Plan contractor hiring in South Korea

Use a direct service agreement with the contractor's registered Korean individual business, and pay each commercial invoice on the milestone and due date the agreement defines. The Korean operating choice comes before the first invoice: identify the service under the VAT decree, confirm that the customer has no Korean establishment, and agree how the contractor will obtain the required receipt record. Listed software and information services can qualify for zero-rated VAT. Professional, business-support, and investment-advisory services also need customer-country reciprocity. If the contract does not choose governing law, Korean law is the presumed closest connection because the contractor supplies the service through the Korean business.

Sources: Korean VAT Enforcement Decree, Article 33, Korean Value-Added Tax Act, Article 8, Korean choice-of-law statute, Articles 45–46, Korean Civil Act, Article 387

If the line is crossed

Misclassification changes the governing-law analysis first: a person who habitually works in Korea keeps the mandatory employee protections of Korean law even when the contract selects foreign law. Where the Labor Standards Act applies, terms below its standards are replaced by the statutory standards, and the employer must give written terms covering pay, hours, weekly holidays, and annual leave. The Act's scope is a separate gate. It generally applies to a business or workplace ordinarily using at least five workers, with only prescribed provisions extending below five. Establish the Korean workplace and local headcount facts before calculating employment entitlements or replacing the contractor documents.

Sources: Korean Act on Private International Law, Article 48, Korean Labor Standards Act, Articles 11, 15 and 17

사업자등록증

Business registration certificate

The business registration certificate is the contractor's authoritative Korean supplier-identity document. It carries the registration number issued by the district tax office after the individual registers the business. Collect a current copy before signature, then match its Korean name and registration number to the contract and every billing record. A mismatch can leave procurement paying a person whose registered supplier identity differs from the approved vendor. The certificate answers the tax-identity question only. It does not establish independent status, prove that a service qualifies for zero-rated VAT, or shift any Korean contractor filing to the foreign buyer.

Issued by: The district tax office issues it to the registered contractor.

Timing: Registration is due within 20 days after the business starts and may be requested before commencement.

Sources: Korean Value-Added Tax Act, Article 8

외화입금증명서

Foreign-currency deposit certificate

The foreign-currency deposit certificate is the contractor's core receipt document when the service uses the foreign-customer zero-rate rule in VAT Enforcement Decree Article 33. The issuing bank confirms the qualifying receipt, and the contractor attaches the certificate to the Korean VAT return. The foreign buyer neither issues nor files it. Payment operations still affect whether it can be obtained, so the contract, invoice reference, payer identity, amount, and currency should remain easy to reconcile. A payment record that cannot be matched to the service can hold up the contractor's zero-rate substantiation even when the underlying service category qualifies.

Issued by: The contractor's foreign exchange bank issues it to the contractor.

Timing: The contractor obtains it for the receipt and submits it with the preliminary or final VAT return claiming the zero rate.

Sources: Korean VAT Enforcement Decree, Article 101

상호주의 입증 관계 증명서류

Supporting documents proving reciprocal VAT relief

Reciprocity documents are the extra zero-rate file for listed professional, business-support, and investment-advisory services. They show that the customer's country grants equivalent VAT relief to Korean residents or domestic companies, or has no comparable tax. The contractor submits them with the Korean VAT return alongside the receipt certificate. The customer-country rule means a service description such as consulting is too loose for invoice approval: the parties must identify the decree category and the buyer's jurisdiction. Listed information services do not use this reciprocity file. They carry the separate network-delivery proof described next.

Issued by: The contractor assembles current official law or other competent documents for submission to the Korean tax authority.

Timing: They accompany the VAT return for a professional, business-support, or investment-advisory service relying on the foreign-customer zero rate.

Sources: Korean VAT Enforcement Decree, Articles 33 and 101

정보통신망 용역 제공 증명서류

Documents proving online provision of listed information services

Network-delivery proof is the extra zero-rate document for information services within VAT Enforcement Decree Article 33(2)1(f). It must show that the listed service was provided through an information and communications network to a recipient within the foreign-customer class referenced by VAT Act Article 52(1). This covers the named software-development, programming, systems-integration, data-processing, hosting, portal, and other information-service categories. The contractor assembles the proof and attaches it to the Korean VAT return with the foreign-currency deposit certificate. Keep the contract, acceptance record, and service-delivery record specific enough to connect the online service, foreign recipient, invoice, and receipt.

Issued by: The contractor assembles the proof; Article 101 names no issuing authority for this document.

Timing: It accompanies the final VAT return claiming zero rate for an Article 33(2)1(f) information service, unless already submitted with the preliminary return.

Sources: Korean VAT Enforcement Decree, Article 101(1) table item 10(c) and Article 101(2)

A Korean service supplied to a foreign business without a Korean establishment can carry zero-rated VAT only when the service category, receipt method, and category-specific evidence all fit the VAT decree. Software development, programming, systems integration, data processing, and hosting are expressly listed and require proof of provision through an information and communications network to the specified foreign-customer class. Professional, business-support, and investment-advisory services add the reciprocity test. The contractor also submits a foreign-currency deposit certificate. If no zero-rate or exemption rule applies, the standard Korean VAT rate is 10 percent. Article 71 separately exempts an Article 33(2)1 supply from Korean tax-invoice issuance. Its proof-and-request exception applies under item 9 to other supplies for a no-establishment foreign recipient.

