Mandatory vs. Optional Fields: Ensuring Compliance for South Korea’s e-Tax Invoices
In the South Korean tax system, the legal validity of a transaction is determined by the accuracy of the data contained within the e-Tax Invoice (e-tax invoice).
Under the Value Added Tax Act (Article 32), the National Tax Service (NTS) categorizes invoice data into two groups: Mandatory Fields and Optional Fields. Understanding the difference is crucial for global enterprises to avoid automatic penalties and ensure tax deductibility.
1. Mandatory Fields (필요적 기재사항)
These are the elements that must be 100% accurate for the invoice to be recognized as a legal tax document. If even one of these fields is missing, incorrect, or omitted, the invoice is considered "invalid," leading to severe financial penalties.
Mandatory Field | Description | Why it Matters |
Supplier’s BRN & Name | The seller's Business Registration Number and legal trade name. | Identifies the tax-paying entity responsible for the sale. |
Buyer’s BRN | The recipient's Business Registration Number. | Determines who is eligible for the VAT input tax deduction. |
Value of Supply | The net amount of the transaction (excluding the 10% VAT). | The base for calculating the tax liability. |
Write Date | The date the invoice was generated and reported. | Determines the tax period in which the transaction is recognized. |
Critical Note: For the buyer, if the Buyer’s BRN is incorrect, they will be denied the Input Tax Deduction. This means the buyer must absorb the 10% VAT as a pure cost rather than a refundable credit.
2. Optional Fields (임의적 기재사항)
These fields provide additional context for the transaction. While they are highly recommended for accounting reconciliation and audit trails, an error in these fields does not invalidate the tax document.
Buyer’s Address: The physical location of the recipient.
Business Category/Type: The industry classification of the parties involved.
Item Description: Details of the goods or services provided (e.g., "Software Subscription Fees").
Quantity & Unit Price: The breakdown of how the total value was calculated.
Remarks: Any additional notes for the internal procurement or finance teams.
3. The Consequences of Errors in Mandatory Fields
The National Tax Service (NTS) uses an automated system to detect discrepancies.
Errors in mandatory fields trigger Sur-tax Penalties for both parties.
For the Seller:
Inaccuracy Penalty: Typically 1% of the Supply Value if mandatory fields are misreported.
Non-issuance Penalty: Can escalate to 2% of the Supply Value if the error is deemed as a failure to issue a valid invoice.
For the Buyer:
Deduction Denial: The most significant risk. The buyer cannot claim back the 10% VAT they paid to the seller if the invoice is legally void.
Late Receipt Penalty: If a corrected invoice is issued late, a 0.5% penalty may still apply.
4. Best Practices for Global Procurement Teams
Because the NTS system is digitally rigid, global firms should implement the following safeguards:
Validate BRNs in Real-time: Ensure the Business Registration Number of your Korean partners is active and correctly formatted before issuing an invoice.
Automate Data Mapping: Instead of manual entry, map your ERP’s "Net Amount" and "Tax Date" directly to the NTS Mandatory Fields to eliminate human error.
Synchronize Dates: Ensure the "Date of Issuance" on the e-tax invoice aligns with the revenue recognition policies of your headquarters and Korean tax law.