🌽Tax exemption on payments
Learn how to set the tax-free amount when requesting a payment.
This guide is intended for businesses who sell tax-free products and services as stipulated in Article 26 of the VAT Act (Supply of Tax-Free Goods or Services).
If you are a general business that does not sell the goods or services specified in this article, you may skip this guide. A 10% VAT is automatically applied through the PG or credit card company for such businesses.
Getting Tax-free Merchant ID through PG Contract
If you are a tax-free business, you can submit a business registration card to prove your tax-exempt status when signing a PG contract. You will receive a merchant ID that allows you to set the following tax-free related properties when requesting a payment using IMP.
request_pay
.
amount
: total payment amounttax_free
: tax free amount
Some PGs use a single merchant ID, without getting a separate tax-free merchant ID, for both taxable and tax-free amounts. They set the tax_free
property to indicate the tax-free portion of the order.
Merchant ID
The name of the merchant ID issued after applying for and signing a PG contract varies by PG. For example, the merchant ID for KG INICIS is Merchant ID (MID)
, Kakao Pay is Member Code (CID)
, and Naver Pay is Partner ID
.
Three types of merchant IDs can be issued according to your business's tax-exempt status.
Tax-free merchant ID
A tax-free merchant ID is issued to businesses that only sell tax-free products and services. If you make a transaction with a tax-free merchant ID, all payments are tax exempted regardless of the
tax-free
setting.
Taxable merchant ID
A taxable merchant ID is issued to businesses that only sell taxable products and services. If you make a transaction with a taxable merchant ID, all payments are taxed regardless of the
tax-free
setting.
Combination merchant ID
A combination merchant ID is issued to businesses that sell both taxable and tax-free products and services. You must use a combination merchant ID to set the tax-free amount for only the tax-free items.
To pay for both taxable and tax-free items, specify the total payment amount for all items in the
amount
property, and the total tax-free amount for only tax-free items in thetax_free
property.
tax_free
is required
For transactions using combination merchant ID, you must set both the amount
and tax_free
properties. If the tax_free
value is missing, an error may occur when you attempt to open the payment page for some PGs.
Note that KG Inicis processes all payments as tax-free; if you change to a combination merchant ID while using a taxable merchant ID, all previous taxed payments are converted to tax-free payments.
Applying tax_free setting
The scenarios in this section show how to set the amount
and tax_free
properties when purchasing tax-free and/or taxable items.
Assume that a flower business (tax-free business) sells tax-free plant seedlings and taxable vases as follows:
Plant seedlings: tax-free, 11,000 won each
Vase: subject to VAT, 22,000 won each
CASE 01. Purchasing only tax-free items
For a purchase of one seedling, set the total payment amount to 11,000 won, and the total tax-free amount to 11,000 won as follows:
In this case, the total amount of 11,000 won is tax-free, and the final payment is calculated as follows (terminology may vary by PG):
Total tax-free amount: 11,000 won
VAT: 0 won
CASE 02. Purchasing only taxable items
For a purchase of one vase, set the total payment amount to 22,000 won, and the total tax-free amount to 0 won as follows:
In this case, a 10% VAT is applied to the total amount of 22,000 won, and the final payment is calculated as follows:
Total item price: 20,000 won
VAT: 2,000 won
CASE 03. Purchasing both tax-free and taxable items
For a purchase of 3 seedlings and 1 vase, set the total payment amount to 55,000 (33,000 + 22,000) won, and the total tax-free amount to 33,000 won (for seedlings) as follows:
In this case, a 10% VAT is applied to the total taxable amount of 22,000 won, and the final payment is calculated as follows:
Total item price: 20,000 won
Total tax-free amount: 33,000 won
VAT: 2,000 won
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