2026 Value-Added Tax (VAT) Changes: Filing, Deduction, and Surtax Guidelines Business Owners Need to Know

Changes to the 2026 Value-Added Tax Filing at a Glance

Businesses preparing for the final Value-Added Tax filing in July 2026 should not stop at simply collecting sales and purchase data. Certain industries now have new documents to submit, limits on some deductions have changed, and oversight of fraudulent tax invoices and businesses operating under false names has been strengthened.

Since VAT filing cycles repeat regularly, the process may feel similar each time; however, failing to keep up with these amendments can lead to the following issues:

• You may end up paying more tax by omitting eligible deductions.
• Incorrect classification of taxable and tax-exempt items may result in an amended return or a tax assessment.
• Failing to submit required schedules may result in a surcharge.
• If a business partner’s tax invoice does not match the actual transaction, you may face surcharges or the risk of an audit.

This article summarizes the Value-Added Tax (VAT) filing requirements for the first half of 2026 and the major changes taking effect in the second half of 2026 from a business practitioner’s perspective. Before actually filing your return, you must confirm with the National Tax Service, HomeTax, your local tax office, or a tax agent whether these changes apply to your specific industry and transaction structure.

Summary Table of Major Amendments for 2026

Amendments to Check Immediately for the First Half of 2026 Filings

1. Increase in Surtax Rates for Issuing or Receiving Fictitious Tax Invoices

Tax invoices issued or received without an actual transaction are generally referred to as fictitious tax invoices. According to the 2026 amendments, the surcharge rate for issuing or receiving fictitious tax invoices has been raised from 3% to 4% of the original supply value.

It is important to note that fictitious tax invoices are not merely a clerical error. Exchanging tax invoices without an actual transaction results in the improper deduction of input tax or the distortion of revenue and expenses. Therefore, the National Tax Service strictly regulates fraudulent tax invoices.

Businesses are advised to keep the following documents on file for each transaction:

• Contracts, purchase orders, and quotes
• Tax invoices and transaction statements
• Bank transfer records and credit card payment records
• Delivery notes, inspection certificates, and waybills
• Deliverables, emails, and work reports
• Business registration status and actual contact information of business partners

In particular, for tax invoices used to claim input tax credits, simply having the invoice is not sufficient. You must also verify whether the goods or services were actually supplied, whether the amount and supply date match, and whether the business partner is a legitimate business entity.

2. Submission of Cash Sales Statements for Media Content Creators (e.g., YouTubers and Creators)

Starting with the first half of 2026’s Value-Added Tax (VAT) filing, businesses engaged in media content creation—such as YouTubers and creators—must verify whether they are required to submit cash sales statements. If they are required to submit a cash sales statement but fail to do so, a surcharge equivalent to 1% of the non-submitted amount may be imposed.

Media content creators have diverse revenue streams.

• Platform advertising revenue
• Donations, membership fees, and similar forms of support such as “Star Balloons” and “Super Chat”
• Production fees for sponsored or advertising content
• Sales of courses, e-books, and merchandise
• Settlements from overseas platforms
• Individual service fees received in cash or via bank transfer

Depending on the transaction structure, it may vary which of these amounts constitute taxable revenue, whether a zero-rate or foreign transaction review is required, and whether the business is subject to the cash sales statement filing requirement. Even if you entrust your tax filing to a tax agent, you must inform them in advance that you have “income from media content creation” and provide settlement data for each platform.

Business owners filing their own returns must ensure they do not omit the option to attach or enter a cash sales statement on the HomeTax filing screen.

3. Strengthened Crackdown on Front Companies and Management of Supporting Documentation

A “front company” refers to a business registered under the name of someone other than the actual business operator, or a situation where the nominal business owner and the actual operator are different. Such structures can lead to the issuance of fraudulent tax invoices, tax evasion, and income concealment, posing significant tax risks.

With the 2026 amendments to the Value-Added Tax Act, the requirement to submit documentation proving the actual status of business operations has been codified. Since the head of the competent tax office may request the submission of supporting documents when verifying the existence of a business premises or whether the business is actually in operation, it is prudent for even legitimate businesses to keep the necessary documentation on hand.

Examples of acceptable supporting documents are as follows.

