Introducing self-billing invoices
The approved tax reform proposal included a significant amendment to Article 71-2 of South Korea’s current VAT law. This change now allows the purchaser to issue invoices for the supply of goods and services in circumstances where the supplier cannot do so. This, in turn, enables the purchaser to claim a deduction for the relevant input VAT. However, it’s important to note that, for now, issuing self-billing invoices remains dependent on the confirmation from a district tax office per use case. The amendment is expected to enter into force starting 1 July 2023 and will apply to all supplies of goods and services, excluding VAT-exempted supplies.
How will self-billing invoices affect South Korea’s e-invoicing system?
Implementing the self-billing system is expected to expand the transactional scope of the country’s e-invoicing issuance and the scope for e-tax invoicing. This is because the self-billing transactions are in the range of e-tax invoicing and are generally very similar to those in VAT invoicing.
What businesses need to know when adopting self-billing invoices in South Korea
Ultimately, the self-billing invoice system is expected to simplify the invoicing process for businesses in South Korea. Implementing the new system can provide buyers much-needed flexibility while reducing the burden on suppliers. However, successful input VAT deduction will hinge on the buyers’ ability to issue invoices that comply with the related tax regulations. Therefore, companies may need to consider the various compliance requirements of the South Korean e-invoicing system. Some essential requirements include the following:
- E-invoices must be issued to the recipient, and the invoice data must be reported via the government portal within a day of issuance.
- Before transmitting e-invoices, suppliers must digitally sign them with an electronic signature.
- Businesses must seek confirmation from a district tax office before issuing self-billing invoices.
In summary, businesses must have the needed infrastructure and resources to comply with the overarching requirements of South Korea’s e-invoicing system.
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