A Return a Week Late and a Review Notice Delayed: Whose Time Does the Penalty Tax Count?

The Bill Read and the Status Confirmed

This entry reads Bill No. 2221037, the Partial Amendment Bill to the Framework Act on National Taxes. The Bill was submitted by the Government on September 3, 2026, and the session is shown as the 439th National Assembly (regular session). On the verification date, the National Assembly progress page records referral to the Finance, Economy and Planning Committee on September 4, 2026 and placement on the agenda on September 28, 2026. It records the outcome of the 5th plenary committee meeting on September 29, 2026 as placement on the agenda, explanation of the proposal, review report, general debate, and referral to the subcommittee. The page did not show the outcome of the subcommittee's review or any later stage.

The parts read are the following parts of the original bill PDF: the reasons for the proposal, the main contents, the reference notes, the amended provisions, the addenda, the comparison table of current and proposed provisions, the cost estimate, and the financing plan. The review report and the meeting minutes were not read. As material from the earlier stage, the page for the advance legislative notice under Ministry of Finance and Economy Public Notice No. 2026-209 (from August 4 to August 20, 2026) was read. The notice's main contents list two items. The first is clarifying when the penalty tax for late payment arises and including the date of payment in the period of imposition. The second is expressly naming the handling of grievance petitions among the matters deliberated by the Taxpayer Protection Committee. The Bill's main contents do not list these two items. Instead, they newly list an expansion of the persons whose names are published for breaching the duty to report overseas financial accounts. The Bill's amended provisions nonetheless still contain the provisions on when the penalty tax arises, on the date of payment, and on grievance petitions.

On the verification date, the current Framework Act on National Taxes is shown as Act No. 21987 (partially amended on September 29, 2026, in force from October 2, 2026). It was therefore amended once after the Bill was submitted. This entry compared the current text of Articles 21, 26-2, 47-4, 48, 84-2 and 85-5 with the 'current' column of the Bill's comparison table and found no textual difference within the scope covered. The current text of Articles 47-5 and 81-18 was not separately compared.

Sources for this section: National Participatory Legislation Center, National Assembly Legislative Status: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Participatory Legislation Center, Advance Legislative Notice: Partial Amendment Bill to the Framework Act on National Taxes (Ministry of Finance and Economy Public Notice No. 2026-209) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026)

What the Current Provisions Now Provide

Current Article 26-2(1) sets the exclusion period for assessment at five years from the date on which the national tax can be assessed, or seven years for offshore transactions. Article 26-2(2), subparagraph 1 sets it at seven years (ten years for offshore transactions) where the taxpayer has not submitted a tax base return by the statutory filing deadline. Article 26-2(2), subparagraph 2 sets it at ten years (fifteen years for offshore transactions) where national tax has been evaded, or a refund or deduction obtained, by wrongful acts. The latter part of that subparagraph applies the same period to income tax or corporate tax on amounts disposed of under Article 67 of the Corporate Tax Act where the national tax evaded by wrongful acts is corporate tax. The sentence that extends the longer period to amounts subject to income disposition currently exists only for wrongful acts. Article 67 of the Corporate Tax Act provides for amounts that are included in gross income or excluded from deductible expenses upon a return, a determination or correction, or an amended return. Such amounts are disposed of to the recipient or others as a bonus, a dividend, other outflow from the company, retention within the company, and the like.

Current Article 26-2(3) applies where, in a tax period after the exclusion period has expired, losses carried forward or tax credits carried forward under Article 144(1) of the Restriction of Special Taxation Act are deducted. In that case, the exclusion period for assessment of the income tax or corporate tax for the tax period in which those losses or credits arose is one year from the statutory filing deadline of the tax period in which they were deducted.

Current Article 48(2), subparagraph 2 reduces the penalty tax for failure to file on a return filed after the deadline. The reduction is 50 per cent if the return is filed within one month after the statutory filing deadline, 30 per cent if filed after more than one month but within three months, and 20 per cent if filed after more than three months but within six months. For amended returns under subparagraph 1 of the same paragraph, the reduction starts at 90 per cent within one month. Item (a) of subparagraph 3 of the same paragraph reduces by 50 per cent the penalty tax for late payment imposed for the period of delay where the result of a pre-assessment review under Article 81-15 is not notified within the period for decision and notification. Article 81-15(4) requires the result to be notified within 30 days from the date on which the request is received. Article 48(1), subparagraph 2 provides that no penalty tax is imposed where there is justifiable cause for the failure to perform the obligation.

