Korea Bad-Debt VAT Credit and Recovery Repayment Calculator
Calculate Korean bad-debt VAT relief at 10/110 and subsequent recovery add-backs under 2026 rules. Review the 10-year outer limit, confirmation and recovery periods, supporting evidence and a downloadable ledger for one domestic 10% taxable sale.
South Korea · General VAT supplier · One domestic 10% taxable sale · 2026 rules
Amounts are fictional examples and conditions start unverified. A customer closing its business alone does not establish bad debt. Projections for 2027–2036 hold 2026 rules constant. Supplier closure, VAT status changes, partial prior credits, zero-rated or exempt sales and debt-to-equity valuation require separate review.
Bad-debt VAT review result
Conditions or dates unverified: credit and repayment pending
Formula reference · Bad debt ÷ 11
KRW 1,000,000
Initial credit
Pending review
Recovery VAT add-back
Pending review
Credit retained after recovery
Pending review
The credit reduces output VAT. Cash refunds and payment timing depend on the full VAT return, prepaid tax and other adjustments. If you later claim a credit after selecting no credit, recalculate that scenario.
- Gross invoice
- KRW 11,000,000
- Unpaid before confirmation
- KRW 11,000,000
- Balance outside this confirmed bad debt
- KRW 0
- Bad debt remaining after recovery
- KRW 7,700,000
- Tenth supply anniversary
- 2034-03-15
- Base outer limit (before holidays/extensions)
- 2034-07-25
- User-verified final date
- Unverified · Base-date comparison only
- Date-window review
- Within entered date range · Other conditions separate
Credits and add-backs by taxable period
Dates below are January/July 25 base dates before holiday adjustments or extensions. Verify actual dates with Hometax. A negative net credit increases output VAT for this debt.
| Period | Base date · Before adjustments | Credit | Recovery | Add-back | Net credit |
|---|---|---|---|---|---|
| 2026 H1 | 2026-07-25 | Pending review | KRW 0 | Pending review | Pending review |
| 2026 H2 | 2027-01-25 | KRW 0 | KRW 3,300,000 | Pending review | Pending review |
Individual recovery ledger
1. 2026-08-20 · 2026 H2
Recovered KRW 3,300,000
Add-back Pending review
Remaining debt KRW 7,700,000
Rounding uses differences in cumulative floor(gross recoveries ÷ 11), reconciling full recovery to the initial credit. This planning allocation can differ from per-entry rounding on official forms.
Evidence to share with your tax adviser
- Invoice, contract and VAT return reporting the corresponding output VAT
- Receivables ledger, prior receipts and reconciliation of unpaid balances
- Reason-specific evidence: court, rehabilitation or discharge decisions, enforcement results and uncollectibility records
- Review of confirmation date and required expense recognition, plus the bad-debt VAT credit/repayment statement
- Prior credit return, subsequent bank receipts and verified filing dates, recovery periods and rounding
How does Korean bad-debt VAT relief work?
When a customer does not pay an invoice, the supplier may face both a receivable loss and VAT already reported on the sale.
South Korea allows qualifying bad-debt VAT to reduce output VAT for the taxable period in which the debt becomes confirmed as uncollectible under the statutory rules.
An overdue payment or a customer closing its business does not, by itself, establish entitlement to the credit.
This calculator follows one domestic sale taxed at 10% by a continuing general-VAT supplier, linking the confirmed bad debt to subsequent recoveries.
It helps business owners, accounting staff and tax advisers reconcile the same invoice, credit and recovery figures.
Use a complete VAT return calculator for overall output VAT, input VAT and refunds; this page isolates the adjustment for this bad debt.
Keep three different amounts separate
- The formula reference measures the VAT component of the entered bad debt before eligibility is verified.
- The initial and retained credits measure the output-VAT reduction under the entered conditions and credit scenario.
- The cash refund depends on the entire return, prepaid VAT and other adjustments; it is not determined here.
