Deemed supply on closure: deduction rate per taxable period, non-building depreciable assets
Because the widespread shortcut — 'value the leftovers at market price, or at book value' — is wrong for exactly the assets worth the most money. Ordinary stock is valued at market value; depreciable assets have their own statutory formula, and it is neither market value nor the depreciated figure in the accounts. Getting this wrong produces a final VAT bill that is too high as often as too low.
- Applies to
- Machinery, equipment, fixtures, vehicles and other non-building depreciable assets held at closure, where input VAT was deducted on purchase
- Review cadence
- Checked once a year
What we have recorded
- 2026-10-0625% per taxable period, capped at 4 periods
Supply value = acquisition cost × [1 − 25% × elapsed taxable periods], counting a maximum of four periods. Korean VAT taxable periods are half-yearly, so four periods is roughly two years: an asset bought more than two years before closure reaches zero and carries no deemed-supply VAT, while one bought shortly before closure is taxed on most of its cost. This only applies where input VAT was deducted at purchase.
Enforcement Decree of the Value-Added Tax Act, art. 66
One reading so far. This becomes a history the first time the figure moves while we are watching — which is the part that cannot be reconstructed later.