[News Terms] Expanding the Scope of 'Simplified Taxation' to Reduce Tax Burden on Small Business Owners

Increase to less than 104 million won from July
Simplified taxpayers up 74.1% compared to last year

The National Tax Service (NTS) will expand the scope of 'simplified taxation (簡易課稅)'. On the 18th, the NTS announced that it plans to implement various improvements related to value-added tax (VAT), including expanding the application scope of simplified taxation from July to reduce the tax burden on small business owners and increase transaction transparency.

'Simplified taxation' is a system that allows small-scale individual business owners to easily fulfill their VAT obligations. It refers to the taxation imposed on individual business owners (simplified taxpayers) whose supply price of goods and services (including VAT) in the previous year is less than 48 million KRW.

When conducting a business subject to VAT, one registers as either a general taxpayer or a simplified taxpayer. General taxpayers are subject to a 10% tax rate, can deduct the full amount of VAT from purchase tax invoices received when buying goods, and must issue tax invoices. Typically, individual business owners with an annual sales amount (including VAT) of 80 million KRW or more fall into this category.

Simplified taxpayers are exempt from the obligation to issue tax invoices and are subject to a lower tax rate of about 1.5% to 4%. Individual business owners with annual sales (including VAT) under 80 million KRW are classified as simplified taxpayers. In particular, pure simplified taxpayers with annual sales (including VAT) under 48 million KRW are completely exempt from VAT.

From July 1 this year, the NTS will raise the simplified taxation application threshold from the previous 80 million KRW to less than 104 million KRW. However, for real estate rental businesses and taxable entertainment venues, the threshold remains unchanged at less than 48 million KRW.

Additionally, the NTS revised the exclusion criteria for simplified taxation industries (NTS notice) so that from July 1, skin care services (skin management) and other beauty services (nail art) can apply simplified taxation regardless of business area.

Previously, skin and other beauty businesses located in special or metropolitan cities with a business area of 40㎡ or more could not apply simplified taxation even if their sales were low. Going forward, businesses with a supply amount of less than 104 million KRW in the previous year can apply simplified taxation.

Accordingly, the number of businesses notified as eligible for tax type conversion (general → simplified) as of July 1 this year is 249,000, a significant increase (106,000, 74.1%↑) compared to last year (143,000), and individual notices of tax type conversion have been sent to these businesses.

If businesses eligible for simplified taxation conversion wish to continue as general taxpayers due to reasons such as issuing tax invoices, they must submit a simplified taxation waiver report to the competent tax office by June 30.

This content was produced with the assistance of AI translation services.