One-Person Business Tax Basics
Solopreneur
Solopreneur
Disclaimer
This post is for general information provision only. For accurate tax consultation, always consult a tax accountant.
Key Tax Types
Comprehensive Income Tax
Tax paid by combining all income.
Reporting Period: Every year May 1 - 31
Tax Rate: 6% - 45% (Progressive tax by income bracket)
Value-Added Tax (VAT)
Tax added to sales.
Tax Rate: 10%
Reporting Period:
- Period 1: July 1 - 25
- Period 2: January 1 - 25 of following year
Taxation Type
| Type | Criteria | Features |
|---|---|---|
| General Taxpayer | Annual revenue 80 million KRW+ | Issue tax calculation sheet |
| Simple Taxpayer | Annual revenue 48 million - 80 million KRW | Lower VAT rate |
Business Registration
Recommended Cases
- Expecting annual revenue above certain level
- B2B transactions (tax calculation sheet needed)
- Need expense processing
Registration Method
- Hometax online application
- Visit tax office
Expense Processing
Recognized Expenses
- Office supplies, equipment
- Software subscription fees
- Domain, hosting
- Transportation costs (work-related)
- Education expenses
Receipt Management
- Recommend using business card
- Keep receipts for 5 years
- Available for lookup on Hometax
Tax Saving Methods
Nonghyup Retirement Tax Deduction
- Small business retirement fund system
- Maximum 5 million KRW income deduction
- Join: Korea Federation of Small and Medium Business
Pension Savings
- Up to 4 million KRW per year tax deduction
IRP
- Up to 7 million KRW per year tax deduction
- Combined with pension savings, 9 million KRW limit
Overseas Revenue
When generating revenue from overseas platforms (Stripe, Gumroad, etc.):
- Need to report tax in Korea
- Exchange rate as of deposit date
- Submit W-8BEN form (exempt from US withholding tax)
Tax Accountant Delegation
Costs
- Bookkeeping: 100,000-200,000 KRW/month
- Reporting agency: 100,000-300,000 KRW per case
Good Time to Delegate
- Annual revenue 50 million KRW+
- When transactions become complex
- When time is insufficient