e-Invoice in South Korea: Timeline, Guidelines, Process, and Steps for Implementation

South Korea has taken a major step in digitizing its tax system with e-Invoicing, officially known as e-Tax Invoice in South Korea. Introduced in 2011, businesses must issue and report VAT invoices electronically through the National Tax Service (NTS), ensuring greater efficiency in tax audits and fraud prevention.

Initially applicable to large corporations, the e-Tax Invoice mandate has gradually expanded with lower thresholds in 2012, 2014, 2019, 2022, and 2023. The last amendment was in July 2023, where businesses with annual revenue exceeding KRW 100 million were required to generate and submit electronic invoices to the NTS for clearance.

This guide provides an overview of South Korea’s e-Invoice system, including its regulatory framework, compliance process, and how businesses can integrate e-Invoicing seamlessly.

What is e-Tax Invoice in South Korea?

South Korean e-Tax Invoice is an obligatory electronic process whereby businesses present and report VAT invoices electronically to the National Tax Service (NTS). It was introduced in 2011 for transparency and consistency in taxation. e-Tax Invoices have to be drafted in XML format, encrypted with Public Key Infrastructure (PKI), and reported to the NTS immediately after issuance.

e-Tax Invoice Implementation Timeline

South Korea has been following e-Tax Invoice since 2011, followed by a phased approach. Here is the implementation timeline: 

e-Tax Invoice Process in South Korea

The e-Tax Invoice process in South Korea follows these key steps:

• Invoice Generation: Suppliers can use the free government portal, www.esero.go.kr, with the authentication certificate to issue and distribute e-Tax Invoices in South Korea. Alternatively, they can use an Application Service Provider (ASP) or an ERP system at their expense. 
• Mode of Generation: Invoices are generated in XML form and electronically signed with Public Key Infrastructure (PKI).
• Invoice Release: The e-Tax Invoice is released to the buyer's registered email.
• Submission to NTS: Signed invoices are submitted to the National Tax Service (NTS) portal. Businesses should register with the NTS portal and obtain standard authentication from the National IT Industry Promotion Agency (NIPA).
• Reporting: Invoices should be reported immediately after the issuance (within the next day) or in batches by the 10th of the following month.
• Electronic Signature: An electronic signature is mandatory to complete the procedure. Businesses can either obtain one from the Korea Information Certification Authority or use the certificate generated by the NTS. 

Information to be Filled Out in a Tax Invoice

An e-Tax Invoice includes both mandatory and optional fields.

Mandatory Information:

• Tax number, supplier’s name
• The buyer’s tax number (or ID/resident registration number)
• Value of supply, including VAT amount
• Date of preparation

Optional Information:

• Supplier’s address
• Supplied party’s name, company name, address
• Item supplied
• Unit price, quantity
• Date of delivery, other considerations

e-Tax Invoice Compliance Guidelines

Businesses should follow these mandatory e-Tax Invoice guidelines: 

• XML Format: Invoices must be submitted to the NTS in XML format for consistency.
• Digital Signature: A mandatory digital signature ensures invoice authenticity.
• Archiving: e-Tax Invoices must be stored digitally for five years.
• Invoice Issuance Methods:
  • Free eSero portal (www.esero.go.kr)
  • Certified Application Service Provider (ASP)
  • Business accounting systems with a digital certificate
  • AVRS telephone network
  • Local tax office (offline)

Who Needs to Comply with e-Tax Invoice in South Korea?

The following businesses meeting specific criteria must follow e-Tax Invoice regulations for all the local transactions: 

• Businesses earning over KRW 100 million must comply, regardless of whether they’re a sole proprietor or opting for simplified taxation. 
• All VAT-registered businesses must submit e-Tax Invoices via the NTS.
• Suppliers dealing with other businesses (B2B transactions). 
• Suppliers dealing with government agencies (B2G transactions)

Penalties for Non-Compliance

Failure to adhere to the e-Tax Invoice compliance attracts the following penalties: 

Benefits of e-Tax Invoice in South Korea 

Complying with the e-Tax Invoice can bring in a lot of benefits for the businesses in South Korea, such as: 

• Suppliers receive a tax credit of 100 won per issuance (up to 1 million won per year).
• No need to print or store invoices once they are transmitted to the NTS.
• Third parties can verify invoices via the “Third Party Checking” feature on eSero.
• Eliminates the need to create a summary list of issued and received invoices.
• Ensures compliance, reduces paperwork, and streamlines tax reporting.

How can ClearTax help a business with e-Tax Invoice in South Korea?

ClearTax, a reliable e-Tax Invoice solution provider, ensures business compliance with South Korea's e-Tax Invoice compliance by:

• Seamless ERP & POS Integration: Automatically generates invoices and transmits them to the NTS.
• Real-time Compliance Verifications: Checks whether the invoices adhere to South Korea's e-Tax standards.
• Cloud-Based e-Tax Invoice Portal: Allows easier tracking, reconciliation, and management.
• Automated Reporting & Compliance Alerts: Prevents penalties for late or inaccurate filings.

Conclusion

South Korea's e-Tax Invoice requirement obligates companies to issue and present invoices electronically through the National Tax Service (NTS). It encourages accuracy, eliminates errors, and helps companies evade penalties. Using a secure e-Tax Invoice solution like ClearTax, companies can streamline compliance, issue invoices easily, and stay out of trouble.