How to Apply VAT on Payment


For businesses that sell VAT (VAT) tax-free products specified in Article 26 of the VAT Act (Supply of Tax-Free Goods or Service), the amount (payment amount) and tax_free (tax-free supply value) properties are used when requesting payment approval so that VAT can be applied based on the situation.

If you are a general business who does not handle the goods or services mentioned in the above article, you can skip the below because 10% VAT is automatically applied through PG/Card companies.

Set merchant ID (MID) during PG contract

When you can make a contract with PG, if you can identify yourself as a tax-exempt business and submit a business registration certificate, you can acquire a merchant ID (MID) that can adjust VAT with the amount and tax_free properties. For development convenience, you can select one of the following three options.

(For some PGs, you can use only one merchant ID (MID) and set tax_free properties to differentiate taxable and tax-free products.)
1duty-free merchant ID (MID)
For businesses that sell only tax-free products, it is advantageous to obtain the merchant ID (MID) of PG services in that way. When a transaction is made with the merchant ID (MID) issued in such a way, the VAT is always fixed at 0 by the PG setting. Therefore, the advantage is you can simply specify the amount to be actually paid with the amount property without using the tax_free property.

In that case, tax_free property is ignored and all transactions are regared as duty-free ones.
2taxable merchant ID (MID)
For businesses that sell only taxable products, taxable merchant ID (MID) is issued. In that case, tax_free property is ignored and all transactions are regared as taxable ones.
3composite taxable merchant ID (MID)
In the case of businesses that sell both taxable and tax-free products, they must acquire the PG merchant ID (MID) for that use model, since the VAT amount may vary depending on the products.

When purchasing taxable and tax-free products together, the total amount of the payment needs to be specified in amount property, and the total amount of the duty-free item among the purchased products needs to be specified in tax_free property.

tax_free property is required

In the case of selling both taxable and tax-free products, the amount and tax_free properties must be provided together. Unless there might be some erros for some PGS.

KG Inicis especially, all transactions are regared as duty-free ones. And if you switch taxable ID to composite ID, they change all previous taxable transactions to duty-free ones. So keep in mind with that.

How to specify tax_free property in different scenarios

Assuming a situation where a customer purchases taxable and tax-free products together, we will learn in detail how to specify the amount and tax_free properties for each scenario.

For example, let’s assume that a flower business (VAT tax-free business) sells plant seeds and vases.
  • Plat seed: tax-free product, 11,000 won per seed
  • Vase: VAT taxable product, 22,000 won per item
1When the customer purchase only a seed (tax-free product)
When a customer purchases a 11,000 won seed, the total payment amount is 11,000 won, of which the total amount of duty-free items is 11,000 won. Therefore, specify 11000 for amount property and 11000 for tax_free property.
  IMP.request_pay({
    amount: 11000,
    tax_free: 11000,
    ...
  }, function (rsp) {
    ...
  });
If you specify the payment properties as above, the total amount of 11,000 won is exempt from tax, and you can check the following contents in the issued sales slip. (Terms may vary depending on PG service)
  • Tax-free amount 11,000 won
  • VAT 0 won
2hen a customer purchase only a vase (taxable product)
When a customer purchases a 22,000 won vase, the total payment amount is 22,000 won, of which the total amount of duty-free item is 0 won. Therefore, specify 22000 for amount property and 0 for tax_free property.
  IMP.request_pay({
    amount: 22000,
    tax_free: 0,
    ...
  }, function (rsp) {
    ...
  });
If you specify the payment properties as above, 10% VAT is applied to 22,000 won, and the following contents can be checked in the issued sales slip.
  • General value of supply 20,000 won
  • VAT 2,000 won
3When a customer purchases seeds and a vase together (duty-free and taxable products)
When a customer purchases 3 seeds and 1 vase, the total payment amount is 55,000 won (33,000 won + 22,000 won), of which the total amount of duty-free items is 33,000 won (sum of all 3 seeds). Therefore, specify 55000 for amount property and 33000 the tax_free property.
  IMP.request_pay({
    amount: 55000,
    tax_free: 33000,
    ...
  }, function (rsp) {
    ...
  });
If you specify the payment properties as above, 10% VAT is applied to 22,000 won (taxable amount) out of 55,000 won, and the following contents can be checked in the sales slips issued in full tax exemption for 33,000 won.
  • General value of supply 22,000 won
  • Tax-free amount 33,000 won
  • VAT 2,000 won