VAT Refund Scheme for Designated Tourist Accommodation Businesses
To promote inbound tourism, the Korean government grants a special VAT refund scheme to certain tourist accommodation facilities that meet specific eligibility requirements. This newsletter provides an overview of the system, key qualifications, and the refund procedures.
🔹 Overview
When a foreign tourist stays at an eligible tourist accommodation facility in Korea, the VAT included in the room charge can be refunded. The accommodation business may then claim a deduction for the refunded VAT amount, thereby reducing its tax burden.
🔹 Eligibility Requirements
To be recognized as a Designated Tourist Accommodation Facility, all of the following conditions must be met:
- The facility must be registered under the Tourism Promotion Act as a hotel or a resort condominium business;
- The average room rate charged to foreign tourists must not exceed 110% of the average rate during the same period (3 months) of the previous or preceding year;
- The facility must be one of those officially designated by the Minister of Culture, Sports and Tourism.
※ The highest-priced suite rooms (based on rack rates) are excluded from the VAT refund scheme.
※ For refund processing, the accommodation business may need to install a dedicated terminal in cooperation with an authorized refund operator.
🔹 VAT Refund Procedures
- Issuance of Confirmation of Accommodation Service
The accommodation business issues a “Confirmation of Accommodation Service” (either paper or electronic) to foreign guests.
- Refund Application by Tourist
The foreign tourist applies for a VAT refund through a designated refund operator.
- Delivery of Refund Certificate
The refund operator sends a Refund Certificate to the accommodation business after the refund has been processed.
- VAT Deduction Claim
The accommodation business attaches the Refund Performance Statement in the relevant tax period and claims a deduction for the refunded VAT amount.
HYESUNG Accounting Corporation provides comprehensive tax advisory services to clients across diverse industries. Through our Hotel Business Platform, we offer comprehensive advisory solutions tailored to the hotel and hospitality sector.
