Understand why Korea has implemented the Electronic VAT Invoice system
As an expat in Korea, you might be wondering why you need to switch from the traditional method of issuing paper tax invoices to the electronic tax invoice system. The implementation of this system was primarily initiated to reduce tax cooperation costs and enhance transparency in tax transactions.
**1. Reduction of Tax Cooperation Costs
The National Tax Service (NTS) introduced the electronic tax invoice system to reduce costs incurred by individual business owners during the taxation process. The traditional tax invoice system involved manual writing, storage, and reporting, which was cost-intensive. Moreover, the sheer volume of paper invoices was overwhelming.
If corrections were needed, the process would become even more complex. For instance, if there were 1,000 invoices with incorrect dates, all 1,000 would need to be reissued. As the economy grew exponentially, business transactions became more complex and larger in scale. The NTS realized that manual reporting of tax invoices required excessive human and material resources, prompting the initiation of the electronic tax invoice system.
**2. Ensuring Transparency in Tax Transactions
Paper tax invoices were prone to tax evasion. Individual business owners could issue false tax invoices and evade taxes, with detection taking a considerable amount of time. To prevent this abuse, the NTS sought to ensure transactional transparency through the implementation of the electronic tax invoice system. After issuing an invoice, it is immediately sent to the NTS, eliminating the possibility of issuing false invoices.
**3. Digitization of the Economy
The digitization of the economy refers to the transformation of major economic activities to a digital basis. A prime example is the shift from cash transactions to card or mobile payments. Many companies now issue tax invoices electronically.
Observing this trend, the NTS determined that even non-large corporations are now ready to issue electronic tax invoices due to the maturity of digital infrastructure.
If you would like to schedule a call with Jz, please Schedule a Google Meet Here
**FAQs:**
1. **Why was the electronic tax invoice system implemented in Korea?
The electronic tax invoice system was implemented in Korea to reduce tax cooperation costs, enhance transparency in tax transactions, and align with the digitization of the economy. The National Tax Service (NTS) recognized the need for an efficient and transparent system to handle the growing volume and complexity of business transactions.
2. **How does the electronic tax invoice system reduce costs?
The electronic tax invoice system reduces costs by minimizing the manual labor required in the traditional tax invoice system. This includes the manual writing, storage, and reporting of tax invoices. Additionally, it eliminates the need for reissuing invoices in case of errors, as corrections can be made digitally and instantly. For a quarterly reporting you can download at once at the Home Tax website to file.
3. **How does the electronic tax invoice system ensure transparency in tax transactions?
The electronic tax invoice system ensures transparency by immediately sending issued invoices to the customers, suppliers and NTS simultaneously. This real-time reporting eliminates the possibility of issuing false invoices and helps prevent tax evasion. It provides a clear and traceable record of all tax transactions.
4. **How does the digitization of the economy affect tax invoicing?
The digitization of the economy has transformed major economic activities, including tax invoicing. The shift from cash transactions to card or mobile payments has encouraged many companies and sole-proprietors to issue tax invoices electronically. The NTS has recognized this trend and has implemented the electronic tax invoice system to keep pace with this digital transformation.
**Keywords:** Electronic Tax Invoice System, National Tax Service (NTS), Tax Cooperation Costs, Transparency in Tax Transactions, Digitization of Economy.
Comments