Imagine a new design company in Korea receiving its first customer payment. The bank balance rises by 1,100,000 Korean won (KRW). Its founder, Maya, wants to know how much the company can use for its next project and how much she can take for living costs.
The payment alone cannot answer either question. Part of it is tax charged to the customer. The company also has costs to cover, and payments to its owner need a clear reason and the right treatment.
This guide follows that fictional payment through the records and conversations it creates. It explains the main ideas a foreign founder needs before meeting a Korean tax accountant. The aim is to understand what the numbers mean, what evidence to keep and who will handle the next task. An accountant still needs the actual business and transaction details to work out its obligations.
What the customer has paid for
In this example, the company charges KRW 1,000,000 for a completed design project, plus KRW 100,000 of value-added tax. Usually shortened to VAT, this is a tax charged on many sales of goods and services.
Korea's standard VAT rate is 10%. Assume this company is a general VAT taxpayer and that its design project is taxable at that rate. The customer pays KRW 1,100,000 in total. The company's sales revenue, the amount earned from selling the work before costs, is KRW 1,000,000. The remaining KRW 100,000 is the VAT charged on that sale.
The National Tax Service's VAT guide explains the general system and the different calculation used by eligible small businesses in the simplified system. Some sales are exempt from VAT; others qualify for a 0% rate. These categories have different rules. The accountant should identify the business's category and the transaction's treatment before anyone uses this example to plan a real payment.
How a purchase changes the VAT calculation
During the same VAT period, Maya's company buys supplies for its work. It pays KRW 400,000 for the supplies and KRW 40,000 of VAT, for a total payment of KRW 440,000.
Assume the purchase meets the rules for a full VAT credit and the company has the required evidence. A credit means an amount it can subtract when calculating the tax due. VAT on an eligible business purchase is called input VAT. The VAT charged on sales is often called output VAT.
With no other transactions or adjustments, the example works like this:
- The customer pays KRW 1,100,000, including KRW 100,000 of sales VAT.
- The company pays its supplier KRW 440,000, including KRW 40,000 of eligible purchase VAT.
- Subtracting the KRW 40,000 credit from KRW 100,000 leaves KRW 60,000 of VAT to keep available.
- After the supplier payment and that reserve, KRW 600,000 remains: KRW 1,100,000 minus KRW 440,000 minus KRW 60,000.
Maya now has a clearer view of the payment, but the last figure is still before other bills and income tax. It is not a calculation of her take-home pay or the company's final taxable profit.
The purchase-credit assumption matters. Article 39 of the VAT Act excludes specified purchases, including certain nonbusiness spending and purchases missing required tax-invoice information, subject to exceptions. A payment from the company account does not automatically qualify.
Keeping money available is a budgeting step. The business still needs to report the tax and pay what is due. As more sales, purchases or refunds arrive, the estimate needs updating.
The records that explain the money
A bank statement shows that money arrived or left. The accountant also needs to know why it moved. For the design project, that means the customer's agreement, what the company delivered, the relevant dates, its sales documents and the payment record.
An ordinary invoice is a bill asking a customer to pay. A Korean tax invoice, called 세금계산서, records information used for VAT. The documents serve different purposes. Sending a PDF bill with a bank account number does not by itself complete the electronic tax-invoice process.
NTS explains the prescribed electronic methods in its electronic invoice overview. Its obligation guide covers corporations and the individual businesses subject to electronic issuance. A VAT-exempt transaction may need a different document, called 계산서.
Before the first sale, Maya and the accountant should agree which document is needed, who will issue it, and when issuance and transmission to NTS must happen. If a customer pays in stages, the company keeps the agreement and each payment record. The date money arrives should not be assumed to decide every tax-reporting question.
Purchases need the same care. The company keeps the supplier's appropriate document, its payment record and a short explanation of the business purpose. If Maya buys a computer, she identifies what it is and when the company begins using it. Equipment can need different accounting treatment from supplies used up on a project.
An expense deduction is a cost the tax rules allow when calculating taxable income. An input VAT credit reduces VAT due. A purchase can raise both questions, and the answer to one does not settle the other. Recording the business purpose helps the accountant assess each.
Whose income is being taxed?
VAT is only one part of the picture. A business also needs to work out its income after relevant costs and tax adjustments. The business form determines whether that calculation belongs to an individual or a separate company.
A sole proprietor runs the business as an individual. Its business income enters that person's income-tax calculation, as described in NTS's individual income-tax guidance. Keeping business and personal spending separate makes that calculation easier to support. Moving money into a personal account does not turn a household purchase into a business cost.
A corporation has its own legal identity and tax position. The money in Maya's company account belongs to the company. Her foreign nationality does not, by itself, make it a foreign corporation for Korean tax purposes. NTS's corporate-tax overview describes the distinction through the company's circumstances.
Before Maya pays herself, she needs to explain the purpose to the accountant. Salary pays for work. A dividend distributes company profit to an owner under the applicable rules. A loan repayment returns money the owner previously lent to the company. Reimbursement repays a business expense someone covered for it. Each needs appropriate records and treatment.
This is why a useful first discussion includes both living costs and business bills. The accountant can help plan the company and personal sides, including relevant national and local taxes. Our business-form guide explains the wider choice between operating as an individual and through a company.
A routine that keeps the figures understandable
Bookkeeping is the regular recording of sales, purchases and other money movements. Reconciliation means comparing related records and explaining differences. Both become easier when the business keeps the evidence as it goes.
Maya matches the customer's bill to the KRW 1,100,000 deposit and the supplier's document to the KRW 440,000 payment. If a payment service later sends sales money after deducting a fee, she keeps its statement. The accountant can then see the sale and the fee, rather than just the smaller deposit.
The company and accountant choose a place for records and a regular handoff date. They might agree that Maya sends the previous month's folder early in the next month, answers questions about missing records and reviews an updated tax estimate. That is a practical arrangement for this example, not a legal monthly schedule for every business.
Refunds, borrowing, owner payments and overseas transactions deserve clear notes. A loan entering the account has a different purpose from a customer payment. An owner repayment has a different purpose from a supply purchase. Describing what happened is more useful than labeling every deposit “sales” and every transfer “expense.”
The business-banking guide covers access to funds and payment records. The records routine connects those movements to the work the business actually did.
Who will prepare, file and pay?
A tax return reports the information and calculation required for a tax. Filing the return and paying the amount due are separate jobs. An accountant's estimate or a saved spreadsheet still needs to become the required filing and payment.
A 세무사 is a qualified Korean tax accountant. The Certified Tax Accountant Act includes tax advice, preparing books for tax reporting and handling tax filings among the profession's functions. The service agreement should state which work is included in the fee.
Maya asks whether her agreement covers bookkeeping, VAT returns, corporate tax, relevant personal and local-tax work, and questions from the tax office. Payroll and specialist cross-border advice may need a separate scope. She also confirms the working language, contact person, fees and access to the records and filed returns.
Together they build a calendar for the company's actual tax category and accounting year. It includes record handoffs, draft reviews, filing and payment dates, and any interim obligations. NTS's VAT guidance describes different reporting arrangements for different taxpayers, so another founder's calendar may not fit.
A quiet month also deserves a check: which filings are still needed when there are few or no sales? When the business hires, changes its activity or starts a new kind of overseas payment, Maya tells the accountant before assuming the existing arrangement covers it.
Before the business pays people
A business may have tax duties when it pays someone for work. Withholding means deducting tax from a covered payment and sending it to the tax authority. NTS's withholding guidance explains that the duties depend on the income and recipient.
Before the first salary or contractor payment, the accountant needs to know who will receive it and what it is for. A familiar freelancer percentage should not be applied to every worker, company or overseas payee.
The working relationship also needs attention. Calling someone a contractor in an agreement does not settle whether they are an employee. A Korean Supreme Court decision explains that the actual arrangement matters, including control over the work and other circumstances. Questions about supervision, hours and location belong in an employment-status review.
Insurance duties need their own assessment, including pension, health, employment and work-injury insurance. The National Pension Service and National Health Insurance Service describe coverage and conditional exclusions for foreigners. Being foreign is not a blanket exemption. The business should check each worker's circumstances and those of a working founder.
When money or work crosses a border
An overseas customer's payment and a bill from an overseas supplier raise different tax questions. Before agreeing to a new arrangement, the business should give its accountant the contract, parties, countries, payment purpose and details of where the work happens.
A tax treaty is an agreement between countries that can affect the taxation of particular income. NTS's nonresident withholding guidance describes treaty rate limits and the evidence needed to apply them. An overseas address alone does not establish an exemption or reduced rate.
The founder's personal tax residence is another question. NTS's residence guidance considers residence and living circumstances. Nationality alone does not decide it. Someone with overseas income or work split between countries needs an assessment of those facts.
If a related overseas company charges the Korean business, the accountant needs the agreement and support for the price. If an overseas company has people doing business in Korea, it should ask whether that activity creates Korean tax obligations. These arrangements need specialist review beyond the simple payment example here.
What a useful first meeting should resolve
Maya brings the customer agreement, sales documents, supplier evidence and both bank records. She asks the accountant to check the VAT treatment and purchase credit, estimate other taxes, and explain how the company can pay her lawfully.
They then agree who gathers records, prepares calculations, reviews the figures, submits each return and makes each payment. They record the dates and where filing and payment confirmations will be kept. This is a hypothetical division of work, not a report of a real engagement.
The next step for a new business is to take one actual sale and purchase to its accountant. Working through those records can turn a vague concern about tax into clear decisions about available money, missing evidence and the next deadline.
Sources and scope
Official tax, statutory, court and insurance sources checked October 14, 2026. The fictional VAT example assumes a standard-rate taxable sale by a general VAT taxpayer, a fully eligible purchase credit in the same period, and no other transactions or adjustments. It does not establish an individual business's tax category, profit, filing dates, insurance coverage or treaty eligibility. This is a general introduction. Confirm actual arrangements with a qualified Korean professional and the relevant authority.
Cover: Part of a customer payment may need to be set aside for tax obligations. Cover illustration created with AI for PIN Insights.
