Special Series: Everything About Foreign Tourist Urban B&B Business 05
05. How to Register Your Business, and What Taxes Will You Pay?
Writer Suran
Editor ONDA Somora Manager
Essential Knowledge for Airbnb Entrepreneurs
Airbnb is hailed as the sharing economy's biggest success story — the most effective way to monetize unused space. But dive in without doing your homework, and you could find yourself running an illegal accommodation, facing crackdowns. Where's the line between legal and illegal? Tourism Promotion Act. Foreign Tourist Urban B&B Business regulations. The taxes every legal Airbnb operator needs to know. Suran breaks it all down for you.
Suran
After a long corporate career, I opened Guesthouse Suran in Seochon in 2014. I hit my startup goal: work 20 hours a week, earn ₩3 million a month. Since 2018, I've been living the digital nomad life — working from wherever I want.
Through columns and lectures, I share accurate legal and tax information with Airbnb and share-house entrepreneurs.
Website: www.bnbsuran.co.kr
How to Register a Foreign Tourist Urban B&B Business
"I went to the tax office and said I wanted to register a guesthouse business, and they said no — told me to go to the district office first! I'm trying to register a business and pay taxes, and it's not even straightforward!"
This is a story someone shared with me. They rushed to the tax office, eager to get their business up and running ASAP, only to be told they couldn't issue the registration. Why?
Because depending on the type of business, some registrations can be done directly at the tax office (for example, my "Guesthouse Startup Lecture" and "Consulting" business registration was processed right at Jongno Tax Office), while others require additional steps (restaurants are a typical example).
The Foreign Tourist Urban B&B Business (hereafter "Urban B&B") registration needed for guesthouse startups or Airbnb operations falls into the latter category. To operate an Urban B&B in Seoul or metropolitan cities, you must first apply for a "Foreign Tourist Urban B&B Business Designation Certificate" at your district office's tourism department (or city hall tourism department elsewhere). Only after this certificate is issued can you take it to the tax office to get your business registration certificate.
Issuing the Foreign Tourist Urban B&B Designation Certificate
"So I just need to go to the district office first!" — and off you rush. Hold on. Let's think this through. To operate an Urban B&B, you need a property. You need to confirm whether your property qualifies for Foreign Tourist Urban B&B operations. Recall the earlier installments in this Magazine ON series:
1) The types of housing allowed for Urban B&Bs are legally defined (detached house / multi-family house / multi-unit house / townhouse / apartment)
2) The property's total floor area must not exceed 230㎡ (approximately 69 pyeong)
3) You must reside there (not necessarily own it — tenants can apply)
4) You must verify the building registry (illegal structures are disqualified)
5) If it's a multi-unit residential building, you need resident consent (check with your district office on how to obtain this and the scope required)
If your property meets all these conditions, you can now visit the district office tourism department and submit your application. Note: the Urban B&B designation certificate cannot be applied for online. You must physically visit the district office tourism department and fill out the application form by hand. Make sure to ask ahead about the required supporting documents so you can prepare them in advance.
Foreign Tourist Urban B&B Designation Certificate Issuance Process
After reviewing your submitted documents, the responsible official will conduct an on-site inspection. In Jongno District, fire safety officials sometimes accompany them to inspect fire safety equipment. If you pass this on-site inspection successfully, your Foreign Tourist Urban B&B Designation Certificate will be issued.
Tip 1
During the on-site inspection, officials may conduct a brief test to see if you can communicate in a foreign language. Typical questions include giving directions from a subway station, train station, or bus stop to your property, or introducing your property. Don't worry too much if your language skills aren't perfect. Having a family member who can help is acceptable.
Jongno District Foreign Tourist Urban B&B Designation Certificate
Urban B&B Business Registration and Taxes
Let's review the process for registering your Foreign Tourist Urban B&B business:
Receive Urban B&B designation from the district office.
Take your designation certificate to the tax office to obtain your business registration certificate.
Step 1 is complicated, but Step 2 is quite simple. For the tax office, having someone register a business means they're going to earn money and pay taxes — so even if you're a first-time entrepreneur, they'll guide you kindly through the process.
The taxes paid by a Foreign Tourist Urban B&B business are twofold:
Declare the revenue generated from your Urban B&B operations and pay the corresponding value-added tax (VAT).
File your comprehensive income tax return every May and pay income tax.
VAT and comprehensive income tax always go together. As your accommodation revenue grows, the 10% VAT on that revenue increases, and you'll pay more in comprehensive income tax as well. Pay these two taxes, and you're officially a legal Airbnb operator running a Foreign Tourist Urban B&B business.
Tip 2
I occasionally get questions like: Can I just register the Urban B&B designation at the district office without filing a business registration? Reasons cited include landlords refusing to allow business registration or workplace policies prohibiting side businesses.
No, you can't.
In today's digitized world, do you really think the National Tax Service won't know you're operating an Urban B&B? Even if you don't immediately head to the tax office after receiving your district office designation certificate, nothing will happen right away — but eventually, you'll get a call from the tax office. Legally, you're required to complete business registration within two weeks of starting operations.
So far, we've covered how to register a Foreign Tourist Urban B&B business and the taxes involved in Urban B&B operations.
Next time, we'll explore what penalties you face if you run an illegal Airbnb operation in violation of the law.
[Series Index]
2019.07 Understanding the Tourism Promotion Act: Grasp the Intent, Understand the Law 2019.08 Only Certain Housing Types Are Allowed 2019.09 Urban B&B vs. Rural B&B 2019.10 Need Resident Consent to Operate in an Apartment? 2019.11 Business Registration: How to Register and What Taxes You'll Pay 2019.12 Illegal Airbnb: What Are the Penalties? 2020.01 Do You Know About the Tourism Promotion Development Fund? 2020.02 Can Domestic Guests Legally Stay? 2020.03 Why Doesn't Jeju Have Urban B&Bs? 2020.04 What Impact Will Shared B&Bs Have?