Current Article 47-4(1), subparagraph 1 sets the period for the penalty tax for late payment as running from the day after the statutory payment deadline to the day before the date of the payment notice (or, where payment is made before the date of the payment notice, the day before the date of payment). Subparagraph 1-2 sets it as the number of months elapsed from the day after the designated payment deadline to the day before the date of payment. Article 21(2), subparagraph 11, item (b) provides that the tax liability for that penalty tax arises, for each day after the lapse of the statutory payment deadline, when that day elapses. Article 4 provides that, absent special provisions, periods are calculated in accordance with the Civil Act.

Current Article 84-2(1) provides that rewards may be paid within a limit of KRW 2 billion (KRW 4 billion for material for calculating evaded tax, and KRW 3 billion for reports of concealed property). Paragraph (6) leaves the payment criteria to Presidential Decree. Article 85-5(1), subparagraph 4 permits publication of the personal details and other information of a person who failed to report, or under-reported, an overseas financial account by the reporting deadline where the amount unreported or under-reported exceeds KRW 5 billion. Paragraph (4) requires the person subject to publication to be notified and given an opportunity to explain, with re-deliberation after six months have passed.

Sources for this section: National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026) · National Law Information Center, current Corporate Tax Act (Act No. 21217)

What the Bill Seeks to Change

The Bill would add a latter part to Article 26-2(2), subparagraph 1. Under it, where the national tax for which no return was filed by the statutory filing deadline is corporate tax, income tax or corporate tax on amounts disposed of under Article 67 of the Corporate Tax Act would also be subject to seven years (ten years for offshore transactions). Proposed Article 26-2(3), subparagraph 3 would bring within the special rule for losses carried forward, etc. two categories of carried-forward amounts. The first is foreign income taxes carried forward under Article 57(2) of the Income Tax Act. The second is foreign corporate taxes carried forward under Article 57(2) or Article 57-2(2) of the Corporate Tax Act.

The Bill would insert a new item (a) in Article 48(2), subparagraph 2, providing a 75 per cent reduction for a return filed after the deadline within one week after the statutory filing deadline. The former item (a) would become item (b), and 'within one month' would change to 'after more than one week but within one month'. The Bill would also delete item (a) of Article 48(2), subparagraph 3 and insert a new subparagraph 4. That subparagraph would set at 75 per cent the reduction of the penalty tax for late payment for the period of delay in the decision on and notification of a pre-assessment review.

Some provisions are not mentioned in the Bill's main contents. Proposed Article 21(2), subparagraph 11, item (b) would change 'after the lapse of the statutory payment deadline' to 'when the statutory payment deadline lapses and thereafter'. Proposed Article 47-4(1), subparagraphs 1 and 2 would change 'the day before the date of the payment notice (or, where payment is made before the date of the payment notice, the day before the date of payment)' to 'the day before the date of the payment notice (or, where payment is made before the date of the payment notice, the date of payment)'. Subparagraphs 1-2 and 2-2 would change 'the day before the date of payment' to 'the date of payment'. Article 47-5(1), subparagraphs 2 and 3 are changed in the same way. Proposed Article 81-18 would add the handling of grievance petitions to the matters deliberated by the Taxpayer Protection Committee. The Bill would also delete the basis in Article 84(3) for grants for taxpayer guidance.

Proposed Article 84-2(1) would delete the wording on the ceiling on rewards. It would also add, as subparagraph 6-2, a person who has provided material important in detecting breaches of the duty to submit a statement of overseas trusts. Proposed Article 85-5(1), subparagraph 4 would lower the threshold amount for publication of names from KRW 5 billion to KRW 3 billion. Article 1 of the Addenda proposes entry into force on January 1, 2027. Articles 2 to 7 set out rules of application, and Article 8 sets out a transitional measure.

The cost estimate records revenue of KRW 7.5 billion from 2027 to 2031. This consists of an increase of KRW 16 billion under the exclusion-period item and a decrease of KRW 8.5 billion under the item for higher penalty-tax reduction rates. The formula for the penalty-tax item is stated as the 2020–2024 average of KRW 3.4 billion in penalty tax reduced because of delays in pre-assessment review, multiplied by the increase in the reduction rate. The estimate assumes promulgation in December 2026.

