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

For the 2026 Value-Added Tax (VAT) filing, there are now more items that businesses must verify, including an increase in the surcharge rate for processed tax invoices, the submission of cash sales statements for media content creation businesses, and the submission of evidence regarding businesses operating under a false name. Changes such as the limit on the deemed input tax credit for used cars, changes in the tax treatment of groceries (taxable vs. tax-exempt), and the criteria for simplified taxpayers may also directly affect filing results by industry.

Published 2026-07-18 Views 13 16 min read KO EN JA ES

Business owner at a desk with documents, calculator, checklist, and tax-related icons — The illustration shows a business owner reviewing VAT filing and deduction items.

Key points

When issuing or receiving a fraudulent tax invoice, the surcharge rate has increased from 3% to 4% of the supply value, making it even more important to verify the authenticity of the transaction.
Businesses engaged in media content creation—such as YouTubers and creators—must submit a cash sales statement when filing their value-added tax returns; failure to do so may result in a 1% surcharge on the amount not reported.
Due to stricter enforcement against businesses operating under false names, you must keep records that prove actual business operations, such as lease agreements, utility bills, employment contracts, and photos of the business premises.
Effective July 1, 2026, a cap will be applied to the deemed input tax credit for used cars; any amount exceeding the cap may be carried forward for a one-year deduction, subject to certain requirements.
You should also double-check existing amendments—such as the raised threshold for simplified taxpayers, the extension of the preferential limit on the deemed input tax credit for tax-exempt agricultural products, and the interest rate on deemed rent from lease deposits—before filing your 2026 tax return.

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

Category	Amendment or Note	Effective/Verification Date	Actions Required by Business Owners
Fictitious Tax Invoices	Surcharge rate for issuing/receiving increased from 3% to 4%	Verify during 2026 filing	Verify the existence of the transaction, contracts, deposit records, and delivery documentation
Media Content Creation Industry	Mandatory submission of cash sales statements	Final tax return for the first half of 2026	Confirm eligibility (e.g., YouTubers, creators) and submit statements
Management of Businesses Operating Under a Nominee’s Name	Codification of grounds for submitting evidence proving actual business operations	Upon request by the tax office or during tax return review	Retain lease agreements, utility bills, employment contracts, and photos of business premises
Deemed Input Tax Credit for Used Cars	New credit limit established; partial carryover of credit allowed	Effective July 1, 2026	Calculate credit limit in advance; maintain vehicle registration numbers and VINs
Imported Unprocessed Foodstuffs	Extension of VAT Exemption for Certain Items, Such as Cocoa Beans	Through 2027	Verify Whether Imported and Distributed Items Qualify for Exemption
Simply Processed Food Products in Bottles or Cans	Transition to Taxable Status After Exemption Expires	Remain Vigilant After 2025	Classify as Taxable Sales and Reflect in Tax Invoices and Tax Returns
Input Tax Credit for Tax-Exempt Agricultural Products	Extension of Preferential Deduction Limit	Through the end of 2027	Restaurants and similar businesses should verify whether any deductions were omitted
Deemed Rent from Lease Deposits	Apply an annual fixed deposit interest rate of 2.9%	Report for the applicable tax period	Landlords should recheck the deemed rent calculation formula
Simplified Taxation Threshold	Raised to 104 million won based on the previous year’s supply value	When Verifying Tax Classification	Check tax classification and tax invoice requirements on HomeTax
VAT Refunds for Cosmetic Surgery for Foreign Tourists	VAT refund system to be terminated	Starting in 2026	Existing refund processing methods will be discontinued

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.

Document	Information Verified
Lease Agreement	Business location and right of use
Utility bills (electricity, water, gas) and other service charges	Actual use of the business premises
Employment Contracts	Hired staff and operational substance
Photos of the business premises (interior and exterior)	Signage, equipment, inventory, office space, etc.
Contracts and purchase orders with business partners	Evidence of actual business operations
Records of sales and purchase payments	Use of a business-registered bank account and transaction flow

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.

Business Type	Standard Deduction Limit	Preferential Deduction Limit
Sole Proprietor	40–50%	55–75%
Corporation	30%	50%

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.

Document	Reason for Requirement
Sales Tax Invoices and Receipts	Verify taxable and tax-exempt sales
Purchase Tax Invoices and Receipts	Review input tax credits and deemed input tax credits
Credit Card Sales and Cash Receipt Data	To prevent omission of reported sales
Online Platform Settlement Data	To verify sales from delivery apps, online shopping malls, and content platforms
Bank Account Transaction History	To reconcile cash sales with actual amounts received
Lease Agreements	To verify the existence of business premises and deemed rental income from leasing activities
Utility and Management Fee Statements	Proving Business Premises Operation
Vehicle Purchase and Sale Records	Calculating the Deduction Limit for Used Cars
Import Declaration Certificate	Determining Taxable vs. Tax-Exempt Imported Items

Practical Guidelines for Reducing Filing Errors

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

Images

Shield, documents, and magnifier linked to vehicles, meals, utilities, retail, and warning icons — The illustration shows VAT-related expense categories being checked for deductions and risks.

