Is the VAT on Your Receipt Really 10% of the Price?

Korea's Value-Added Tax Act sets the rate at 10%. That 10% is added to the pre-tax price, the amount shown on a receipt as the taxable goods value or supply value. An item worth ₩10,000 becomes ₩11,000 once ₩1,000 of tax is added, and the shop's price tag usually shows that ₩11,000.

So a receipt for ₩11,000 shows a goods value of ₩10,000 and VAT of ₩1,000. To work backward from what you paid, you divide by 11 rather than taking 10%. If you take 10% of ₩11,000, you get ₩1,100 and overstate the tax by ₩100. Korea's National Tax Service has also said that when tax is not listed separately, or it is unclear whether it is included, 10/110 of the amount received is treated as VAT.

Grocery receipts often split items into taxable and tax-exempt goods. The law does not charge VAT on unprocessed food. Rice, vegetables, fruit, fish, eggs and milk fall into this group, and they stay exempt if they are only dried, frozen or packaged. Simply prepared foods such as kimchi and tofu are treated as exempt too.

But an apple turned into juice becomes a taxable product. Foods whose nature has been changed in making them, such as snacks, instant noodles and drinks, carry the 10%. Tap water, books and newspapers, and coal briquettes are also exempt, so the VAT on a receipt is often smaller than one-eleventh of the total you paid.

Many people think VAT is a tax the shop owner pays, but in practice the buyer pays it as part of the price, and the shop collects it and reports it to the government. The shop then pays the difference after subtracting the VAT it paid when buying its own stock.

In daily life, watch out for quotes marked VAT excluded. For moving, interior work or office supplies, 10% is added on top of the quoted figure, so a ₩1,000,000 quote actually means paying ₩1,100,000. When comparing prices, first check whether VAT is included, and you will not get confused.