Korean VAT for foreign AI and SaaS businesses

From search engines and streaming services to cloud platforms, apps, online marketplaces and, more recently, AI-powered tools, digital services have become part of everyday life. Businesses can now reach customers in other countries with just a few clicks, often without having any physical presence in those markets.

As digital business continues to grow across borders, tax authorities have been updating their rules and strengthening the taxation of digital transactions. Korea has adopted a similar approach. Since 2015, foreign businesses providing electronic services to Korean consumers may be required to register for Korean VAT and meet local filing and payment obligations. 
 

Does this apply to my business?

If your business provides electronic services to Korean consumers (B2C), you should check whether Korean VAT registration requirements apply.

What is an electronic service?

Examples include:

• Digital content such as games, audio, and video
• Software and apps
• SaaS and cloud services
• Online advertising services
• AI-powered services
• Online platform and intermediary services

In practice, many services provided through the internet or other electronic networks may be treated as electronic services.

Do small businesses need to register? 

Yes. Korea does not have a minimum revenue threshold for foreign providers of electronic services. This means that even start-ups and smaller digital businesses may need to register for Korean VAT if they provide services to Korean consumers.

What about B2B transactions?

Generally, B2B transactions are not included. Electronic services provided to Korean business customers for business purposes are generally excluded from the simplified VAT reporting regime for foreign suppliers. 
 

How does registration and filing work?

Foreign businesses are generally required to register within 20 days of commencing business activities in Korea. After registration, VAT returns must be filed and VAT paid quarterly through Hometax, the online tax platform operated by the Korean National Tax Service. 

Is it mandatory to appoint a tax agent?

No. Appointing a tax agent is not a legal requirement. However, errors in registration, filing, or payment may result in penalties. For foreign businesses that are not familiar with Korean tax requirements, professional support can help reduce compliance risks and ensure that obligations are managed efficiently.

If your business plans to offer digital services to customers in Korea, whether through AI solutions, SaaS products, mobile apps, cloud services or online platforms, it is worth reviewing the potential VAT implications before launching in the market.

Forvis Mazars in Korea assists foreign businesses supplying electronic services to Korean consumers with simplified VAT registration, VAT filing and payment support, and indirect tax advisory services.