Practical FAQ

● Supporting documentation requirements for business expenses in Korea

1. What types of business expenses require valid supporting receipts?

Under the Corporate Income Tax Law (CTL) of Korea, all business-related expenditures of KRW 30,000 or more per payment must be supported by valid receipts, such as VAT tax invoices, VAT-exempt invoices, corporate credit card receipts, or cash receipts, etc.

2. Are personal credit card receipts acceptable?

- General expenses: Yes, personal credit card receipts may be used as valid supporting documents.
- Entertainment expenses: No, personal credit card receipts are not acceptable.

3. What types of receipts are acceptable for entertainment expenses?

Entertainment expenses over KRW 30,000 must be supported by:
- A corporate credit card receipt, cash receipt, or
- A VAT tax invoice (although obtaining VAT invoices for entertainment expenses is practically not possible).

4. Are there exceptions for certain entertainment-related payments?

Yes, cash gifts for congratulations or condolences to business partners or customers are exempt from supporting receipt requirements when the amount is KRW 200,000 or less.

5. What are the consequences of failing to obtain valid supporting receipts?

If expenditure exceeds the threshold without valid documentation:
- The expense may be disallowed as a deduction for corporate income tax return purposes, or
- Even if allowed, it may be subject to a 2% additional tax on the disbursement amount.
(This additional tax does not apply to non-deductible entertainment expenses.)