Changes for households and small businesses in the second half of 2026 — areas excluded from simplified VAT revised and Yellow Umbrella Mutual Aid limit raised
Source material is a Korean government announcement (in Korean).
From 1 July, the designation of 544 areas as excluded from simplified VAT taxation is revised, so sole traders with supply value of less than 104 million won pay simplified VAT at 1.5% to 4%, and the annual payment limit for the Yellow Umbrella Mutual Aid rises from 12 million won to 18 million won.
Key facts
| Areas excluded from simplified VAT revised | The designation of 544 areas nationwide as excluded from simplified VAT taxation is revised from 1 July |
|---|---|
| Who qualifies and the rate | Sole traders with supply value of less than 104 million won in the previous year, at a rate of 1.5% to 4% (instead of the standard 10%) |
| VAT exemption | No obligation to pay value added tax if annual turnover is less than 48 million won |
| Yellow Umbrella Mutual Aid | Annual payment limit rises from 12 million won to 18 million won, with an income deduction of up to 6 million won |
| AI tax advice | The generative AI Hometax chatbot expands to value added tax from 1 July, available 24 hours a day |
Last checked:
A series of measures for households and small businesses take effect in the second half of 2026. From 1 July, the designation of 544 areas nationwide as excluded from simplified VAT taxation is revised, so sole traders with supply value of less than 104 million won in the previous year pay the simplified VAT rate of 1.5% to 4%, and the annual payment limit for the Yellow Umbrella Mutual Aid (노란우산공제) rises from 12 million won to 18 million won. The generative AI chatbot on Hometax also expands to cover value added tax from 1 July.
Summaries below are factual notes based on government announcements and primary sources — not evaluations or opinions.
FAQ
What changes with the revision of the areas excluded from simplified VAT?
From 1 July, the designation of 544 areas as excluded from simplified VAT taxation is revised, so sole traders with supply value of less than 104 million won in the previous year pay a simplified VAT rate of 1.5% to 4% instead of the standard 10%, and file VAT once a year instead of twice.
How much has the Yellow Umbrella Mutual Aid limit risen to?
From 1 July the annual payment limit rises from 12 million won (3 million won per quarter) to 18 million won, and payments qualify for an income deduction of up to 6 million won depending on the size of business income.