Distinguish net supply value from gross invoice value
Invoice amount
Select VAT excluded when entering the invoice net supply value.
A KRW 10,000,000 net sale plus KRW 1,000,000 VAT gives a KRW 11,000,000 gross receivable.
If you enter the total payable by the customer, select VAT included to avoid adding VAT twice.
For the model, VAT on a net invoice is floored to whole KRW.
Receipts before confirmation
Enter all money received for the sale before bad-debt confirmation, including VAT.
Subtracting these receipts from the gross invoice produces the unpaid balance immediately before confirmation.
A receipt on the confirmation date belongs here if it occurred before confirmation, so already collected money is not treated as bad debt.
This confirmed bad debt
Enter only the gross portion confirmed as uncollectible under this event.
The remaining unpaid balance is not automatically treated as another bad debt.
Exclude late interest, contractual damages and litigation costs from the taxable-sale principal.
The amount cannot exceed the unpaid balance before confirmation.
Subsequent recoveries
Record actual recovery dates and VAT-inclusive amounts, up to 20 entries.
The ledger sorts entries by date.
Do not mix receipts from other invoices, pre-confirmation receipts or merely promised future payments with actual recoveries.
Total recoveries cannot exceed this confirmed bad debt.
Verify the reason and confirmation date first
VAT Act Enforcement Decree Article 87 refers to Income Tax Act Enforcement Decree Article 55(2) and Corporate Tax Act Enforcement Decree Article 19-2(1) for recognized bad-debt grounds.
Examples include completion of an applicable limitation period, uncollectibility under a court rehabilitation or discharge decision, and uncollectibility caused by insolvency, enforcement or business closure.
Selecting a reason in a form does not establish those legal facts.
Customer closure is not automatically the confirmation date
Even after closure, remaining assets or possible distributions may affect the uncollectible amount.
Corporate Tax Act Enforcement Decree Article 19-2(3) distinguishes the event date from the date of expense recognition for different grounds, so accounting timing must also be checked.
Do not automatically use a chosen overdue period, the date of a demand letter or an internal decision to stop collection as the legal confirmation date.
The calculator starts with transaction scope and supporting evidence unverified.
A conditional credit scenario requires a selected reason and confirmation of the facts, date, required expense recognition and evidence.
Until then, the formula reference is visible while credit and repayment amounts remain pending review.
Partial prior credits, corrections of erroneous returns, supplier closure and changes in VAT status require separate analysis.
The 10-year outer limit differs from the credit period
VAT Act Enforcement Decree Article 87(2) describes bad debt confirmed by the final-return deadline for the taxable period containing the date 10 years after supply.
Simply adding 10 years to the supply date does not identify the complete outer-limit date.
General VAT taxpayers use H1 for January–June and H2 for July–December, with ordinary base final-return dates of July 25 and January 25 of the following year respectively.
Supply on March 15, 2016
The tenth supply anniversary is March 15, 2026, which falls in 2026 H1.
The corresponding base final-return deadline is July 25, 2026.
If the bad debt is confirmed on July 20, 2026, the credit belongs to 2026 H2, the period of actual confirmation.
The outer-limit comparison and the credit period therefore serve different purposes.
Framework Act on National Taxes Article 5 provides deadline exceptions for Saturdays, Sundays, public holidays and other specified circumstances.
July 25, 2026 is a Saturday, so the displayed base date is not the actual filing deadline.
This calculator does not automatically apply holiday calendars or special extensions; all filing dates are labeled as base dates before holidays or extensions.
Beyond the base outer limit, the result remains pending unless you enter a final date verified through official guidance.
That field does not grant an extension or calculate a claim-for-correction deadline.
Credit and recovery add-back formulas
At confirmation
Bad-debt VAT credit = Gross bad debt × 10/110
VAT Act Article 45 allows the credit to reduce output VAT in the period of confirmation.
The fraction 10/110 equals 1/11 and applies to the VAT-inclusive bad debt, not to net supply value.