If you are operating your business properly, there is no need to worry excessively. However, if your business registration address differs from your actual place of business, if the business is registered under the name of a family member or acquaintance, or if the account holder’s name differs from the business owner’s, it is advisable to resolve these issues in advance.

Effective July 1, 2026: Limit on Deemed Input Tax Credit for Used Cars

There is also an important change for businesses that buy and sell used cars, such as used car dealerships. Starting July 1, 2026, a limit will be imposed on the deemed input tax credit for used cars.

Previously, if certain requirements were met, 10/110 of the acquisition cost could be claimed as a deemed input tax credit; however, following the amendment, the credit will be applied up to the limit of “sales revenue minus the amount of purchases documented by tax invoices.”

Practical Considerations

• The acquisition cost and sales price for each vehicle must be tracked separately.
• Purchases for which tax invoices were received must be separated from purchases eligible for the deemed input tax credit.
• For amounts that cannot be deducted due to exceeding the limit, verify whether they can be carried forward for deduction within one year.
• Since vehicle registration numbers and VINs must be submitted when applying for the deduction, do not omit vehicle-specific identification information.

Used car dealers are advised to calculate the eligible deduction amount in advance for transactions in the second half of the year. Since amounts exceeding the deduction limit may occur, it is practically safer to create monthly or vehicle-specific tracking sheets and review them with a tax agent.

Items from Past Amendments That Require Continued Attention in 2026

1. Extension of VAT Exemption for Imported Unprocessed Foodstuffs Such as Cocoa Beans

The value-added tax (VAT) exemption for certain imported unprocessed foodstuffs, such as cocoa beans, cocoa shells, and cocoa husks, has been extended through 2027. Businesses that import or distribute these items must verify their product classification and transaction type to ensure they remain eligible for the VAT exemption through 2027, just as before.

It is difficult to determine whether imported food items are taxable or tax-exempt based solely on their names. Since the determination may vary depending on the actual items declared to customs, the degree of processing, the type of packaging, and the method of domestic sale, it is advisable to keep the import declaration certificate and product classification documents on file together.

2. Transition to Taxation for Simply Processed Food Products Packaged in Bottles or Cans

Certain simply processed food products packaged in bottles or cans were previously exempt from value-added tax (VAT), but have become subject to taxation following the expiration of the exemption period. Examples include soy sauce, soybean paste, chili paste, kimchi, fermented seafood, tofu, pickled vegetables, and blanched vegetables.

Businesses selling these items must verify the following:

• Taxable/exempt classification by product in POS systems or online stores
• Taxable/exempt classification when issuing tax invoices or cash receipts
• Taxable/exempt classification in purchase records
• Whether the taxable base is reflected in the VAT return

If these items are still being treated as tax-exempt, it could result in the omission of taxable sales; therefore, you must immediately review your product master data and accounting standards.

3. Extension of the Preferential Limit for Deemed Input Tax Credit on Tax-Exempt Agricultural Products

Businesses that purchase tax-exempt agricultural products to supply taxable goods or services may receive a deemed input tax credit under certain conditions. Industries such as restaurants and food manufacturing are significantly affected by this system.

The preferential deduction limit has been extended through the end of 2027, allowing both sole proprietors and corporate businesses to benefit from a limit more favorable than the standard limit.

For the deemed input tax credit on tax-exempt agricultural products, supporting documentation—such as invoices by supplier, credit card sales slips, and cash receipts—is essential. Businesses with a high proportion of agricultural product purchases should verify that no invoices are missing before filing their tax return.

4. Interest Rate for Deemed Rent on Lease Deposits: 2.9% per annum

Real estate landlords may need to calculate deemed rental income based on security deposits. The fixed-term deposit interest rate to be applied for the 2026 tax return is set at 2.9% per annum.

Deemed rental income is a system that includes the amount equivalent to the investment income from the security deposit in the taxable base, even if no actual monthly rent was received. Applying the interest rate incorrectly can result in underreporting or overreporting; therefore, you must verify the security deposit amount, lease term, taxable floor area, and fixed-term deposit interest rate specified in the lease agreement.

5. Threshold for Simplified Taxpayers Raised

The threshold for simplified taxation—based on the total supply value from the previous year—has been raised from 80 million won to 104 million won. Consequently, small-scale business operators who were previously close to qualifying as general taxpayers under the old criteria may now be classified as simplified taxpayers under the new standards.

