If I don't roast green beans myself and instead buy pre-roasted beans, do I lose out on the deemed input tax credit?
Yes. The deemed input tax credit only applies when you directly purchase and roast tax-exempt agricultural product green coffee beans and then sell them. If you buy already-roasted beans as a finished product, that's treated as a regular taxable transaction eligible only for the tax-invoice-based input tax credit. Equipment like roasting machines and grinders is classified as a depreciable asset once a single transaction exceeds 1 million KRW and must be expensed over its useful life, and it's worth managing in-store and online sales revenue by channel.
The Most Confusing Part — How Beans Are Purchased and Roasting Equipment
Tax treatment differs depending on whether you roast green beans yourself or buy finished beans
Direct roasting of green beans qualifies for the deemed input tax credit
If you purchase tax-exempt agricultural product green coffee beans directly to roast and sell, you can claim the deemed input tax credit. If you purchase already-roasted beans as a finished product instead, that's a regular taxable transaction eligible only for the tax-invoice-based input tax credit.
Manage your roasting equipment investment through depreciation
Roasting machines involve a substantial initial investment, so it's more favorable for stable tax management to expense them over their useful life rather than deducting the entire cost in the year of purchase.
Income Structure of Independent Cafes & Roasteries
Key Expense Items
Must-Read for Independent Cafe & Roastery Owners
Split Your Roasting Equipment & Bean Purchases by Type to Save on Taxes
From roasting machines to bean sales revenue, categorizing each item correctly cuts unnecessary tax
Long-Term Fixed Assets — Depreciable Equipment
Roasting equipment: roasting machine, cooling unit
Extraction equipment: grinder, espresso machine
If a single transaction exceeds 1 million KRW, it's classified as a depreciable asset and must be expensed over its useful life.
Raw Materials — Green Beans Qualify for the Deemed Input Tax Credit
Green beans, syrup, and milk are fully expensed at the time of purchase. If you directly purchase tax-exempt agricultural product green beans, you can also claim the deemed input tax credit as long as you have documentation.
Personnel Service Costs — Barista Wages
A barista who works regularly is reported as employment income, while a freelance barista contracted per job is withheld at 3.3% as business income.
Distinguishing Online Bean Sales Revenue
In-store sales revenue and online (Smart Store, etc.) bean sales revenue are different channels, so managing them separately makes VAT filing and inventory management much smoother.
| Category | Examples | Tax Treatment |
|---|---|---|
| Long-term fixed assets | Roasting machine, grinder, espresso machine | Depreciate if over 1 million KRW |
| Raw materials | Green beans, syrup, milk | Fully deductible at purchase, green beans qualify for deemed input tax credit |
| Personnel services | Barista wages | 3.3% withholding or employment income |
| Online sales channel | Bean sales via Smart Store, etc. | Managed separately from in-store sales |