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026)

Does a Company's Failure to File Extend Even the Period for the Recipient's Income Tax?

The latter part of proposed Article 26-2(2), subparagraph 1 applies seven years to income tax on amounts subject to income disposition where the unfiled national tax is corporate tax. The taxpayer for that income tax is the recipient who received the disposition as a bonus or dividend, and the recipient may well have filed his or her own income tax return on time. The latter part of current subparagraph 2 creates the same link only under the requirement of wrongful acts. The Bill seeks to create the same link solely on the ground that the company failed to file, without wrongful acts. It does not make the recipient's filing or circumstances a requirement.

Article 2 of the Addenda provides that this amended provision applies from cases in which a disposition is made under Article 67 of the Corporate Tax Act after this Act enters into force. The reference point for application is the time of disposition, not the tax period or how far the exclusion period has run. The question therefore remains whether the wording also covers a disposition made after entry into force for a tax period whose five years for the recipient's income tax had already expired at entry into force. The cost estimate explains the basis of the revenue increase by reference to income amounts in cases disposed of as deemed bonuses over the last five years in which the five-year exclusion period for income tax had expired but seven years had not yet been reached. The Bill does not state whether this explanation means that the rule applies to cases where the period has expired, or is merely an explanation of the estimation method.

Does the Bill provide that seven years applies, where the disposition is made after entry into force, even to the recipient's income tax for tax periods whose five years had already expired before entry into force? And on what basis is a longer period justified for the recipient in a case of failure to file without wrongful acts?

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026) · National Law Information Center, current Corporate Tax Act (Act No. 21217)

How Is the One-Week Band Counted, and Where Is Its Effect Calculated?

Proposed Article 48(2), subparagraph 2, item (a) provides a 75 per cent reduction for a return filed after the deadline within one week after the statutory filing deadline. The Bill does not separately prescribe how the week is counted, so under Article 4 the calculation of periods under the Civil Act applies. The current reduction bands were divided only into monthly units of one, three and six months, and the Bill introduces a weekly band for the first time. This entry did not separately read the Civil Act provisions on the calculation of periods or the provisions on special rules for deadlines, and therefore offers no specific date calculation.

The reasons for the proposal explain that raising the reduction rate of the penalty tax for returns filed after the deadline within a short period eases the taxpayer's burden. However, the fiscal impact factors table in the cost estimate describes the Article 48 item only as the higher reduction rate for delays in decisions on pre-assessment review. It does not separately record any change in revenue from the reduction for returns filed after the deadline within one week. The Bill does not reveal whether that effect was considered small or was not estimated.

Article 5 of the Addenda applies the amended provision from cases in which a return is filed after the deadline after this Act enters into force. On the wording, a return whose statutory filing deadline fell before entry into force but which is filed within one week after entry into force would also receive the new reduction rate. Where are the starting point of the one-week band, the treatment of returns straddling entry into force, and the revenue effect prescribed and calculated?

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026)

Why Does One Quarter of the Penalty Tax Remain for the Period by Which the Tax Authority Delayed Notification?

Current Article 81-15(4) requires the result to be notified within 30 days from the date on which the request for pre-assessment review is received. Exceeding that period is a matter on the side of the party that must give notice. The current law reduces the penalty tax for late payment for the period of delay by half, and the Bill would reduce it by three quarters. Either way, part of the penalty tax for the period by which the tax authority delayed notification remains with the taxpayer.

Article 48(1), subparagraph 2 provides that no penalty tax is imposed where there is justifiable cause. The Bill, however, does not move this delay into the exclusion from imposition in paragraph (1), but leaves it as a reduction rate in paragraph (2). The reasons for the proposal cite only the easing of the taxpayer's burden and do not state why the rate of 75 per cent was chosen. The cost estimate records an average annual revenue decrease of KRW 1.7 billion, based on the increase in the reduction rate.

Article 8 of the Addenda provides for a pre-assessment review requested before entry into force whose notification is delayed until after entry into force. In that case, the former rate applies to the period up to the day before the date of entry into force, and the new rate applies to the period thereafter. The method of dividing the period is clear. How is the decision to leave part of the penalty tax with the taxpayer for the period of the tax authority's delay in notification justified?

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026)

Why Include the Day of Payment in the Penalty-Tax Period?

