Send Invoice in South Korea

South Korea's e-invoicing system, officially known as the e-Tax Invoice, is a mandatory electronic process for businesses to issue and report VAT invoices to the National Tax Service (NTS). Introduced in 2011, this system aims to enhance transparency, improve tax audit efficiency, and prevent fraud. The legal framework for e-invoicing is primarily governed by the Value Added Tax Act.

• Mandatory Issuance: All corporate taxpayers have been required to issue e-invoices since 2011.
• Threshold for Individual Businesses: As of July 1, 2023, businesses with annual revenue exceeding KRW 100 million (approximately USD 83,000 or EUR 73,000) in the preceding year are obligated to generate and submit electronic invoices to the NTS. This threshold was further lowered to KRW 80 million for sole proprietors in 2024.
• Scope of Transactions: The e-invoicing mandate applies to both Business-to-Business (B2B) and Business-to-Government (B2G) domestic transactions. International transactions and exports are generally outside the scope of the main mandate.

The NTS acts as the central authority for this system, requiring real-time or near real-time reporting of e-invoices.

Sending e-invoices in South Korea involves a structured workflow to ensure compliance with NTS regulations. The process is designed for efficiency and real-time reporting.

Here's a step-by-step guide to sending e-invoices:

1. Obtain a Digital Certificate: Before issuing e-invoices, businesses must acquire a digital certificate. This certificate, often a Public Key Infrastructure (PKI) certificate, is essential for authenticating the invoice issuer and electronically signing the e-invoice. Businesses can obtain one from a certified Korea Information Certification Authority or, in some cases, use a certificate generated by the NTS.
2. Generate the E-Invoice: Suppliers can generate e-invoices using several methods, including the free government portal, www.esero.go.kr, a certified ASP, their own ERP or accounting system, or the AVRS telephone network for limited internet access.
3. Include Mandatory Information: The e-invoice must contain specific mandatory data fields, such as the supplier's and buyer's tax registration numbers, names, the value of supply (including VAT), and the date of preparation.
4. Electronically Sign the Invoice: The generated e-invoice must be digitally signed using the obtained digital certificate to ensure its authenticity and integrity.
5. Transmit to the NTS: Signed e-invoices must be reported to the National Tax Service (NTS) portal. This is a real-time or near real-time reporting requirement, often referred to as a "pre-clearance" model.
6. Send to the Buyer: After transmission to the NTS, the e-invoice is typically sent to the buyer's registered email address.

South Korea's e-invoicing system relies on specific technical standards to ensure uniformity and efficient processing by the National Tax Service (NTS). Understanding these specifications is crucial for compliance.

• Required E-Invoice Format: E-invoices must be generated and submitted to the NTS in an XML format. This standardized format ensures consistency and allows for automated processing.
• Mandatory Data Fields: Each e-invoice must include specific mandatory information for legal validity, such as the supplier's tax registration number, the buyer's tax registration number, the total value of the supply including VAT, and the date of preparation.
• Electronic Signature: A mandatory electronic signature is required to guarantee the authenticity, integrity, and non-repudiation of the e-invoice, using a digital certificate issued by a Public Certification Authority or an e-tax certificate from the NTS.
• Archiving Requirements: Issued e-invoices must be stored digitally for a period of at least five years from the end of the issuing fiscal year.

Adhering to South Korea's e-invoicing regulations is critical, as non-compliance can lead to significant penalties for businesses. The NTS enforces strict deadlines and requirements.

• Non-Issuance or Using Non-Compliant Invoices: If a supplier fails to issue an e-tax invoice or issues it in a non-compliant format, a penalty of 2% of the supply price is typically imposed on both the supplier and the buyer.
• Late Transmission to NTS: If an e-invoice is not transmitted to the NTS by the 10th of the following month, a penalty of 1% of the supply price may be applied.
• False Entry: Penalties for false entries can escalate to 2% of the supply value.

Common compliance mistakes and how to avoid them include missing mandatory fields, incorrect formats, failure to obtain a digital certificate, delayed transmission, and inadequate archiving.