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2025 Korea Tax Guide: VAT Refund, Income Tax Filing & Foreigner Tax Benefits

Introduction

As of 2025, South Korea has introduced several updates in VAT, digital platform reporting, and income tax rules. For foreigners—whether short-term visitors, expatriates, or business operators—it is vital to understand how to claim VAT refunds, comply with VAT obligations, and properly file annual income tax. This guide provides the **latest confirmed rules**, practical steps, and key changes that affect foreign individuals and entities in Korea.

VAT Refund for Foreign Tourists (Tax-Free Shopping)

Eligibility in 2025

  • You must be a **non-resident** (staying less than 6 months in Korea). ([Traveloka](https://www.traveloka.com/en-sg/explore/tips/the-complete-korea-tax-refund-guide-for-international-travellers-trp/498210?utm_source=chatgpt.com))
  • Purchases must be made at **registered tax-free shops**. ([Creatrip](https://creatrip.com/en/blog/414?utm_source=chatgpt.com))
  • Minimum purchase: **KRW 15,000 per receipt (VAT included)**. ([Traveloka](https://www.traveloka.com/en-sg/explore/tips/the-complete-korea-tax-refund-guide-for-international-travellers-trp/498210?utm_source=chatgpt.com))
  • Goods must be exported within **3 months** of purchase. ([Creatrip](https://creatrip.com/en/blog/414?utm_source=chatgpt.com))
  • Cosmetic surgery VAT refunds for medical tourists are being reconsidered—policy changes may restrict or abolish this scheme after 2025. ([Korea Biomed](https://www.koreabiomed.com/news/articleView.html?idxno=28501&utm_source=chatgpt.com))

Refund Process

  1. At purchase, present your passport and request a **VAT refund receipt**.
  2. Some stores allow **immediate refunds** at the point of sale within set limits. ([Creatrip](https://creatrip.com/en/blog/414?utm_source=chatgpt.com))
  3. At departure (airport/seaport), present goods, receipts, and passport at the refund counter or self-service kiosk. ([Creatrip](https://creatrip.com/en/blog/414?utm_source=chatgpt.com))
  4. Refunds can be received in **cash, credit card reversal, or via refund operator** after customs validation.

⚠️ Refunds are subject to service charges and fees, so the actual refunded amount is slightly less than the 10% VAT. ([Creatrip](https://creatrip.com/en/blog/414?utm_source=chatgpt.com))

VAT Obligations for Businesses & Foreign Entities

Standard VAT Rules (2025)

Korea applies a **10% standard VAT rate**. Businesses must file VAT returns quarterly, with deadlines on the **25th of the month** following each quarter. ([PwC Tax Summaries](https://taxsummaries.pwc.com/republic-of-korea/corporate/other-taxes?utm_source=chatgpt.com))

New Digital Platform VAT Reporting (Effective July 2025)

From **July 1, 2025**, foreign **digital service providers and intermediaries** (online platforms, marketplaces, payment processors) must submit **detailed transaction reports** to the Korean tax authorities. ([VATupdate](https://www.vatupdate.com/2025/05/19/south-korea-enforces-vat-reporting-for-foreign-digital-platforms-starting-july-2025/?utm_source=chatgpt.com)) Failure to comply may lead to penalties. ([PwC](https://taxsummaries.pwc.com/republic-of-korea/corporate/other-taxes?utm_source=chatgpt.com))

VAT Refund for Foreign Companies

Foreign entities may claim VAT recovery under Korea’s **reciprocity principle** (allowed only if their home country grants similar benefits to Korean firms). Applications require original invoices, proof of business activity, and export documentation. ([NTS](https://www.nts.go.kr/english/main.do?utm_source=chatgpt.com))

Income Tax Filing for Foreign Residents

Residency Rules

  • Stay **183+ days** in Korea → considered a **resident**, taxed on **worldwide income**. ([NTS](https://www.nts.go.kr/english/main.do?utm_source=chatgpt.com))
  • Stay <183 days → **non-resident**, taxed only on **Korean-sourced income**. ([NTS](https://www.nts.go.kr/english/main.do?utm_source=chatgpt.com))