On subsequent recovery
VAT associated with recovery = Gross recovery × 10/110
After a credit has been claimed, the VAT associated with any recovered bad debt is added to output VAT in the taxable period of recovery.
Maintain separate records of the original credit and each recovery-period adjustment.
If no bad-debt credit was claimed, this calculator assigns zero bad-debt recovery add-back.
The planned option assumes the full credit will be claimed; the claimed option records your confirmation that the full credit on this same debt was already taken.
If the actual return differs, reconcile the claim history before using the results.
Amounts are floored to whole KRW.
Each recovery add-back uses the increase in floor(cumulative gross recovery / 11).
For a KRW 11 bad debt recovered in KRW 5 and KRW 6 installments, the add-backs are KRW 0 and KRW 1, reconciling with the original KRW 1 credit.
This is a planning allocation to keep a fully recovered ledger reconciled.
Verify official per-entry, aggregate and payment rounding separately; this allocation may differ from the filed form.
Example: KRW 11 million bad debt and KRW 3.3 million recovery
After all example conditions are verified
Assume a gross sale of KRW 11,000,000 on March 15, 2024 becomes confirmed bad debt on June 10, 2026 and all full-credit requirements are satisfied.
There were no prior receipts, so the formula credit is KRW 1,000,000 in 2026 H1.
Recovery of KRW 3,300,000 on August 20, 2026 produces a KRW 300,000 add-back in H2 and leaves KRW 700,000 of credit retained.
The remaining bad-debt receivable is KRW 7,700,000, which is different from the retained tax credit.
The initial screen does not approve this credit because its conditions start unverified.
Prior receipts or recovery in the same period
If KRW 2,200,000 was received before confirmation, the remaining KRW 8,800,000 can be entered as this bad debt and has a formula credit of KRW 800,000.
Do not record those prior receipts again in the subsequent recovery ledger.
In a separate same-period example, a KRW 11,000,000 bad debt and a KRW 5,500,000 recovery produce a KRW 1,000,000 credit, KRW 500,000 add-back and KRW 500,000 net credit in one period row.
Full subsequent recovery makes total add-backs equal the original credit, leaving zero retained credit.
How to use and share the calculation
- Reconcile the invoice and receivables ledger, then enter supply date, VAT basis and prior receipts.
- Enter the confirmed bad-debt amount and date, and review reason-specific evidence.
- Confirm scope and documentation, then choose planned full credit, full credit already claimed or no credit.
- Check the base 10-year outer limit and, if needed, enter an officially verified date reflecting holidays or extensions.
- Record subsequent recoveries by date and calculate the ledger.
- Review period totals and remaining debt, then save the CSV containing both results and conditions.
Changing inputs hides the previous result and prompts recalculation so an old figure is not mistaken for the updated answer.
Remove every recovery row if there have been no recoveries; multiple receipts on the same date can also be recorded separately.
The CSV includes assumptions and the limits of the base-date calculation, so share the complete file with supporting evidence.
Practical scenarios and evidence before filing
Unpaid invoice after customer closure
In addition to closure information, gather the assets, enforcement and possible-distribution records needed to establish the relevant reason.
Retain the confirmation-date analysis rather than moving the credit to a more convenient taxable period.
Receipts after rehabilitation or discharge
Separate amounts established as uncollectible by the decision from amounts scheduled for payment.
Update the ledger when money is actually received; promised payments and receipts relating to other debts can otherwise distort the add-back.
- Invoice, contract and the VAT return reporting the relevant output VAT
- Receivables ledger, prior receipts and unpaid-balance reconciliation
- Reason-specific judgments, decisions, enforcement results, uncollectibility evidence and confirmation-date review
- Verification of required expense recognition and the bad-debt VAT credit/repayment statement
- Prior credit return, later bank receipts or distributions and recovery-period reconciliation
VAT Act Article 45(2) and Enforcement Decree Article 87(4) require the relevant final return and documents evidencing the facts.
This common preparation checklist does not certify that every legally required document for your particular reason is present.
