Tax Exemption on Payments

This guide describes 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 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 tax-free amount when requesting a payment.

When opening the payment page with IMP.request_pay, you can apply the tax-free amount using the following properties:
  • amount: total payment amount
  • tax_free: total tax-free amount

Some PGs use a single merchant ID, without getting a separate tax-free merchant ID, to set the tax-free amount in the tax_free property.

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.
1Tax-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.
2Taxable 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.
3Mixed merchant ID
A mixed merchant ID is issued to businesses that sell both taxable and tax-free products and services. You must use a mixed 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 the tax_free property.

tax_free setting is required

For transactions using mixed 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.

Some PGs, in particular KG Inicis, process all payments as tax-free. Note that if you change to a mixed 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 the section show how to set the amount and tax_free properties when purchasing tax-free and/or taxable items.

Assume that a flower 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
1Purchasing 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:
  IMP.request_pay({
    amount: 11000,   // total payment amount
    tax_free: 11000,  // total tax-free amount
    ...
  }, function (rsp) {
    ...
  });
In this case, the total amount of 11,000 won is tax-free, and the final payment is calculated as follows:
  • Total tax-free amount: 11,000 won
  • VAT: 0 won
2Purchasing 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:
  IMP.request_pay({
    amount: 22000,   // total payment amount
    tax_free: 0,  // total tax-free amount
    ...
  }, function (rsp) {
    ...
  });
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
3Purchasing 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:
  IMP.request_pay({
    amount: 55000,   // total payment amount
    tax_free: 33000,  // total tax-free amount
    ...
  }, function (rsp) {
    ...
  });
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