Although the tax burden and filing methods for simplified taxpayers differ from those of general taxpayers, it cannot be said that they are simply advantageous in every respect. In particular, you must review the obligation to issue tax invoices, the method of input tax credit, whether business partners can claim input tax credits, and the value-added rates by industry.

The items to check are as follows:

• Check your current tax classification on HomeTax
• Check the total supply value for the previous year
• Check whether your business falls under industries or regions excluded from the simplified tax system
• Check whether you are required to issue tax invoices
• Check whether your business partners typically require tax invoices

6. End of VAT Refunds for Cosmetic and Plastic Surgery Services for Foreign Tourists

The value-added tax (VAT) refund system for cosmetic and plastic surgery services provided to foreign tourists was discontinued as of 2026. Medical institutions and related businesses must take care not to file reports or provide guidance based on the previous refund system.

Any internal guidelines, payment systems, refund processing procedures, or foreign-language information pages that were created under the previous system must be updated. Incorrect refund processing may result in future tax assessments or customer complaints.

Checklists by Industry

Restaurants, Cafes, and Food Manufacturing

• Verify that you have collected all documentation for the purchase of tax-exempt agricultural products.
• Review whether you are eligible to apply the preferential limit for deemed input tax credits.
• If you sell simple-processed food products packaged in bottles or cans, verify whether they are subject to taxation.
• Check that the taxable and tax-exempt codes for each item in your POS system are up to date.

YouTubers, Creators, and Content Providers

• Verify whether your business qualifies as a media content creation business.
• Compare settlement data from each platform with your bank deposit records.
• Ensure you do not omit any amounts subject to the cash sales statement requirement.
• Revenue from overseas platforms may require review for taxation, the zero-rate, or foreign transactions, depending on the transaction structure.

Used Car Sales

• Calculate the deemed input tax credit limit for transactions occurring on or after July 1, 2026.
• Maintain records of vehicle registration numbers and VINs for each vehicle.
• Review whether amounts exceeding the limit can be carried forward for deduction.
• Separate the amounts on tax invoices from purchases eligible for the deemed input tax credit.

Real Estate Leasing Business

• Verify whether lease deposits are subject to the deemed rental income calculation.
• Verify that the annual interest rate of 2.9% for time deposits has been applied.
• Organize lease agreements, records of security deposit changes, and monthly rent collection records.
• If operating both taxable and tax-exempt leases, verify the apportionment of common input tax.

Import and Distribution Business

• Verify whether imported unprocessed foodstuffs, such as cocoa beans, are eligible for an extension of tax exemption.
• Retain import declaration certificates and commodity classification documents.
• Review whether the distinction between taxable and tax-exempt goods changes at the domestic sales stage.
• Verify that the correct type of tax invoice or sales receipt is issued to business partners.

Documents Business Owners Should Prepare Before Filing

Most VAT filing errors result from missing documents, incorrect classification of taxable versus tax-exempt items, or discrepancies in tax invoices. It is recommended to prepare at least the following documents before filing.

Practical Guidelines for Reducing Filing Errors

1. First, check the revised regulations for your specific industry. The same rules do not apply to all businesses.
2. Compare the amounts on tax invoices with your actual deposit and withdrawal records.
3. Distinguish between taxable sales, tax-exempt sales, and sales subject to the zero-rated tax.
4. Verify whether any supporting statements need to be submitted.
5. Check not only whether a deduction is available but also the limit and supporting documentation requirements.
6. Verify the facts regarding tax invoices from suspicious business partners before filing.
7. Retain contracts, statements, and settlement records even after filing.

Conclusion

The key points businesses should pay particular attention to for the 2026 VAT filing are “stricter surcharges,” “submission of statements,” “verification of business location,” “deduction limits,” and “reclassification of taxable and tax-exempt sales.” YouTubers and content creators, used car dealers, restaurants, food distributors, and real estate rental businesses will be significantly impacted by these changes, so they require separate review before filing.

Accurate VAT filing is not merely a procedure for paying taxes, but a process for reviewing a business’s revenue structure, cost documentation, and transaction stability. By reviewing the amendments in advance and organizing supporting documentation, businesses can minimize unnecessary surcharges and ensure they do not miss out on eligible deductions.