FAQ

What is the first change you should check for in the 2026 Value-Added Tax (VAT) return?

You should first check the following: the increase in the surcharge rate for processed tax invoices, the requirement for media content creators to submit cash sales statements, the management of evidence for businesses operating under a false name, and the establishment of a new limit on the deemed input tax credit for used cars. Depending on your industry, it is also important to understand the distinction between taxable and tax-exempt food products, the deemed input tax credit for tax-exempt agricultural products, and the criteria for simplified taxpayers.

How did the surcharge rate for false tax invoices change in 2026?

The surcharge rate for fictitious tax invoices issued or received without an actual transaction has increased from 3% to 4% of the supply value. Businesses must retain not only tax invoices but also supporting documents—such as contracts, payment records, and delivery records—that prove the actual transaction.

Can I be charged a surcharge even if I didn't realize there was a problem with the tax invoice issued by my business partner?

If an invoice is determined to be fictitious or inaccurate, the recipient may also face the risk of being assessed a surcharge. Therefore, it is prudent to verify the business partner, the details of the supply, payment records, and the actual delivery of goods or services before claiming an input tax credit.

Do YouTubers and content creators also have to submit cash sales reports?

Businesses engaged in media content creation must verify whether they are required to submit a cash sales statement when filing their value-added tax return for the first half of 2026. Failure to report the required amounts may result in a surcharge equal to 1% of the amount not reported.

What income documentation do media content creators need to prepare?

It is recommended that you prepare platform advertising revenue settlement documents, donation records, sponsorship and advertising contracts, bank deposit records, and sales records for e-books, courses, and merchandise. Revenue from overseas platforms may require separate review depending on the transaction structure.

What documents should I keep on hand in preparation for stricter enforcement against businesses operating under false names?

It is advisable to keep records such as the lease agreement, statements of utility bills (electricity, water, and gas), the employment contract, photos of the interior and exterior of the business premises, contracts with business partners, and bank statements for the business’s account. These documents will help prove that the business is actually in operation.

When does the input tax credit limit for used cars take effect?

It has been confirmed that the limit on the input tax credit for used cars will apply to transactions occurring on or after July 1, 2026. Therefore, you must distinguish between the application criteria for transactions reported in the first half of 2026 and those occurring in the second half of the year.

What additional information is required when applying for the input tax credit for used cars?

Since you must submit the vehicle registration number and VIN when applying for a deduction, you must accurately manage the identification information for each vehicle. You must also organize the acquisition cost, sale price, and tax invoice purchase amount for each vehicle in order to calculate the deduction limit.

What is the threshold for simplified taxation in 2026?

The threshold for eligibility as a simplified taxpayer—based on the total value of supplies in the previous year—has been raised to 104 million won. However, there may be exceptions depending on industry, region, and the obligation to issue tax invoices, so you should check your tax classification on HomeTax.

Is it always advantageous to switch to the simplified tax system?

While taxpayers under the simplified tax system may have advantages in terms of filing and tax burden, this is not always the case. You should also consider whether your business partners require tax invoices, how the input tax credit system works, and how the value-added rate is applied by industry.

Are minimally processed food products packaged in bottles or cans exempt from value-added tax?

Certain minimally processed food products packaged in bottles, cans, and other containers are now subject to tax following the expiration of their tax-exempt period. If you sell items such as soy sauce, soybean paste, red pepper paste, kimchi, fermented seafood, tofu, pickled vegetables, or blanched vegetables, you must recheck the tax-exempt or taxable status for each product.

Until when will the preferential limit for the deemed input tax credit on duty-free agricultural products apply?

It has been confirmed that the preferential limit for the deemed input tax credit on tax-exempt agricultural products has been extended through the end of 2027. Businesses that purchase large quantities of tax-exempt agricultural products—such as restaurants and food manufacturers—are advised to verify their supporting documentation and the credit limit before filing their tax returns.

What is the interest rate used to calculate the deemed rent from a security deposit?

The annual interest rate for time deposits to be applied when calculating deemed rent from security deposits for the 2026 tax filing has been set at 2.9%. Landlords should verify the security deposit amount, lease term, and whether the income is subject to taxation to minimize calculation errors.

Will VAT refunds for cosmetic and reconstructive medical services provided to foreign tourists continue to be available?

The value-added tax (VAT) refund program for cosmetic and reconstructive medical services provided to foreign tourists has been discontinued as of 2026. Relevant medical institutions must review their systems to ensure they no longer apply the previous refund guidelines, payment processes, or reporting procedures.

What should I check on HomeTax before filing my value-added tax return?

On HomeTax, you must verify your tax classification, records of issued and received electronic tax invoices, credit card sales, cash receipts, estimated tax notices or estimated tax returns, and the documents attached to your tax return. Depending on your industry, you may also need to review additional documents, such as cash sales statements or documents related to deemed input tax credits.

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