Maximizing VAT Return in Korea; Make It Easy With Jz

To maximize VAT deductions when filing your return in Korea, it's important to collect proper receipts that qualify as deductible expenses. Here are some key steps and tips to ensure that you collect the right type of receipts for VAT purposes:

1. Understand the Requirements for VAT-Eligible Receipts

For a receipt to qualify as VAT-deductible, it must generally meet the following criteria:

Seller's Business Details**: The receipt should clearly display the name, registration number, and address of the supplier.
Date of Transaction**: Make sure the receipt shows the exact date of the purchase.
VAT Amount and Rate**: The receipt should indicate the VAT rate and the amount of VAT charged.
Description of Goods/Services**: The receipt must describe the goods or services purchased. It helps substantiate the nature of the expense.
Tax Invoice Format**: In like many countries, proper VAT receipts must be in the form of a tax invoice issued by a VAT-registered supplier.

2. Categorize Your Expenses

Ensure that your purchases are related to your business activities. VAT is only recoverable on expenses incurred for business purposes. Typical expenses that might qualify include:

Office Supplies**: Stationery, office furniture, and IT equipment.
Utilities**: Electricity, water, and gas bills.
Rent and Lease Payments**: Office rental or business property lease.
Travel and Transport**: Business travel costs, fuel, and public transport.
Professional Services**: Legal, accounting, and consulting fees.

By categorizing these expenses, you can more easily track and collect the relevant receipts.

3. Prefer Tax Invoices from VAT-Registered Businesses

You can only claim input VAT on purchases from VAT-registered suppliers. Therefore, ensure that you're dealing with businesses that are registered for VAT and can issue proper tax invoices. A tax invoice contains the supplier’s VAT registration number, which confirms that the supplier is registered for VAT.

4. Use a Centralized Record-Keeping System

To keep track of receipts, use accounting software or an expense management system to:

Digitize Receipts**: Use a mobile app to scan and store receipts. This also makes the process easier for future audits.
Track Payment Details**: Ensure you have proof of payment linked with the receipts. Maintaining an accurate and organized system will reduce errors and ensure you can substantiate your VAT claims.

5. Know the Difference Between VAT and Non-VAT Receipts

Certain expenses do not qualify for VAT recovery, such as:

Entertainment Costs**: Meals, events, or gifts for clients are often non-deductible.
Vehicle(passenger car) related expenses like purchase, fuel, repair cost and others.
Exempt Supplies**: If you buy goods or services that are VAT-exempt, you cannot recover VAT on those expenses.

6. Verify Receipts Before Filing

Before filing your VAT return, cross-check the receipts to ensure they meet all requirements. Here are a few checkpoints:

Invoice Completeness**: Confirm all necessary details are present (e.g., business name, VAT rate).
Business Purpose**: Verify that each receipt relates directly to your business operations.
Valid Registration Numbers**: Confirm the VAT registration number is valid by checking it through official VAT registration number lookup services if available.

7. Avoid Common Mistakes

Cash Receipts Without Tax Invoice**: Cash receipts often don’t contain all the necessary information to qualify as a tax invoice for VAT purposes. Always ask for a formal tax invoice.
Lost Receipts**: If a receipt is lost, try to obtain a duplicate from the supplier to ensure you have proof of expense.
Personal Expenses**: Avoid claiming VAT on personal expenses mixed with business ones. If an expense is partially personal, only the business portion is recoverable.

8. Request VAT-Compliant Receipts

When you make a business purchase, explicitly request a tax invoice compliant with VAT requirements. Many suppliers can provide a simpler sales receipt by default, but you need a full tax invoice to claim input VAT.

9. Keep an Audit Trail

A proper audit trail helps if tax authorities question your VAT deduction claims. Make sure that all receipts are linked to your accounting records, and payments are clearly visible in your bank statements.

### Summary

To reduce VAT when filing your return, focus on: