If I run a driving school, how does tax filing differ from other academies?
A driving school (motor vehicle driving academy) is explicitly excluded, along with dance academies, from the VAT-exempt educational-service category under the Value-Added Tax Act, so unlike other academies you must file and pay VAT. In exchange, since you are a taxable business, you can claim an input VAT credit for VAT you paid on purchases such as training-vehicle purchases/maintenance and rent — the exact opposite structure from other VAT-exempt academies. If you are opening a new driving school, it is important to understand this difference first and prepare your filing system accordingly.
The key exception — driving schools are subject to VAT
Even though they are both called an "academy," the tax structure is completely different
Motor vehicle driving academies are excluded from the exemption
The Value-Added Tax Act exempts educational services in principle, but explicitly makes dance academies and motor vehicle driving academies an exception subject to VAT. Unlike other academies, you have a VAT filing/payment obligation.
In exchange, you can claim the input VAT credit
As a taxable business, you can get a refund on VAT you paid on purchases such as training-vehicle purchases/maintenance and rent through the input VAT credit. This is the key difference — the exact opposite structure from other VAT-exempt academies.
Other academies (essay, transfer, civil service) follow the general principle
Key expense categories
Must-read for vocational/certification academies
Only driving schools have a different tax structure — sort by category to save on taxes
Since taxable/exempt status splits by academy type, sorting each item correctly matters
Long-term fixed assets — training vehicles/facilities
[Driving school] training vehicles, simulators
[Other academies] interior, teaching equipment
Anything over 1,000,000 KRW per unit is classified as a depreciable asset and must be expensed gradually over its useful life. A driving school, as a taxable business, can also claim the input VAT credit.
Consumables — past-exam-question printing / vehicle upkeep
Civil service/transfer academies expense past-exam-question/mock-exam printing costs, while driving schools expense vehicle maintenance/fuel costs, both in full at the time of purchase or payment.
Personal service costs — instructor fees
A per-contract instructor is subject to 3.3% withholding as business income; a regularly employed instructor is reported as employment income. The same standard applies regardless of academy type.
Input VAT credit — only for driving schools
A driving school, as a taxable business, can claim the input VAT credit on rent/vehicle-related purchases, but every other academy is VAT-exempt and cannot claim this credit.
| Category | Examples | Tax treatment |
|---|---|---|
| Long-term fixed assets | Training vehicles, interior, teaching equipment | Depreciated if over 1,000,000 KRW |
| Consumables | Past-exam-question printing / vehicle upkeep | Expensed in full immediately |
| Personal services | Instructor fees | 3.3% withholding or employment income |
| Input VAT credit | Driving schools vs. other academies | Only driving schools are taxable/eligible; others are exempt/not eligible |
Frequently Asked Questions
Check out other academy types too
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