Do I Charge Korean VAT When Billing an Overseas Customer?

Not long ago, a client reached out to us. They were doing market research in Korea for a customer based overseas, and the first invoice was about to go out. Should they add 10% Korean VAT?

The short answer: zero-rating if the conditions are met, 10% if not. Zero-rating means 0% VAT on the invoice while you keep your input VAT credits. The catch is that having an overseas customer alone doesn't make it 0%.

Korean VAT law zero-rates only certain services supplied from Korea to overseas customers (VAT Act Art. 24(1)3; Enforcement Decree Art. 33(2)1). Three basic conditions, plus one more for professional services:

1. Your overseas customer is a non-resident or foreign corporation with no place of business in Korea

2. The service is on the statutory list: professional services such as market research and software development, among others

3. The fee is paid in foreign currency and received through a Korean bank. Direct remittance, offsetting against payables, and certain card payments also qualify (keep the remittance proof)

4. For professional services (including market research), business support services, and investment advisory: reciprocity applies. The customer's country must grant Korean businesses the same exemption, or have no VAT-type tax at all (Decree Art. 33(2)1 proviso). It varies by country, so check before the invoice goes out, not at filing time.

Miss any one of these and it's 10%. Get it wrong, and you'll owe the VAT later, with penalties on top.

In this case, we confirmed that the customer's country qualified for reciprocal exemption, and the invoice went out at 0%. Two practical notes: the payment proof must be submitted with the VAT return as zero-rate supporting documentation (Decree Art. 101), and no Korean tax invoice is required for this type of supply (Decree Art. 71(1)5)—a commercial invoice and the payment records are enough.

If you've started billing overseas customers, run this check once before the first invoice. Not sure how a condition applies to your situation? Reach out through our contact page before that first invoice goes out.

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By JH Kim, Korean CPA (KICPA) · June 2026

This article is for general information only and is not tax or legal advice on any specific matter. Tax outcomes depend on the particular facts of each case. Accounting Corporation YOON accepts no liability for any action taken in reliance on this article. Always obtain individual professional review before acting. Based on Korean law in force as of June 2026; subsequent amendments may affect its accuracy.