Korean VAT: adding it, and taking it back out
Taking VAT out is division, not subtraction.
Subtract 1,100 from 11,000 and you get 9,900. That's the wrong answer. It's 10,000.
You multiplied to put it on, so you divide to take it off.
Putting it on
Multiply the net amount by 1.1. Korean VAT is a flat 10% on almost everything.
100,000 × 1.1 = 110,000This is the calculation you do at the bottom of a quote where you wrote "VAT not included".
Taking it off: this is where people slip
You received 110,000 KRW and the VAT is already inside it. What was the net amount?
Don't take 10% off. 110,000 × 0.9 = 99,000. Wrong.
net = 110,000 ÷ 1.1 = 100,000
VAT = 110,000 ÷ 11 = 10,000The 10% was calculated on 100,000, not on 110,000. Taking 10% off 110,000 removes 11,000, but the tax that actually went on was 10,000. You're out by 1,000.
The gap scales with the amount. On 55 million KRW you would be out by half a million.
Two things to remember
- total ÷ 11 = VAT
- total ÷ 1.1 = net
Dividing by 11 looks odd until you see why: the total is 11/10 of the net, so the tax is exactly one eleventh of what you received.
Checking is easy. Multiply the net back by 1.1 and you should land on the original total.
Amounts you'll see often
| Total | Net | VAT |
|---|---|---|
| 11,000 | 10,000 | 1,000 |
| 55,000 | 50,000 | 5,000 |
| 110,000 | 100,000 | 10,000 |
| 330,000 | 300,000 | 30,000 |
| 550,000 | 500,000 | 50,000 |
| 1,100,000 | 1,000,000 | 100,000 |
When it doesn't divide evenly
If the total is 100,000 the net comes to 90,909.09… In practice you round to the won: 90,909 and 9,091. What matters is that the two add back up to the total.
Card receipts in Korea print it this way too: the net and the VAT appear separately near the bottom, so you can always check your arithmetic against the receipt.
How to write it on a quote
This is where arguments start. If your quote just says "1,000,000 KRW", the sender assumes another 100,000 goes on top and the client assumes that's the whole number.
So always write one of these, never the bare figure.
- VAT not included net 1,000,000 / VAT 100,000 / total 1,100,000
- VAT included total 1,000,000 (net 909,091 / VAT 90,909)
Write all three numbers and you can copy them straight onto the tax invoice later. An extra line is cheaper than a phone call.
What this does not cover
- Receipts from a simplified taxpayer are calculated at a different rate
- Some things are exempt: books, unprocessed agricultural and marine produce, medical treatment
- How much input tax you can deduct is a judgment call, not arithmetic
This is only the arithmetic. If filing or deductions are involved, ask an accountant.
Both directions come back together: one amount typed in, and the figure with VAT added sits next to the figure with VAT stripped out. Discounts and "what percent went up from 120,000 to 150,000" belong to the same panel. A quote with several lines is a job for the running calculator instead, which reads the numbers out even when you type labels beside them and keeps the total in view underneath.