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Invoice Types and Requirements in Korea

The Korean economy is one of the largest financial systems in existence. By in large, the financial system runs with the aid of technology. This means that a large section of economic activities occurs electronically. Therefore, financial documents must be in digital form. As a result, most invoices in Korea are in electronic form. Nonetheless, physical invoices are used when needed.

Several invoices are used in Korea. Each is used following specific requirements. Some of the types of invoices used in Korea are discussed below.

Purchase Invoice

In Korea, a seller is required by law to give a purchase invoice to a buyer of products or services. Typically, a purchase invoice must contain the quantity, description, and cost of products or services as agreed between the two parties. The provision of this document is a requirement as it eases the activities of the tax authorities by simplifying the tax remittance process and limiting tax evasion. Additionally, this document serves as proof of the sale of goods or services.

Sales Invoice

Unlike a purchase invoice, a sales invoice is a type of invoice that is issued after the delivery of goods or provision of services. Therefore, a client receives a sale invoice from a supplier or seller after goods have been received. Just like in the case of the purchase order, Korean law requires that a sales invoice contains detailed information about the goods and services received. Also, the quantity and price of each item must be written as well.

Commercial Invoice

Commercial invoices are particularly important in international trade. This is due to the large number of agricultural activities that occur within the country. When agricultural goods are prepared for shipment abroad, a business must prepare a commercial invoice to be used for clearance at the point of exit. As a standard invoice, a commercial invoice must contain important information such as description and quantity of goods to be exported. This requirement is important as it is required for the payment of export taxes.

Timesheet Invoice

A timesheet invoice is another type of invoice that is used in Korea. It lets employers keep track of the time workers spends working while on the job. This document helps protect both employers and employees as the right amount of money exchanges hands. Employers get to pay their staff the exact amount of money they have to work for. On the other hand, employees get the right amount of money for the work they offer. To ensure proper compliance, workers are required to clock in while getting into work.

The Korean Government requires all employers to prepare a periodic timesheet invoice for the remittance of taxes to the authorities.

Credit Invoice

Credit invoices are mostly used to ease the exchange of goods and services between customers and sellers. This document is used to offer refunds and discounts to clients if a mistake occurs in the process of supplying goods or services. As a result, the Korean Government requires a credit invoice to be generated for payment of taxes.

Invoices for Businesses in Korea

A business must obtain a digital certificate to issue an electronic tax invoice. That is done by registering with the Korean tax authority, the National Tax Service (NTS).

Moreover, the business entities need the customer’s tax registration certificate and business email address. The businesses then use the details on that customer certificate to create the customer’s invoice.

E-Tax Live Reporting

In 2011, South Korea introduced electronic invoicing of taxes, and in 2014, it became a requirement for most business entities. Moreover, all VAT registered businesses must submit their invoices to the National Tax Service (NTS).

They can do it using the following methods:

  • Use the eSero free portal provided by the tax office to upload invoices.
  • Outsource the task to a licensed e-invoice service Application Service Provider (ASP).
  • Use a digital signature to create an in-house e-invoice accounting system.
  • Submit e-invoices using the AVRS telephone system.
  • Issue the electronic invoices offline by visiting a local tax office.

Sending the Invoice to the Customer and NTS

Once they create a digital invoice, they can send it to the customer via email. Furthermore, the business has to send a copy of that electronic invoice to the NTS. Otherwise, a monthly batch of the invoices should be sent by the 10th of the following month.

If a supplier does not issue an invoice or issue one in paper form, then the NTS can impose a penalty of 2% of the value of the goods supplied. Both parties will pay the fine.

Mandatory and Optional Invoice Details

All invoices must include the supplier’s name and registration number, the buyer’s name and tax registration number, the VAT amount, the tax base, and the date the invoice was issued. These details make it easy for the tax authority to assess the tax due date and who should pay it.

Other optional details that a business can include in an electronic invoice are:

  • Address of the supplier
  • Business name and address of the supplied entity
  • Item supplied
  • The unit price and quantity of the supplies

When to Issue an Electronic Invoice to the Customer

The best time to use a Tax invoice is when the products are delivered. Once a business issue and circulates an invoice, no one is allowed to alter its details.

The exception is if there is a Presidential Decree to modify the invoice. This makes it necessary to use invoicing software to minimize invoicing errors.

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