This course covers the Framework Act on National Taxes as tested in Introduction to Tax Law, the first-round subject of Korea’s certified tax accountant exam. Articles are cited from the version in force on 11 August 2026 (Act No. 21860), checked on 20 September 2026. This is not tax or legal advice on any individual case.

1. Learning objectives

Explain which prevails when the Framework Act conflicts with an individual tax law.
Distinguish the three situations in which the substance-over-form principle applies (attribution, calculation, step transactions).
Distinguish what the prohibition of retroactive taxation prevents and what it does not.
State the requirements for challenging a tax authority’s disposition under the principle of good faith.

2. What the Framework Act governs

Each individual tax law governs its own tax. The Income Tax Act taxes income, the Corporate Tax Act taxes corporate income, and the Value-Added Tax Act taxes supplies of goods and services. Yet all of them need some things in common: when a tax liability arises, when it becomes final, how an overpayment is undone, and how an unfair disposition is challenged.

The Framework Act sets out this common ground in one place, which is why it is read before the individual tax laws.

What the Framework Act covers
Area	Key articles	What it governs
Basic principles	Articles 14–20	Substance over form, good faith, taxation based on records, prohibition of retroactive taxation
Tax liability	Articles 21–27	Timing of establishment, methods of finalisation, exclusion periods, extinctive prescription
Priority of national taxes	Article 35	Ranking against other claims
Returns and corrections	Articles 45–45-3	Amended returns, requests for correction, returns after the deadline
Appeals	Articles 55–81	Objections, requests for review, requests for adjudication
Tax audits	Article 81-2 onward	Limits on audit powers and taxpayers' rights

When it conflicts with an individual tax law

As a rule, the individual tax law prevails (Article 3). The Framework Act contains common provisions, so if a particular tax has a special rule, that rule is followed. However, basic principles such as Article 14 (substance over form) and Article 18 (standards of interpretation) underlie interpretation and operate alongside the individual tax laws when they are read.

3. Substance over form — look at substance, not labels

Article 14 has three paragraphs, and each targets a different situation. This is a frequent dividing line in exam questions.

Three situations of substance over form (Article 14)
Paragraph	Target	Wording of the article
Paragraph 1	Substance of attribution	If attribution is merely nominal and someone else is the de facto recipient, that person is treated as the taxpayer
Paragraph 2	Substance of calculating the tax base	The law applies according to the substance, regardless of name or form
Paragraph 3	Step transactions	If a benefit is obtained unfairly by indirect means through a third party or through two or more transactions, they are treated as a direct transaction or as a single act

Paragraph 1 asks who pays, paragraph 2 how much is calculated, and paragraph 3 whether several steps are combined into one. Paragraph 3 was added in 2007 as a general anti-avoidance rule.

4. Prohibition of retroactive taxation — what it prevents

Article 18(2) prevents retroactive taxation under a new tax law enacted after the tax liability has been established. The reference point is not the law’s effective date but the time the tax liability is established.

The line for prohibiting retroactive taxation

\text{Liability established} < \text{New law in force} \Rightarrow \text{New law cannot be applied}

Income tax liability is established when the tax period ends (Article 21(2)1). That is why a tax law effective in July 2026 cannot be applied to income tax for 2025.

Paragraph 3 goes a step further. Once an interpretation of tax law or a practice of tax administration has been generally accepted by taxpayers, acts done in accordance with it are treated as proper and are not taxed retroactively under a new interpretation.

What it does not prevent

Quasi-retroactivity: a law that changes while a tax period is running and applies to that whole period is, in principle, allowed, because the liability has not yet been established.
A change of interpretation as such: applying a new interpretation going forward is not prevented; what is prevented is applying it to the past.
Answers to individual queries: if such an answer does not amount to a “generally accepted practice”, it is hard to obtain the protection of paragraph 3.

5. Good faith — not only the taxpayer’s weapon

Article 15 is one sentence: “A taxpayer shall perform his or her duties faithfully and in good faith, and the same shall apply to tax officials performing their duties.”

For a taxpayer to challenge the tax authority under this article, the requirements developed by case law must be met.

The tax authority expressed an official view that could be relied on to the taxpayer.
The taxpayer was not at fault in relying on that view.
The taxpayer did something in reliance on it.
The tax authority made a disposition contrary to that view and the taxpayer suffered a disadvantage.

The key is requirement 1. An official’s oral guidance or general publicity material is hard to recognise as “the expression of an official view”.

6. Taxation based on records — if there are books, use the books

Article 16 provides that where a taxpayer keeps and records books under the tax laws, the tax base is examined and determined on the basis of those books and supporting evidence. Only where the records are untrue or incomplete may the government rely, for that part, on facts it has investigated.

This article sets the limit on estimated assessment. To assess by estimation despite the existence of books, the tax authority must first show why the books should be rejected.

7. Check your understanding

🧠 Knowledge Check

Q1. A acquired shares in B’s name and received dividends. Who is liable for tax on the dividend income, and under which article?

A, to whom the income is actually attributable. Article 14(1) of the Framework Act provides that where attribution is merely nominal and someone else is the de facto recipient, the tax laws apply with that person as the taxpayer. The deemed gift arising from the nominee arrangement itself (under the Inheritance and Gift Tax Act) is a separate matter.

Q2. Can an amended Income Tax Act that took effect on 1 July 2026 be applied to income tax for 2025? State the test with the relevant articles.

No. Income tax liability is established when the tax period ends (Article 21(2)1), so the 2025 liability was established on 31 December 2025. Article 18(2) prohibits retroactive taxation under a new tax law enacted after establishment.

Q3. A taxpayer phoned an official at the tax office, was told “that transaction is not taxable”, and left it out of the return. When later assessed, can the taxpayer challenge the assessment under the principle of good faith?

It is difficult. A claim of breach of good faith requires the tax authority’s expression of an official view, and an official’s oral guidance is generally not recognised as one. The taxpayer would need something in proper form, such as a written ruling, and would also need to show reliance on that view and a resulting disadvantage.

Q4. Company A transferred an asset through subsidiaries in three steps and reduced its tax burden. What must the tax authority establish to tax this as a single direct transaction?

The requirement of Article 14(3): that the steps are recognised as intended to obtain tax benefits unfairly. If the transactions have independent business purposes and the tax benefit is incidental, it is hard to recharacterise them as a step transaction.

8. Limits of this chapter

Whether “unfairness” exists under Article 14(3) varies from case to case. This chapter covers the structure of the article; specific judgments require study of case law.
The four requirements of good faith are standards built by case law. The article itself is one sentence, so the requirements must be confirmed from the cases.
The permissible scope of quasi-retroactivity is dealt with in Constitutional Court decisions and lies beyond this chapter.

The next chapter asks when a tax liability arises and when it becomes final: why establishment and finalisation are separated, and how that distinction connects to exclusion periods and extinctive prescription.

References

Korea Law Information Center, Framework Act on National Taxes, Articles 3, 14, 15, 16, 18 and 21 (in force 11 August 2026, Act No. 21860; checked 2026-09-20)
Enforcement Decree of the Certified Tax Accountant Act, Annex 1 (first-round exam subjects — scope of Introduction to Tax Law)

Framework Act on National Taxes — The Principle of Statutory Taxation and the Standards for Interpreting Tax Law