Sources: Korean VAT Act, Articles 20, 24, 30, Korean VAT Enforcement Decree, Articles 33, 71 and 101

What an invoice has to show

• 공급하는 사업자의 등록번호와 성명 또는 명칭, on an Article 71(1)9 proof-and-request tax invoice

  The supplier's Korean business registration number and registered name lead a Korean tax invoice issued through Article 71(1)9's proof-and-request exception. That scenario requires a supply covered by item 9, plus the foreign buyer's proof that it is a business in its country and its request for the tax invoice. It does not override item 5's separate exemption for an Article 33(2)1 supply. Give the contractor the proof and request before the invoice date, then verify the supplier number against the 사업자등록증. A commercial invoice remains the billing record for the exempt Article 33 path.

  Sources: Korean Value-Added Tax Act, Article 32, Korean VAT Enforcement Decree, Article 71

• 공급가액, 부가가치세액, 작성 연월일 and the foreign customer's name and address, on an Article 71(1)9 tax invoice

  A Korean tax invoice issued through Article 71(1)9's proof-and-request exception separates the supply value and VAT amount, states its preparation date, and identifies the foreign customer by name and address. The decree also calls for the supplied item, unit price and quantity, supply date, and transaction type. These fields let the tax amount be read as an intentional value instead of a missing calculation. Match the customer identity to the foreign-business proof and verify the supplier's registered details against the 사업자등록증. Return the document for correction when its value, tax, date, customer, item, or transaction-type fields conflict with the underlying supply record.

  Sources: Korean Value-Added Tax Act, Article 32, Korean VAT Enforcement Decree, Articles 67 and 71

Billing and payment timing for this cross-border service come from the contract: the contractor issues a commercial invoice at the agreed milestone, and the buyer pays on its stated due date. Write the governing law, supply milestone, invoice date, currency, due date, and usable payment reference into the same schedule. If the parties choose no law, Korean law is presumed most closely connected to the contractor's service. Under that law, a fixed due date starts delay when it arrives; silence leaves delay until the contractor makes a demand. Keep the payment identity and reference aligned with the invoice so the contractor can obtain the Korean receipt certificate used for zero-rated VAT.

Sources: Korean choice-of-law statute, Articles 45–46, Korean Civil Act, Article 387, Korean VAT Enforcement Decree, Article 101

When invoices are settled

When Korean law governs, a fixed payment date puts the buyer in delay as soon as that date arrives; a debt with no due date enters delay only after the contractor demands payment. The Civil Act creates no automatic 30-day invoice term. A separate Subcontracting Act can require a payment date within 60 days after service completion, but only for a statutory service entrustment between defined prime-contractor and subcontractor businesses. Do not apply that clock to the no-presence buyer until its outsourcing activity, both parties' statutory size status, and Korean territorial reach are established. Otherwise, late-payment damages use the lawful agreed rate or the Civil Act's 5 percent annual rate without proof of loss.

Sources: Korean Civil Act, Articles 379, 387 and 397, Korean choice-of-law statute, Articles 45–46, Korean Fair Transactions in Subcontracting Act, Articles 2 and 13

The currency on the invoice

Foreign-currency consideration is workable for a Korean contractor, while the contractor's VAT base still converts to Korean won under a statutory timing rule. If the consideration is converted into won before the service's supply time, the actual converted amount becomes the base. If it remains in foreign currency or is received after supply, the contractor uses the basic or cross rate at the supply time. The buyer does not acquire Korean-won accounting duties from this rule. It should keep the contract currency, invoice currency, supply date, and paid amount consistent, because a later payment-date rate does not replace the contractor's supply-date conversion for Korean VAT.

Sources: Korean VAT Enforcement Decree, Article 59

Approving zero Korean VAT only because the customer is overseas

An overseas customer with no Korean establishment satisfies only one part of the Korean zero-rate rule. The contractor's service must also fall within an industry listed in VAT Enforcement Decree Article 33 and the consideration must produce the prescribed receipt record. Professional, business-support, and investment-advisory services add proof of customer-country reciprocity. Software development and the named information services use a different listed category and need proof of provision through an information and communications network. Record the precise service and customer jurisdiction in the agreement, then approve zero VAT only after the contractor confirms the category and documents. A failed condition exposes the service to the 10 percent standard rate unless another exemption applies.

Sources: Korean VAT Act, Articles 24 and 30, Korean VAT Enforcement Decree, Articles 33 and 101

Rejecting the commercial invoice because the contractor crossed 80 million won

The 80 million won figure switches an eligible individual business onto electronic form when that business is required to issue Korean tax invoices. It does not remove Article 71(1)5's separate exemption for an Article 33(2)1 supply. For that zero-rate path, the contractor can send a commercial invoice and retain the Korean return documents behind the VAT result. The foreign-business proof-and-request exception instead belongs to item 9 for other supplies to a no-establishment foreign recipient. If the specific supply falls within item 9, give the contractor the proof and request before the invoice date so the required Korean fields can be completed.

Sources: Korean VAT Enforcement Decree, Articles 68 and 71

Managing a registered contractor through employee hours and approvals

A Korean business registration certificate and business-income treatment do not preserve contractor status when daily practice shows dependent labor for wages. Fixed hours and place, detailed supervision, internal work rules, no genuine substitute, buyer-owned tools, no delivery risk, and a continuous exclusive relationship all point toward worker status under the Supreme Court test. The Court gives limited negative weight to missing fixed salary, employee tax withholding, or social-insurance enrollment when the engager could choose those features. Build the engagement around an accepted service result, real discretion over method and schedule, the ability to serve other customers, and genuine responsibility for correction and delivery risk, then review actual practice against the contract.

Sources: Korean Labor Standards Act, Article 2, Supreme Court of Korea, worker-status decision 2004Da29736