A Comprehensive Guide to South Korea’s e-Tax Invoice System

For multinational corporations, South Korea’s tax infrastructure is often cited as one of the most digitally advanced and rigorous in the world.
At the heart of this system is the e-Tax Invoice, locally known as e-tax invoice.

Unlike the optional digital invoicing found in many other jurisdictions, Korea’s system is a mandatory, real-time reporting framework that serves as the primary legal evidence for all B2B transactions.

1. Definition and Legal Framework

An e-Tax Invoice is a tax invoice issued in a standardized electronic format (XML) and transmitted to the National Tax Service (NTS).

Under the Value Added Tax Act, all corporate entities and individual businesses exceeding a specific revenue threshold are legally required to issue invoices through this system.
It is more than a commercial bill; it is a government-validated certification of a taxable transaction.

2. Historical Context: From Paper to Real-Time Data

The NTS introduced the mandatory e-invoicing system in 2011.
Before this transition, paper invoices were the norm, which often led to administrative delays, lost documents, and tax evasion through "ghost" transactions.

The digital transition allowed the Korean government to:

• Secure real-time transparency in B2B transactions.

• Automate the VAT filing process for businesses.

• Establish a centralized database of the nation’s economic activity.

  

3. Mandatory Fields: The "Required Data" for Legal Validity

In South Korea, an e-tax invoice must contain specific information known as Mandatory Fields (필요적 기재사항).
If any of these are missing or incorrect, the invoice is considered legally void, even if the transaction actually occurred.

The Four Essential Pillars:

1. Supplier’s Information: The Business Registration Number (BRN) and the legal trade name of the entity.

2. Buyer’s Information: The Business Registration Number (BRN) of the recipient.

3. Value of Supply: The net transaction amount before the 10% Value Added Tax (VAT).

4. Write Date: The actual date the transaction is recorded and reported to the NTS.

Note: While buyer addresses and item descriptions are often included, they are categorized as "Optional Fields" and do not affect the legal validity of the tax document in the same way the four fields above do.

4. Transmission and Validation: The 24-Digit Approval Number

A unique feature of the Korean system is that an invoice is not considered legally "issued" simply because it was sent to the buyer.
Its legal life begins only when it is transmitted to and accepted by the NTS server (Hometax).

Upon successful transmission, the NTS server generates a 24-digit Approval Number.
This unique identifier is the ultimate proof of the transaction's legitimacy. Both the buyer and the seller use this number during their quarterly VAT reporting to cross-verify the data.

5. Compliance and Penalties

The NTS enforces strict deadlines. Generally, an invoice must be issued by the time of supply and transmitted to the NTS by the following day. Failure to comply results in Automatic Sur-tax Penalties:

• Late Issuance/Transmission: Penalties typically range from 0.3% to 1% of the supply value.

• Non-Issuance or False Entry: Penalties can escalate to 2% of the supply value.

• Buyer’s Risk: If a buyer receives an invalid invoice (e.g., one missing mandatory fields), they may be denied Input Tax Deductions, effectively increasing their tax burden by the full 10% VAT amount.

6. Global Comparison: The "Korean Difference"

The South Korean e-Tax Invoice system is a highly automated, centralized, and legally rigid framework.
For global firms, ensuring the accuracy of the Mandatory Fields and obtaining the NTS Approval Number are the most critical steps for maintaining compliance in the Korean market.

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