Framework Act on National Taxes — Establishment and Finalisation of Tax Liability, Exclusion Periods and Prescription

Articles are cited from the version in force on 11 August 2026 (Act No. 21860), checked on 20 September 2026.

1. Learning objectives

Distinguish the establishment of a tax liability from its finalisation, and state when each tax is established.
Explain the difference in finalisation between self-assessed taxes and government-assessed taxes.
Distinguish what the assessment exclusion period and the extinctive prescription of the right to collect each limit.
Calculate how non-filing and fraudulent acts extend the exclusion period.

2. Establishment and finalisation are different events

A tax liability goes through two stages. Establishment arises by force of law the moment the taxable requirements are met; finalisation is the procedure that turns that abstract liability into a specific amount.

Two stages

\text{Requirements met} \rightarrow \text{Established (Art. 21)} \rightarrow \text{Return or determination} \rightarrow \text{Final (Art. 22)}

Establishment is automatic; finalisation is a procedure. This distinction sets the starting points for exclusion periods, prescription and penalty taxes.

When each tax is established (Article 21(2))

When a tax liability arises
Tax	Time of establishment
Income tax and corporate tax	When the tax period ends (corporate tax on liquidation income: on dissolution)
Inheritance tax	When the inheritance commences
Gift tax	When property is acquired by gift
Value-added tax	When the tax period ends (imported goods: when the import declaration is filed)
Stamp tax	When the taxable document is prepared
Securities transaction tax	When the trade is confirmed
Comprehensive real estate holding tax	The assessment reference date

3. Methods of finalisation — self-assessment and government assessment

Article 22(2) lists the national taxes finalised by the taxpayer’s return: income tax, corporate tax, value-added tax, individual consumption tax, liquor tax, securities transaction tax, education tax, the transportation, energy and environment tax, and the comprehensive real estate holding tax when a return is filed.

National taxes outside this list become final when the government makes a determination (paragraph 3). Inheritance tax and gift tax fall into this group.

4. Assessment exclusion period — how long tax can be assessed (Article 26-2)

The exclusion period is the period within which the state can assess tax. Once it passes, the power to assess itself disappears. Unlike prescription, it cannot be interrupted or suspended.

Assessment exclusion periods
Situation	Period	Offshore transactions
General rule	5 years	7 years
No return filed by the statutory deadline	7 years	10 years
Tax evaded, refunded or credited through fraud or other wrongful acts	10 years	15 years

If the national tax evaded through wrongful acts is corporate tax, the same 10 years also applies to income tax or corporate tax on amounts disposed of under Article 67 of the Corporate Tax Act in connection with it.

Special rule for loss carryforwards (Article 26-2(3))

If a loss carryforward from a tax period whose exclusion period has expired is deducted in a later period, the exclusion period for income tax or corporate tax of the period in which the loss arose becomes one year from the statutory filing deadline of the period in which it was deducted. This is a route to reopening a period that has already closed.

5. Extinctive prescription of the right to collect — how long tax can be collected (Article 27)

This is the period within which the state can collect a finalised tax. It depends on the amount excluding penalty taxes.

Prescription of the right to collect national taxes
Amount of national tax	Period
₩500 million or more	10 years
Other national taxes	5 years

The starting point depends on the method of finalisation (paragraph 3).

Tax reported on a return for a tax finalised by return: the day after the statutory filing and payment deadline
Tax stated in a notice where the government determines, corrects or assesses at any time: the day after the payment deadline in the notice

Unless this Act or the tax laws provide otherwise, prescription follows the Civil Act (paragraph 2), so it can be interrupted and suspended.

6. Worked example

Take global income tax for 2025 (statutory filing deadline 31 May 2026).

Situation	Exclusion period starts	Expires
Return filed normally	1 June 2026	31 May 2031 (5 years)
No return filed	1 June 2026	31 May 2033 (7 years)
Evasion through wrongful acts	1 June 2026	31 May 2036 (10 years)

If the tax was reported but not paid, prescription of the right to collect starts on 1 June 2026, the day after the statutory filing and payment deadline: 5 years for a ₩300 million liability, 10 years for ₩600 million.

7. Check your understanding

🧠 Knowledge Check

Q1. A corporation filed no return for its 2025 corporate tax. How many years does the state have to assess, and under which article?

Seven years (Article 26-2(2)1): no tax base return was filed by the statutory deadline. For an offshore transaction it is 10 years.

Q2. When is value-added tax liability established and when does it become final? How do imported goods differ?

It is established when the tax period ends (Article 21(2)4), except that for imported goods it is when the import declaration is made to the head of customs. It becomes final when the taxpayer files a return (Article 22(2)3); if no return is filed or the return does not conform to the tax laws, it becomes final by the government’s determination or correction.

Q3. The state has not collected a finalised national tax of ₩600 million for six years. Is the right to collect still alive?

Yes. Prescription for national taxes of ₩500 million or more is 10 years (Article 27(1)1). The amount is judged excluding penalty taxes.

Q4. A loss from the 2018 tax period, whose exclusion period has expired, was deducted in the 2026 tax period. Can the tax authority look at 2018 again?

Yes. Under Article 26-2(3), the exclusion period for the period in which the loss arose becomes one year from the statutory filing deadline of the period in which it was deducted. This special rule opens only if the loss carryforward was actually deducted.

8. Limits of this chapter

Article 26-2 has further paragraphs not covered here, such as special exclusion periods following decisions and judgments on appeals. Check the whole article.
Grounds for interrupting prescription (payment notices, demands, requests for distribution, seizure) are covered with the collection procedures in the next chapter.
The ₩500 million threshold excludes penalty taxes. Including them gives a different answer.

The next chapter covers the ranking of national taxes against other claims and secondary tax liability.

References

Korea Law Information Center, Framework Act on National Taxes, Articles 21, 22, 26-2 and 27 (in force 11 August 2026, Act No. 21860; checked 2026-09-20)