We also sell hair products at the salon — does that revenue need to be reported differently from service revenue?
Service revenue and hair product sales revenue are different in nature, so it's best to manage them separately. Both are subject to VAT and reported on a combined basis, but keeping separate records of product inventory and service-supply purchase documentation makes both inventory management and tax filing much smoother. If your salon also involves designer incentives, it's worth splitting revenue accurately by category in your books.
The Most Important Issue — Is a Designer a Freelancer or an Employee?
Actual working conditions, not the contract's name, determine the classification
"Fake 3.3% contracts" are a focus of Labor Ministry crackdowns
If a designer shows up at a fixed clock-in time, takes instructions from the owner, and uses the salon's facilities and materials, the working relationship may be judged to be an employee in substance, even if the contract is labeled as a freelance (outsourcing) agreement. Courts have recognized hair designers as employees in some cases, and the Ministry of Employment and Labor has announced it will focus crackdowns on "fake 3.3% contracts."
Design your contract to match the actual working relationship
If a designer recruits and manages their own clients and can set their own hours and methods, a business income (3.3%) freelance contract is appropriate. If clock-in times and hours are fixed, converting to an employment contract and enrolling them in the 4 major insurances reduces both tax audit and labor risk.
Income Structure of Hair Salons
Key Expense Items
Must-Read for Hair Salon Owners
Split Your Facilities & Materials Costs by Type to Save on Taxes
From salon chairs to booking platform fees, categorizing each item correctly cuts unnecessary tax
Long-Term Fixed Assets — Depreciable Equipment
Salon equipment: styling chairs, shampoo stations, hair dryer stations
Interior: store interior, lighting equipment
Beauty tools: professional equipment like curling irons and clippers
If a single transaction exceeds 1 million KRW, it's classified as a depreciable asset and must be expensed over its useful life.
Supplies — Immediately Deductible
Hair dye, perm solution, shampoo/treatment, towels/gowns, and sanitizing supplies are fully expensed at the time of purchase. Keep these separate from your hair product sales inventory.
Personnel Service Costs — Designer Incentives
If a designer is settled as a business-income earner (3.3%), withhold 3.3% of the incentive payment and file and pay it by the 10th of the following month. If the working relationship is closer to an employee, treat it as employment income.
Booking Platform & Marketing Costs
Booking platform fees (Naver Booking, Kakao Hairshop, etc.) and social media advertising costs are recurring monthly expenses that are fully deducted at the time incurred.
| Category | Examples | Tax Treatment |
|---|---|---|
| Long-term fixed assets | Styling chairs, shampoo stations, interior, tools | Depreciate if over 1 million KRW |
| Supplies | Hair dye, perm solution, shampoo, towels | Fully deductible at purchase |
| Personnel services | Designer incentives | 3.3% withholding or employment income |
| Booking platform & marketing | Naver Booking, Kakao Hairshop, social media ads | Immediately deductible |