Definition
In Korea, a tax invoice is the official proof of a sale that one business issues to another when it sells goods or services. It records who sold what to whom, for how much, and how much value-added tax (VAT) is attached to that price. Because the seller and the buyer both report the same details to the National Tax Service, it becomes a yardstick for checking that their books match.
How is it different from a convenience store receipt?
When you buy a triangle rice roll at a convenience store, you get a receipt. That slip is just for you, to check what you paid. You can throw it away and nothing happens.
But say a stationery shop owner delivers a box of notebooks to an office nearby. Now it's a different story. The paper that changes hands is a tax invoice. The seller keeps one copy, the buyer keeps one copy, and the very same details go to the National Tax Service (Korea's tax authority).
That's why it has many more fields than a receipt. Both businesses' registration numbers, the date of the deal, what was sold and for how much, and the tax amount each get their own box.
Three parties hold the same record. That's the biggest difference from a receipt. If one side writes down a smaller amount, it won't match the other side's paperwork, and the gap shows up quickly.
Why bother passing this paper around?
The price we pay for goods has value-added tax mixed in. It's a tax on the price of the goods. The buyer bears it, but the seller collects it and sends it to the government on the buyer's behalf.
Say the stationery shop sells notebooks for 1.1 million won. Of that, 1 million won is the price of the goods and 100,000 won is tax. The shop holds on to that tax for a while, then hands it over to the government.
If the buyer is a business too, the story continues. From the VAT it collected from its own customers, it can subtract the tax it already paid when it bought the notebooks, and it only pays the rest. This is called an input tax credit (maeip-seaek gongje in Korean).
But to ask for that subtraction, you need proof that you've already paid. The tax invoice is that proof. Without a tax invoice on file, it's hard to subtract the tax you already paid, which is why businesses take care to get one for every deal.
A bit more precisely
Not every sale comes with a tax invoice. Shops that serve individual customers, like convenience stores, don't issue one for each shopper. Instead, a cash receipt or a card receipt does the same job as proof.
It also matters what kind of business the seller is. A small shop registered as a simplified taxpayer (gan-i gwaseja, a business under Korea's simplified VAT system) sometimes can't issue tax invoices. So before two businesses start trading, they check what type the other side is.
These days, most tax invoices are exchanged electronically instead of on paper. You press an issue button on a screen, it goes to the other business, and the same details are passed on to the National Tax Service.
The paper has become a screen, but the skeleton is the same. The seller, the buyer, and the tax office all see the same details, and that's what gives this document its power.
Common misconceptions
If you receive a tax invoice, you end up paying more tax.
It's actually the opposite. It proves that you've already paid VAT, and a business needs it to subtract that amount from what it owes. So the tax you have to pay goes down.
As long as you keep your receipts, you don't need a tax invoice.
An ordinary receipt, like a handwritten simple receipt, doesn't show VAT separately and isn't reported to the National Tax Service. For deals between businesses, you need proof that the tax office can see too, such as a tax invoice, a cash receipt issued as an expense record, or a card slip from a business card.
Where you meet it
A cafe owner buys coffee beans from a wholesaler, pays, and then keeps the tax invoice on file.
When a company buys a laptop, the person in charge gives the seller the company's name and registration number and asks for a tax invoice.
In one sentence
It's a document where the seller and the buyer together prove what a business deal was for, at what price, and how much tax was included.