South Korea: E-invoicing and Self-Billing Invoices

Update: 8 March 2023

South Korea has recently approved a tax reform which introduces several measures for 2023, among which is the possibility of issuance of self-billing tax invoices.

This tax reform amends the current VAT law to allow the purchaser to issue invoices for the supply of goods and services.

However, this will only be allowed in specific circumstances, such as when the supplier cannot issue the invoice. The purchaser can claim a deduction for the related input VAT by issuing a self-billing invoice.

Therefore, issuing self-billing invoices for VAT-exempted supplies of goods and services will not be permitted. However, the issuance of self-billing invoices by the purchaser depends on confirmation from a district tax office.

What’s next?

This amendment will enter into force and apply to all supplies of goods and services from 1 July 2023.

This South Korean tax reform will expand the transactional scope of the country’s e-invoice issuance and continuous transaction control (CTC) reporting system (e-tax invoicing), as the transactions in the scope of e-tax invoicing are generally the same as those in the scope of VAT invoicing.

Interested in learning more about e-invoicing in South Korea? Contact a member of our expert team today.

Update: 17 January 2021 by Selin Adler Ring

The South Korean E-invoicing System in a Nutshell

Collection of real-time fiscal data is becoming one of the core public finance decision making tools. Transactional data provides a timely and reliable overview of the business sector, enabling governments to rely on analytical data in the decision-making process.

This is what has led many governments to adopt CTC regimes that require taxpayers to transmit their transactional data in real/ near-real time to government services. South Korea was one of the first countries to appreciate the benefits of a CTC regime and mandated reporting of e-invoice data to the government for certain taxpayers as early as 2011.

Mandate scope expanded

The year after the first implementation, the South Korean authorities expanded the mandate scope and the e-invoicing system became mandatory for more taxpayers. 2014 saw another expansion of the CTC mandate to reach its current scope.

The current system requires any business that is a corporate entity or an individual whose aggregate supply value for the immediately preceding tax year is KRW 300,000,000 or more to issue an e-invoice to the recipient of goods or services subject to VAT, as well as to report the invoice data to the government.

The South Korean e-invoicing system mandates the issuance of an e-invoice to the recipient and reporting of this invoice data to the government portal within a day of its issuance. Before e-invoices are transmitted, suppliers must digitally sign them with a PKI electronic signature. E-invoices are reported in an XML format to the National Tax Agency (NTS) Portal. Due to the near-real time reporting time-limit, the South Korean e-invoicing system falls under the category of CTC.

South Korea has implemented a comprehensive e-invoicing system from the beginning and as a result there haven’t been any major changes to the requirements or practices. This is a big relief for taxpayers in South Korea compared to other CTC jurisdictions where there are constant changes.

In addition to the benefits for taxpayers, a considered CTC regime is also less burdensome for the state as the implementation costs of the constant regulatory changes can be significant.

More and more governments are considering the adoption of CTC regimes and should look to South Korea as a success story for this approach which has worked well for both the government and taxpayers.