Filing Period

  • Tax year: **January 1 – December 31**.
  • Filing: **May 1–31** of the following year (e.g., file 2024 income during May 2025). ([NTS](https://www.nts.go.kr/english/na/ntt/selectNttInfo.do?bbsId=30698&mi=10788&nttSn=1342425&utm_source=chatgpt.com))
  • NTS publishes an **annual English tax guide for foreigners**. ([NTS Guide 2025](https://www.nts.go.kr/english/na/ntt/selectNttInfo.do?bbsId=30698&mi=10788&nttSn=1342425&utm_source=chatgpt.com))

Flat Tax Regime (Special for Foreigners)

Foreign professionals may opt for a **flat 19% tax rate** on employment income (excluding local surtax), instead of progressive rates. ([PwC](https://taxsummaries.pwc.com/republic-of-korea/individual/income-determination?utm_source=chatgpt.com)) - Valid for those who started work in Korea **before Dec 31, 2026**. - Applies for **20 years** from first work day. - ⚠️ Choosing this regime means **no deductions/credits** are available.

Steps to File (via Hometax)

  1. Log into **Hometax (국세청)** portal or visit a tax office. ([NTS](https://www.nts.go.kr/english/main.do?utm_source=chatgpt.com))
  2. Declare all income: wages, business, dividends, capital gains, interest.
  3. Upload withholding tax certificates and deduction evidence (insurance, donations, education, etc.).
  4. Pay additional tax or claim refunds if overpaid. ([NTS](https://www.nts.go.kr/english/na/ntt/selectNttInfo.do?bbsId=30698&mi=10788&nttSn=1342425&utm_source=chatgpt.com))
  5. File a correction claim if adjustments are needed after submission.

2025 Tax Reform Highlights

  • Foreign companies claiming **treaty benefits** (reduced withholding on dividends, interest, royalties) must now submit an official **Application for Entitlement**. ([RSM Korea](https://www.rsm.global/korea/en/news/tax-reform-act-2025-summary-key-highlights-foreign-invested-entities-0?utm_source=chatgpt.com))
  • Stricter compliance for liaison offices; non-submission of reports may incur fines up to **KRW 10 million**. ([RSM Korea](https://www.rsm.global/korea/en/news/tax-reform-act-2025-summary-key-highlights-foreign-invested-entities-0?utm_source=chatgpt.com))
  • Global minimum tax (Pillar Two – IIR, UTPR) phased in, affecting multinational enterprises. ([IBA](https://www.ibanet.org/document?id=tax-country-report-korea-2025&utm_source=chatgpt.com))
  • Foreign digital platforms face **mandatory VAT transaction reporting** from July 2025. ([VATupdate](https://www.vatupdate.com/2025/05/19/south-korea-enforces-vat-reporting-for-foreign-digital-platforms-starting-july-2025/?utm_source=chatgpt.com))

Tips for Foreigners

  • Always keep **invoices, contracts, and tax receipts** for at least 5 years.
  • Use the official **NTS English guide** for filing reference. ([NTS](https://www.nts.go.kr/english/na/ntt/selectNttInfo.do?bbsId=30698&mi=10788&nttSn=1342425&utm_source=chatgpt.com))
  • Consider **double tax treaties** to avoid double taxation. ([PwC](https://taxsummaries.pwc.com/republic-of-korea/individual/tax-administration?utm_source=chatgpt.com))
  • Check eligibility for deductions/credits if using the standard progressive rates.
  • Submit filings **on time** to avoid late penalties (up to 20% of unpaid tax). ([PwC](https://taxsummaries.pwc.com/republic-of-korea/individual/tax-administration?utm_source=chatgpt.com))

Conclusion

In 2025, VAT refunds, business VAT obligations, and foreigner income tax rules in Korea have become stricter and more structured. Whether you are a tourist seeking a VAT refund, a business facing VAT reporting, or an expat filing income tax, staying informed about the **latest NTS guidance** and reforms is essential. For tailored advice, always consult a tax professional or official NTS resources.

Tags: Korea VAT refund 2025, foreigner tax guide Korea, income tax filing Korea, Korean Hometax, flat tax 19% Korea, expat taxes Korea, VAT refund Korea, Korea digital platform tax 2025, treaty benefits Korea tax, Korean tax reform 2025

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