Proposed Article 47-4(1), subparagraph 1 moves the end of the period, where payment is made before the date of the payment notice, from the day before the date of payment to the date of payment. Subparagraphs 1-2 and 2-2 likewise change the end point for counting elapsed months to the date of payment. On the wording, the penalty-tax period for a person who pays voluntarily before notice increases by one day. The count of months after notice may differ where the date of payment falls on a month boundary. The same kind of change is also made to Article 47-5, which governs the penalty tax for late payment of withheld taxes and the like.

Proposed Article 21(2), subparagraph 11, item (b) changes the time at which the tax liability arises from 'for each day after the lapse of the statutory payment deadline' to 'when the statutory payment deadline lapses and for each day thereafter'. The advance notice explains this as clarifying that the liability arises immediately upon the lapse of the statutory payment deadline. However, the Bill's reasons for the proposal and main contents do not explain these two changes, and the fiscal impact factors table in the cost estimate has no item for them. The Bill itself does not show whether this is a tidying of the calculation method or a change that increases the burden.

Article 4 of the Addenda applies this amended provision from cases in which the penalty tax for late payment is paid after this Act enters into force. It reads as applying the new calculation even to penalty tax that had been accruing since a statutory payment deadline that passed before entry into force, if payment is made after entry into force. Where are the reason for including the date of payment in the period and the size of the resulting burden explained?

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Participatory Legislation Center, Advance Legislative Notice: Partial Amendment Bill to the Framework Act on National Taxes (Ministry of Finance and Economy Public Notice No. 2026-209) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026)

When the Ceiling on Rewards Is Removed and the Publication Threshold Lowered, What Sets the Standard?

Proposed Article 84-2(1) removes the monetary ceiling on rewards from the Act. The payment criteria remain in Presidential Decree, as under current paragraph (6). The standard for the size of rewards would then be absent from the Act and found only in subordinate legislation. The reasons for the proposal cite the encouragement of reports. The cost estimate, however, records expenditure as 'not applicable' and has no item for rewards in the fiscal impact factors table. Article 6(2) of the Addenda applies the former ceiling where material was provided or a report was made before entry into force.

Proposed Article 85-5(1), subparagraph 4 lowers the threshold for publication of the names of persons breaching the duty to report overseas financial accounts to amounts exceeding KRW 3 billion. Current paragraph (4) is left unchanged. It requires notice before publication and an opportunity to explain, with re-deliberation after six months. Article 7 of the Addenda provides that the amendment applies from cases in which a report must be made under Article 53 of the Adjustment of International Taxes Act after entry into force, even for accounts held before entry into force.

Where, as between the Act and Presidential Decree, are the payment criteria for rewards without a ceiling and the appropriateness of the lowered publication threshold to be prescribed, and who reviews them?

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Law Information Center, current Framework Act on National Taxes (Act No. 21987, in force from October 2, 2026)

Commencement and remaining issues

Article 1 of the Addenda proposes entry into force on January 1, 2027. Its proviso provides that the amended provision of Article 21(2), subparagraph 11, item (b) contained in Act No. 9911, the Partial Amendment Act to the Framework Act on National Taxes, enters into force on the date of entry into force of the Act repealing the Transportation, Energy and Environment Tax Act. This entry did not confirm the date of entry into force of that repealing Act. The reference notes state that the Bill needs to be designated, under Article 85-3(4) of the National Assembly Act, as a bill accompanying the 2027 revenue budget bill. Whether it has been designated was not shown on the page on the verification date. The proposed date of entry into force is not a fixed date.

The remaining issues converge on the reference points set by the rules of application. The exclusion period for assessment is keyed to the time of disposition, the reduction for returns filed after the deadline to the time of filing, the calculation of the penalty tax for late payment to the time of payment, and publication of names to the time the reporting duty arises. Because the reference point differs from provision to provision within the same Bill, several matters concerning a single taxpayer around the time of entry into force may be subject to different rules. This entry does not assess whether that outcome is appropriate.

This entry did not read the review report, the subcommittee review materials, the meeting minutes, the draft amendment to the Enforcement Decree, or other tax-law amendment bills of the same period. It neither supports nor opposes the Bill and does not predict its outcome. How is the treatment to be determined where differing points of application under different provisions overlap for a single taxpayer?

Sources for this section: Original Bill PDF: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037) · National Participatory Legislation Center, National Assembly Legislative Status: Partial Amendment Bill to the Framework Act on National Taxes (No. 2221037)