immigration authorities.
The first period starts on the start date or the application date
A new operator’s first taxable period rarely runs a full six months. Article 5 of the VAT Act sets the first taxable period of a new business as running from the date business commences to the end of the period in which that date falls; where registration was applied for before commencement, it runs from the application date to the end of the period in which that date falls. So a general taxpayer who starts in May has a first period from the start date to 30 June, and one who applied in advance in April has a period from the application date to 30 June. The preliminary return period works the same way: Article 48(1) sets the first preliminary period of a person starting or about to start a business as running from the start date (or the application date, if registered in advance) to the end of the preliminary period in which it falls. Registering early brings the start of the period forward, so purchase records arising in the meantime must be included in the first return. The opening date, application date and date of first sale are often all different, so record each with supporting evidence.
Preliminary and final returns: remember “25 days after”
VAT deadlines are aligned at “within 25 days after the period ends”. Article 48(1) sets the preliminary periods as 1 January to 31 March for the first period and 1 July to 30 September for the second, with the tax base and tax payable or refundable to be reported within 25 days after each ends. Article 49(1) requires a final return within 25 days after each taxable period ends, or, on closure, by the 25th of the month following the month of closure. On a general taxpayer’s calendar that gives 25 April (first-period preliminary), 25 July (first-period final), 25 October (second-period preliminary) and 25 January of the next year (second-period final). For individual operators, however, the rule is that instead of a preliminary return the district tax office determines 50 per cent of the previous period’s tax and collects it by the 25th day after the preliminary period ends, with nothing collected where the amount is under KRW 500,000; where grounds set by Decree such as a business downturn exist, a preliminary return may be filed instead. Which applies in the first period needs individual checking, and simplified taxpayers follow a different schedule.
In May the global income tax return follows
VAT is not the end of it. Article 70(1) of the Income Tax Act requires a resident with global income for the tax year — including one with no tax base or a loss — to file a return of global income with the competent district tax office between 1 and 31 May of the following year. Even if the first year of trading made a loss, a resident with a loss is still required to file. A foreign operator should first establish whether they are a resident or non-resident for income tax; that is decided by facts such as where life is centred rather than by nationality, and the filing approach can differ accordingly. For a general-taxpayer sole trader the basic year runs: January, second-period VAT final return; April, payment of the preliminary notice (where applicable); May, global income tax return; July, first-period final return; October, payment of the preliminary notice (where applicable). Books and records are the common base for all of these returns, so organising sales and purchase records month by month from the start keeps the deadlines manageable. Additional obligations may arise depending on the trade and size, so individual checking is needed.