If we pay compensation for damaged laundry, is that also recognized as an expense?
Yes, compensation for damage or loss of laundry is deductible as a business-related loss compensation payment, and carrying liability insurance also gets the premium recognized as an expense while letting you handle any incident through the insurer to reduce your own risk. If you're a franchisee, royalties, training fees, and headquarters group-buy detergent/solvent purchase costs can also be expensed with a tax invoice, and if you run an unattended laundromat (coin wash) alongside your shop, we recommend regularly checking the payment terminal's settlement records to prevent missed revenue.
The Trickiest Part — Liability and Franchise Fees
You'll want to plan ahead for the risk of damaging a customer's garment and the cost structure unique to franchising
Laundry-Damage Liability Insurance Is Safer
Damaging expensive clothing or luxury items can create significant compensation liability, so liability insurance is safer. The premium is recognized as an expense, and even if you pay compensation directly, you can expense it as long as you keep the agreement and processing records on file.
Franchise Fees and Royalties Are Normally Deductible
If you're a franchisee, you can recognize royalties, training fees, and headquarters group-buy detergent/solvent purchase costs as expenses. Just obtain a tax invoice or receipt from headquarters.
Income Structure Features of Laundry & Dry Cleaning
Key Expense Items
Must-Know for Laundry & Dry Cleaning
Split Laundry Equipment & Consumables by Category to Save on Taxes
From laundry machines to solvent-disposal costs, categorizing each item correctly is what cuts unnecessary tax
Long-Term Fixed Assets — Equipment Subject to Depreciation
Laundry equipment: dry-cleaning machine, large washer/dryer
Finishing equipment: pressing machine, steam iron
Store fixtures: garment-conveyor system, POS system
Once a per-unit purchase exceeds KRW 1 million, it's classified as a depreciable asset and must be expensed over its useful life.
Consumables & Waste Disposal — Immediate Expense
Consumables such as detergent, dry-cleaning solvent, packaging plastic, and hangers, along with outsourced waste-solvent/wastewater disposal costs, are expensed in full at the time of purchase or payment. Solvent is a hazardous material, so keep the disposal company's contract on file.
Personal Services & Labor Costs
Pressing/repair support staff are filed as employment income if regularly employed, or as business income with 3.3% withholding if contracted freelance.
Franchise Fees & Headquarters Management Costs
If you're a franchisee, royalties, training fees, and headquarters logistics/group-buy costs are a recurring monthly cost, expensed in full at the time incurred, and you should always obtain a tax invoice or receipt from headquarters.
| Category | Typical Examples | Tax Treatment |
|---|---|---|
| Long-term fixed assets | Dry-cleaning machine, pressing machine, POS | Depreciated once over KRW 1M |
| Consumables & waste disposal | Detergent/solvent/hangers, waste-solvent disposal | Fully expensed immediately at cost |
| Personal services & labor | Pressing/repair support staff | Employment income or 3.3% withholding |
| Franchise fees/headquarters | Royalties, training fees, group-buy costs | Expensed immediately |