Korea Export VAT Zero Rate: How It Works for Cosmetics

Korea applies a VAT zero rate to exports: goods shipped out of Korea are taxed at 0% instead of the standard 10%, under Article 21 of the Value-Added Tax Act¹.

The Korean supplier proves the export with its customs export declaration, reports the sale as zero-rated, and reclaims the VAT it paid on its own purchases. For an overseas buyer, this is why a Korean export invoice for cosmetics carries no Korean VAT.

The zero rate is not automatic. It depends on the goods actually leaving Korea and on the supplier filing correctly. The steps below explain how it works from the supplier’s side and what a buyer can do to keep the deal zero-rated.

Step 1: Check that the sale is a zero-rated export

Article 21(2) lists three kinds of exports that qualify for the Korea export VAT zero rate:

• Domestic goods carried out of Korea to a foreign country (a direct export).
• Intermediary trade and similar transactions set by Presidential Decree, where the contract and payment are handled at a business place in Korea.
• Supplies to a Korean exporter made under a local letter of credit or a purchase confirmation, as set by Presidential Decree.

For a buyer, the first case is the one that matters: the goods must leave Korea. If you collect goods in Korea, or ask the supplier to deliver to a Korean address such as a forwarder’s warehouse that is not part of the export, the sale may be treated as a domestic supply and taxed at 10%.

Agree the delivery point and trade term before you order; our FOB vs EXW vs DDP comparison explains how the terms differ.

Step 2: The supplier files the export declaration

Every export from Korea is declared to customs under Article 241 of the Customs Act², usually through the UNI-PASS system. The accepted export declaration is the main evidence for the zero rate. The time of supply for exported goods is normally the shipping date, which decides which VAT period the sale falls in.

If you pay in a foreign currency, the supplier converts the amount into Korean won either at the rate it actually exchanged the money before shipment or at the standard rate on the time of supply. This is the supplier’s bookkeeping, but it explains why Korean exporters ask for clear shipping dates and payment records. For the different declaration types, see Korea export declaration types.

Step 3: The right documents for each kind of sale

For a direct export, the supplier does not issue a Korean tax invoice to a foreign buyer. The commercial invoice and the export declaration serve as the trade records, so the commercial invoice you receive will show a 0% or no VAT line.

When a brand sells to a Korean exporter that then ships abroad, the brand can still zero-rate its sale if the exporter gives it a local letter of credit or purchase confirmation. Cosmetics often move from brand to wholesaler to exporter, so these documents are what keep VAT out of the price at each step in the chain.

Step 4: The supplier reports zero-rated sales with supporting documents

In each VAT return, the supplier reports zero-rated sales separately and attaches the documents listed in Article 101 of the VAT Act Enforcement Decree³, such as an export performance statement for direct exports. Under-reporting zero-rated sales can trigger a penalty, as the National Tax Service explains on its penalty tax page⁴.

Step 5: Input VAT is refunded, sometimes early

Because output VAT on exports is zero, the supplier’s input VAT on goods, packaging and logistics becomes refundable. Under Article 59 of the VAT Act⁵, a normal refund is paid within 30 days after the final return deadline.

Businesses with zero-rated sales can apply for an early refund, paid within 15 days after the early-refund filing deadline. This is a big reason Korean wholesalers prefer clean export paperwork: it speeds up their cash flow.

What overseas buyers should check

• Delivery point: make sure the goods are exported by the supplier, not handed over in Korea, unless you accept a 10% VAT charge.
• Invoice consistency: the consignee, quantities and values on the commercial invoice should match the export declaration.
• Import VAT at home: the Korean zero rate does not remove your own country’s import VAT or GST. In Hong Kong there is no VAT or customs duty on cosmetics; most other markets charge import tax on arrival.
• Advice: this guide explains the general structure; specific cases should be checked with a Korean tax adviser.

SEONGWOO GLOBAL exports Korean skincare to overseas buyers from Seoul and has a Hong Kong company, SEONGWOO GLOBAL LIMITED. If you are planning an order, the pages below explain how we work.

Related articles: Korea cosmetics export process · Cross-border ecommerce vs B2B export · Korea export declaration types

Related pages: Services · FAQ · Contact us

Notes

1. Korea’s Ministry of Government Legislation, 부가가치세법 제21조, verified 2026-10-25. ↩

2. Korea’s Ministry of Government Legislation, 관세법 제241조, verified 2026-10-25. ↩

3. Korea’s Ministry of Government Legislation, 부가가치세법시행령 제101조, verified 2026-10-25. ↩

4. Korea’s National Tax Service, 가산세, verified 2026-10-25. ↩

5. Korea’s Ministry of Government Legislation, 부가가치세법 제59조, verified 2026-10-25. ↩