South Korea widens VAT exemptions for entrusted health services, land-lease housing and labour supply

What changed in detail

Presidential Decree No. 34270, promulgated on 29 February 2024 (관보 제20698호), amended the Enforcement Decree of the Value Added Tax Act. It is the same decree that raised the simplified taxpayer threshold to KRW 104 million (kr-simplified-taxpayer-threshold-104m-2024). It widens the VAT exemption list in three places, each with its own start date.

• Article 35(18), entrusted health services. The exemption for medical and health services provided by persons entrusted by central or local government was limited to mental-health promotion and mental-illness welfare services. It now covers services entrusted under Article 15(6) of the Act on the Improvement of Mental Health and the Support for Welfare Services for Mental Patients and other statutes designated by ministerial ordinance. It applies from promulgation, to returns filed and assessments made after that date (addendum Article 4).
• Article 41(1) item 2, land-lease housing. Leasing the land under 토지임대부 분양주택 (land-lease housing under Article 2(9) of the Housing Act), limited to national-housing size, is exempt for services supplied from 1 July 2024 (addendum Article 5).
• Article 42 item 2, sub-items 아 and 자, labour supply. Labour supply under the Employment Security Act, and simple manpower supply performed at another business’s site using that business’s facilities for manufacture, repair, construction and similar work prescribed by ministerial ordinance, are exempt for services supplied from 1 January 2025 (addendum Article 6).

What it means

All three exemptions are still in force. The consolidated Enforcement Decree current from 1 April 2026 (Presidential Decree No. 36133) carries each of them; the only change is that Article 35(18) now refers to an ordinance of the renamed Ministry of Finance and Economy (재정경제부령).

The labour-supply item is the one with commercial bite. Manpower-supply firms that charged 10% VAT to manufacturers and builders lost both the output tax and the right to recover input VAT on those services from 2025, and their customers lost the input credit. Contracts priced VAT-inclusive across 1 January 2025 needed repricing. The exemption is narrow: it covers only work done at the client’s site with the client’s facilities, not staffing in general.