1.52 Million Individual Business Owners Facing COVID-19 Financial Difficulties Exempt from Paying VAT in April

Excluded from Preliminary Notification by National Tax Service Authority... Final Payment in July

[Sejong=Asia Economy Reporter Kim Hyunjung] Small business owners who had difficulties operating due to the impact of COVID-19 do not have to pay the 'preliminary value-added tax (VAT)' in April. The National Tax Service announced on the 8th that from this year, the preliminary VAT notification system will be applied to small-scale corporate businesses.

In addition to individual general taxpayers, small-scale corporate businesses with a total supply value of less than 150 million KRW are exempt from the obligation to file preliminary reports and only need to pay the notified preliminary VAT amount for the first term (January to June) of this year. The number of individuals and corporations applicable to this is 880,000 and 160,000 respectively.

560,000 corporate businesses subject to the reporting obligation must file and pay the first term preliminary VAT by the 26th. With the exemption of reporting obligations for small-scale corporations, the number of taxpayers required to report this year is 410,000 fewer than in the first quarter of last year.

1.52 million individual business owners suffering from prolonged COVID-19 and quarantine measures have been excluded from the preliminary notification target by the National Tax Service's authority.

330,000 small business owners subject to gathering bans or business restrictions and 1.19 million small business owners experiencing business difficulties due to COVID-19 can file and pay their first term actual performance by July 26.

The criteria for small business owners excluded from preliminary notification apply external tax adjustments (verification by tax agents). For example, manufacturing, food service, and lodging industries with revenue (sales) of 300 million KRW or less, and service industries with 150 million KRW or less are excluded from preliminary notification.

Foreign businesses providing electronic services (games, voice, video, software, etc.) domestically are also obligated to register as simplified businesses and file and pay preliminary and final VAT. About 195 foreign businesses, including Google, Apple, Facebook, and Amazon, fall under this category this year. From the services provided this year, foreign simplified businesses will also be subject to penalties for non-compliance in filing and payment, just like domestic businesses.

Meanwhile, the early VAT refund payment targets this year have been expanded to include 'Korean New Deal-related companies' in addition to existing small and medium enterprises, innovative SMEs, startup companies, SMEs affected by Japanese export regulations, businesses in COVID-19 special disaster areas, and exemplary taxpayers. For businesses that apply for early refunds by the 21st, the National Tax Service plans to promptly review and pay the refund by the end of this month, except in cases suspected of improper refunds.