Advantages of Overseas Exports VAT Refund

Value-added tax is a tax borne by the final consumer, and all businesses must pay value-added tax in accordance with the reporting period. However, overseas sales are recognized as exports, and can be refunded with the small business rate. This is one of the great advantages of overseas sales. In order to be recognized as a small business rate, you must prepare and submit the small business rate attachment documents published by the National Tax Service in accordance with the reporting period.

List of attached documents for small business tax (Source: National Tax Service)

VAT reporting period

• Self-employed: January, July (VAT refund: Report by the 25th of the month and receive a refund on the 10th of the following month)
• Corporate business: January, April, July, October (VAT refund: Report by the 25th of the month and receive a refund on the 10th of the following month)

The VAT reporting period is a time of mixed emotions

" When I was working as an employee, payday felt so far away, but now that I am in the position of paying salaries, in the blink of an eye, it is payday for my employees, and before I know it, it is VAT filing day."

In the case of domestic sellers, many business owners sigh because of the VAT they have to pay when the VAT reporting period approaches. However, overseas sellers have to worry about how to reinvest the VAT they receive as a refund. It's a conflicting concern.

In order to be recognized as an export, an export declaration is required.

In order to apply for the small business rate (VAT refund), you must submit the small business rate attachment documents mentioned above. The most common of the small business rate attachment documents is the export performance statement, which can only be written if an export declaration has been made. For information on export declarations, please refer to the post Enjoying the Advantages and Benefits of Overseas Sales (2) - Export Declaration .

▲ Export Performance Statement Format

If you write an export performance statement based on the export declaration content, you can easily write the small business rate attachment documents and also apply for an early VAT refund. Generally, individual business owners file a VAT report every 6 months and corporate business owners file a VAT report every 3 months and receive a refund the following month, but for export declarations, you can apply for a VAT refund every month, so you can receive a VAT refund every month. For businesses with large sales, this can be a great help in managing funds.

VAT refund is based on export declaration, but...

Can I get a VAT refund even if I don't file an export declaration? Yes, it is possible. For sellers who don't file an export declaration , a parcel receipt and a foreign currency deposit receipt (foreign currency deposit certificate) can be used as a substitute for the export performance statement. A parcel receipt is a document issued by a post office, overseas shipping company, etc., and must include a tracking number and the country of departure. For example, if a seller sends a product as a post office small package, the receipt can be recognized as a parcel receipt because the tracking number and the country of destination are indicated on the receipt. If you use the K-Packet service operated by the post office for online export sellers or a special delivery company such as Fedex, you can also use an overseas shipment list that can be downloaded from the web as a substitute for the parcel receipt.

For foreign currency deposits, you can submit a PayPal deposit history for eBay sales, or a deposit history provided by a virtual account service provider such as World First or Payoneer for Amazon sales.

Medicine goes to the pharmacist, taxes go to the tax accountant.

Since there is no published format for writing attachment documents for the small business rate, it is necessary to coordinate them according to the company's situation, so it is necessary to receive confirmation and accounting from a tax accountant. Export declaration work is online, so it can be sufficiently operated in-house, but tax processing requires not only VAT reporting, but also income tax (corporate tax in the case of corporations), four major insurances, and settlement, so it is better to receive the services of a professional tax accountant rather than internal personnel. Recently, the number of professional tax accountants who provide services specialized for online sellers has increased significantly. Selection and concentration are the basics for success in online sales. Leave tax processing to a tax accountant, and sellers should focus on marketing, customer service, and business expansion.

Good news! Get your VAT refund

Once the VAT return processing is completed, the National Tax Service will send you documents related to the refund by mail. The mail will contain details on the refund amount and how to receive it. You can receive the refund directly at the post office, or you can register a refund account and receive it in your account. Once you register an account, the next payment amount will be automatically deposited, which is convenient.

Tax Tips for Foreign Online Businesses

• Use only one business (corporate) card for expense processing
• Most card companies do not give points for shipping costs, but Hyundai (Red) card gives points for shipping costs.
• Don't organize your tax information all at once during the VAT reporting period, but organize it on a set date each month.

FAQs about VAT refunds

Q: Is it possible to get a VAT refund even if I don't have a business?
A: No. The VAT refund system is implemented to encourage exports by individual business owners and corporate business owners registered in Korea, so you must be registered as a business owner.

Q: I am a small business owner. Can I get a refund?
A: It is not possible. Only individual business owners and corporate business owners can apply for a refund.

​Q: My current overseas sales are small. Do I really need to file a tax return?
A: Tax reporting is not optional, but a duty for business owners. In the case of exports, there is a great benefit of VAT refunds, and it is advisable to file an export declaration in order to be recognized as an export company. If recognized as an export company, you can also participate in various national support projects (Enjoying the advantages and benefits of overseas sales (1) - VAT refunds).

Q: Are there VAT refund systems in other countries?
A: In the case of the United States, there is no refund system for overseas exports. Singapore and Hong Kong, which are representative trading countries, do not impose taxes on overseas income, so neither VAT nor income tax are charged for overseas sales.

Q: I sell domestically and also overseas. How do I report this?
A: You can organize and submit domestic sales data as domestic sales data, and overseas sales data as overseas sales data.
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No report, no benefit. We hope you will enjoy the benefits of export declaration and VAT refund for overseas sales.