Enjoy the advantages and benefits of overseas sales (1) - VAT refund

by 300cbt Team

Why overseas sales are beautiful. It's a VAT refund!

VAT refund

The advantage of selling overseas is by far the VAT refund (zero tax rate applied). As you know, products or services sold domestically include a 10% value-added tax. However, in Korea, which has been pursuing an export-oriented economic policy for several decades, a value-added tax refund system is being implemented for transactions recognized as exports to encourage exports. Of course, you can also receive a VAT refund for sales made through online marketplaces or overseas sales shopping malls. The basic conditions for receiving a refund are as follows.

  1. Business registration in Korea (individual business (general), corporate business)
  2. Data to prove overseas shipment (parcel receipt: K-Packet shipment data, tracking information to prove overseas shipment such as FedEx)
  3. Data proving overseas sales (PayPal deposit details, etc.)
When I started selling on eBay, the CEO of the company, who was a senior in the industry and an acquaintance, suffered from tremendous stress whenever the VAT reporting period came around. This company, which sold games in domestic shopping malls and open markets, laid off its employees due to internal problems and was run by a CEO and two practitioners, but sales were maintained at over 100 million won per month. Although the two of us were generating a respectable sales of KRW 100 million, we were having major concerns internally. The product being sold was a game, but the problem was that the game category was a product with a low margin, and the sales structure was such that there was almost nothing left after deducting the open market commission. In particular, the CEO's stress reached its peak when it was time to report VAT and income tax. As time went by, work got busier and sales grew, but there was no profit to reinvest, so I had no choice but to close down the business a few years later. On the other hand, in the case of our company, which received goods from this company, we were actually happy about the VAT reporting period because we received a VAT refund. We were able to create new opportunities by reinvesting the VAT refund.

​Many people tend to think of VAT refunds as a benefit for the company, but it is important to keep in mind that VAT refunds are not sales. It is extremely dangerous for VAT refund itself to become a business model.

FAQs related to business registration for VAT refund

We have summarized frequently asked questions regarding VAT refunds.

Q. Can simplified taxpayers also receive a VAT refund?
A: No. You must be registered as a general business or corporate business to receive a VAT refund.

Q. In order to receive a VAT refund, what type of business and type of business are required on the business registration certificate? What should it include?
A. When selling online, the business type (wholesale, retail) and type (e-commerce) are generally selected, so there is no need to enter trade separately in the business type for VAT refund.

Q. The supplier (wholesaler) of the goods being sold is registered as a simplified taxpayer. In this case, how can I receive a tax invoice?
A. Simplified taxpayers cannot issue tax invoices. To receive a VAT refund, you must receive an invoice from a general or corporate business.

Q. We only sell overseas. Is it necessary to report a mail order business?
A: No. If you only sell overseas, mail order business reporting is not required. However, when using Post Office EMS, you can receive an additional discount if you have registered for mail order. If you also sell domestically online, you must report your mail order business.

Additionally, if you sign up as a trade association member, you can also receive discounts on various trade-related services and international express services such as FedEx and DHL.

Benefits for export companies provided by the government

Each government ministry provides a wide variety of benefits to export companies compared to import companies, such as low-interest loans for export costs, marketing support, interpretation support, and market development projects.
sbc

▲ Small and Medium Business Corporation export marketing support project


go biz

▲ Gobiz Korea export company support project


kotra

▲ KOTRA export company-related business

In order to be certified as an export company on this site, an export declaration certificate is required. An export declaration certificate is not required for a VAT refund, but if you file an export declaration, you can participate in low-interest government loans and various export support programs in addition to VAT refund. Recently, the post office and Unipass system have been linked to automatically file export declarations when processing overseas shipments using K-Packet, greatly reducing the time and cost of export declarations. In the next post, we will discuss the specific process for export declaration.

k packet

▲ Automation of export declaration using K-Packet

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If you sell overseas, VAT refund is a benefit you must enjoy. Are you still hesitating to apply for a VAT refund because tax reporting or export reporting is cumbersome? This is a system that can be of great help to business owners in the long run, so be sure to apply for the large value-added tax refund.

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