South Korea imposes a 1% additional tax on foreign e-service suppliers and intermediaries that miss simplified VAT registration

What changed in detail

Law No. 19931, promulgated on 31 December 2023, amended Article 60(1) of the Value Added Tax Act in two ways. The lead-in, which listed the additional taxes (가산세) imposed on a “사업자” (business operator), now reads “사업자 또는 국외사업자”, bringing non-resident business operators within it. A new item 1의2 then sets an additional tax of 1% of the total supply value from the day business began to the day before registration, where a supplier does not complete the simplified business registration (간편사업자등록) required by Article 53-2(1) and (2) by the deadline.

Article 53-2 is the registration route for electronic services supplied into Korea by foreign suppliers. Under Article 53-2(1), a foreign supplier selling electronic services directly to Korean consumers registers within 20 days of starting business; supplies to registered Korean businesses are outside it. Under Article 53-2(2), where the services are supplied through a third-party open market or payment intermediary, such as an app market, that intermediary is deemed the supplier and it is the one that must register, not the foreign seller behind it. The 1% therefore falls on whichever person owed the registration and missed the deadline. The statement of reasons describes the item as creating the power to impose an additional tax on foreign suppliers that do not complete it.

Under Article 1 of the addendum the Act took effect on 1 January 2024. Article 2 applies the new item to unregistered suppliers’ supplies of goods or services made on or after that date. The same Act also added Article 70(4) and (5), letting an individual who gave up simplified taxation return to it within three years, from 1 July 2024; the Enforcement Decree side of that rule is in kr-simplified-taxpayer-threshold-104m-2024.

What it means

This change is still in force. Article 60(1) item 1의2 of the consolidated VAT Act, in force from 2 January 2026, still sets the rate at 1%.

The practical point for a foreign supplier selling digital services directly to Korean consumers, or for an app market or payment intermediary deemed the supplier, is that late registration now costs money backwards in time: the 1% runs on every supply since business began, not from when the tax office noticed. A supplier that started selling in Korea in 2024 and registered only in 2026 faces the surcharge on two years of sales, on top of the VAT itself. An app developer selling only through such a store is not the one that registers; the store is. For whoever owes the registration, registering before the first Korean sale is the only way to keep it at zero.