Verify the actual submission requirements for your business status and filing history.
Frequently asked questions
Is the credit the cash refund?
No.
It is the reduction of output VAT for this bad debt.
The full return may result in a lower payment or a refund.
Can I claim immediately when the customer closes?
The arithmetic can be estimated, but entitlement needs verification.
Closure alone does not establish the uncollectible amount or confirmation date.
Do I multiply a KRW 10 million net invoice by 10/110?
The fraction applies to VAT-inclusive bad debt.
A fully uncollectible gross invoice of KRW 11 million produces a KRW 1 million credit.
Does recovery require changing the original credit period?
VAT Act Article 45(1) assigns the related add-back to the period of recovery.
An error in the original return requires separate correction analysis.
Is every debt after the tenth anniversary excluded?
The rule refers to the final-return deadline for the period containing that anniversary.
Verify holidays and approved extensions; do not conclude exclusion from the base date alone.
Does this include the corporate income-tax write-off?
No.
This calculator covers the VAT adjustment only.
It does not add income-tax expense deductions, corporate tax rates or loss carryforwards.
Does it cover simplified taxpayers, zero-rated sales or old bad debts?
It covers domestic 10% sales by general-VAT suppliers and confirmation from 2026 onward.
Simplified VAT, zero-rated or exempt sales, supplier closure, pre-2026 confirmation, transition rules and correction claims are outside this model.
Official sources and rule dates
The current status and article text were checked directly through the Korean National Law Information OPEN API on September 10, 2026.
The VAT Act version takes effect January 2, 2026; its Enforcement Decree search version takes effect April 1, 2026, while Article 87 has an article effective date of February 27, 2026.
The Corporate Tax Act Enforcement Decree version takes effect February 27, 2026; the Income Tax Act Enforcement Decree version July 1, 2026; and the Framework Act on National Taxes version August 11, 2026.
Recheck grounds, scope, actual filing dates and amendment transitions before each filing season.
All monetary inputs remain in KRW, and 2027–2036 projections hold the 2026 rules constant.
- VAT Act Article 45: credit, recovery and evidence
- VAT Act Articles 5, 30 and 49: taxable periods, 10% and final returns
- VAT Act Enforcement Decree Article 87: grounds, 10-year scope and documents
- Corporate Tax Act Enforcement Decree Article 19-2: grounds and recognition timing
- Income Tax Act Enforcement Decree Article 55(2): recognized grounds
- Framework Act on National Taxes Article 5: deadline exceptions
Keep the credit and recovery ledger together
Following one invoice through confirmation, the credit return and each actual receipt helps identify add-backs for later returns.
Share the CSV with original evidence and have the credit period, final filing dates and rounding checked before transferring figures into the return.
Related calculators
- VAT Refund Tax Savings CalculatorVAT Refund Tax Savings Calculator helps estimate Korea-related VAT, input tax, refund, or prepayment scenarios in English.
- VAT Prepayment Cashflow CalculatorVAT Prepayment Cashflow Calculator helps estimate Korea-related VAT, input tax, refund, or prepayment scenarios in English.
- Amended Return Refund Calculator (5-Year Retroactive)Estimate a Korean amended-return (claim for correction) refund: the over-paid national tax principal plus statutory refund interest (3.1% per year in 2026) and the 5-year filing window by tax type. Based on the Framework Act on National Taxes Article 45-2 (claim within 5 years after the statutory due date), Article 52 with Enforcement Decree Article 43-3 (interest accrues from the day after payment), and Enforcement Rule Article 19-3 (annual 3.1% rate).
- Payment Order Cost CalculatorPayment Order Cost Calculator helps estimate Korea-related court filing, litigation, payment order, notary, and lawsuit cost assumptions in English.
- Korea Debt Collection Agency vs Lawsuit Net Recovery CalculatorCompare a collection agency, a direct lawsuit, and an agency-first hybrid strategy using expected recovery, timing, fees, litigation costs, VAT, and the time value of money.