Simplified Tax System for Small Businesses: Who Qualifies and What You Get

This scheme offers a streamlined way for small-scale entrepreneurs to manage their tax obligations with less complexity and lower costs.

👤Who it's for

This system is designed specifically for small businesses that operate on a smaller scale. To qualify, your business must have an annual revenue that remains under ₩80 million. This is intended to support those who may find the standard tax procedures too complex or expensive for their business size.

🎁What you get

The primary benefit of this system is a reduction in the VAT (Value Added Tax) rates you are required to pay. By lowering these rates, the scheme helps keep more money within your business. Additionally, you receive simplified tax reporting requirements, which means the process of telling the government about your earnings and expenses is much more straightforward than the standard method.

💰What it costs you

While the tax rates are lower, you have a responsibility to maintain your own records. You are required to perform accurate bookkeeping of your annual revenue. This means you must keep a clear and organized account of all the money coming into your business throughout the year to ensure your simplified reports are correct.

⚠️The catch to know

There is one major operational restriction you must keep in mind: if you are registered as a simplified taxpayer, you cannot issue official tax invoices. This is a critical detail for businesses that sell to other companies that require these invoices for their own accounting. You should consider how this restriction might affect your professional relationships with clients before choosing this method.

📝How to apply

1. Review your business's financial records to confirm your annual revenue is below the ₩80 million threshold.
2. Set up a system for accurate bookkeeping to track your revenue for the year.
3. Visit the official tax portal to manage your status and filings.

https://www.hometax.go.kr