Framework Act on National Taxes — The System of Penalty Taxes

Articles are cited from the version in force on 11 August 2026 (Act No. 21860), checked on 20 September 2026. The percentages are those written in the articles; interest rates are set by presidential decree, so check the Enforcement Decree separately.

What chapter 4 left for later

Chapter 4 looked at the reductions (Article 48) for amended returns and returns after the deadline, but left aside what exactly is reduced. This chapter covers that core.

A penalty tax is not a tax. It is a sanction for breaching an obligation under the tax laws, so it runs on a logic separate from calculating the tax itself.

The nature of penalty taxes (Article 47)

Three short paragraphs set out their nature.

The government may impose penalty taxes on a person who breaches an obligation prescribed by the tax laws (paragraph 1).
A penalty tax belongs to the national tax item of the tax law that prescribes the obligation. However, even when that national tax is reduced or exempted, the penalty tax is not included in the reduction (paragraph 2).
Penalty taxes are added to the tax payable or deducted from the tax refundable (paragraph 3).

Non-filing penalty tax (Article 47-2)

This applies when no tax base return is filed by the statutory deadline. A rate is applied to the tax payable not filed, from which penalty taxes and interest-equivalent additions are excluded.

Non-filing penalty rates (paragraph 1)
Case	Rate
Non-filing through wrongful acts	40%
Wrongful acts arising from offshore transactions	60%
Other cases	20%

Special rule for double-entry bookkeepers and corporations (paragraph 2, item 1)

If a double-entry bookkeeper or corporation fails to file income or corporate tax returns, the penalty is the greater of the amount calculated at the rates above and an amount based on revenue.

Revenue-based amount

\begin{aligned}\text{Wrongful acts} &: \text{Revenue} \times 14/10{,}000 \\ \text{Other} &: \text{Revenue} \times 7/10{,}000\end{aligned}

Article 47-2(2)1(a) and (b). It is linked to revenue rather than tax.

Why compare two amounts? When there is a loss, tax payable is close to zero, so a tax-based penalty effectively vanishes. For those with heavier bookkeeping duties, a floor linked to sales volume plugs that gap.

Add more if there is a zero-rated tax base (item 2)

If no VAT return was filed and there is a zero-rated tax base, zero-rated tax base × 5/1,000 is added. Zero-rated supplies owe no tax, so a tax-based sanction would not work. The idea is the same.

Under-reporting and excess-refund penalty tax (Article 47-3)

This applies when a return was filed but reported too little tax or claimed too large a refund. The base is the under-reported tax payable etc. (under-reported tax payable plus over-reported refund).

Separate calculation when wrongful acts are involved (paragraph 1, item 1)

When there are wrongful acts

\text{Penalty} = \text{Wrongful part} \times 40\%\ [\text{offshore } 60\%] + (\text{Total} - \text{Wrongful part}) \times 10\%

Article 47-3(1)1(a) and (b), where the amounts are the under-reported tax payable etc. Without wrongful acts, 10% applies to the whole (item 2).

For non-filing, a single rate applies to the whole; for under-reporting, the wrongful part is separated from the rest and each gets a different rate, since one return may mix intent with simple error.

Compare non-filing at 20% with under-reporting at 10%: not filing costs twice as much. Filing and getting it wrong is treated differently from not filing at all — the same direction as the reduction rates in chapter 4 (90% vs 50%, 2 years vs 6 months).

When it does not apply (paragraph 4)

The listed cases include, for inheritance and gift tax, property not yet confirmed as inherited or gifted property at the time of filing because of litigation or similar reasons. What could not be known at filing is not sanctioned.

Late-payment penalty tax (Article 47-4)

This concerns late payment, regardless of filing. It covers not only taxpayers but also joint taxpayers, secondary taxpayers and guarantors (linking to chapters 3 and 5).

Paragraph 1 is the sum of four items.

Components of the late-payment penalty tax
Item	Content	Nature
1	Unpaid or underpaid tax × days from the day after the statutory payment deadline to the day before the payment notice × interest rate set by presidential decree	Daily interest
1-2	Tax unpaid by the designated payment deadline × months elapsed from the day after that deadline to the day before payment × interest rate	Monthly interest
2 and 2-2	The same structure applied to tax refunded in excess	Interest
3	Tax due by the statutory payment deadline and unpaid by the designated deadline × 3%	One-off sanction
4	Amount set by presidential decree as the cost of a demand under Article 10 of the National Tax Collection Act	Actual cost

Look at the structure: interest and sanction components are separated.

Items 1, 1-2 and 2 are proportional to time — the later, the more. Item 3 is a flat 3% independent of time, for the mere fact of missing the deadline. Item 4 passes on the actual cost of the demand.

The boundaries differ too. Item 1 runs to the day before the payment notice; item 1-2 from the day after the designated deadline. Before a notice goes out, time is counted in days; after even the notified deadline is missed, in months.

Late-payment penalty for withholding etc. (Article 47-5)

This applies when a withholding agent, that is, a person obliged to collect and pay national taxes, fails to pay or underpays by the statutory payment deadline.

Two caps

\begin{aligned}\text{Overall cap} &: 50\% \text{ of unpaid or underpaid tax} \\ \text{Item 1 (3\%)} + \text{item 2 (interest)} &: 10\%\end{aligned}

Article 47-5(1). Components: item 1 flat 3%; item 2 interest from the statutory deadline to the day before the payment notice; item 3 monthly interest after the designated deadline; item 4 cost of the demand.

The double cap is this article’s hallmark. However long the delay, the total never exceeds 50%, and the pre-notice stage (3% plus interest) never exceeds 10%.

The obligations covered are defined in three categories (paragraph 2): withholding of income tax and corporate tax, collection and payment by tax associations, and collection and payment by recipients of services etc. under Article 52 of the Value-Added Tax Act.

Caps on penalty taxes (Article 49)

Caps are set separately for each type of breach.

Category	Cap
SMEs under the Framework Act on Small and Medium Enterprises	₩50 million
Other enterprises	₩100 million

The caps apply to penalty taxes for breaches of cooperative duties under the Income Tax Act, Corporate Tax Act, Value-Added Tax Act, Inheritance and Gift Tax Act and Restriction of Special Taxation Act (items of paragraph 1): duties such as invoices, payment statements and books, where the number of cases piles up.

Non-filing, under-reporting and late-payment penalty taxes are not on this list. Those linked directly to the principal tax have no cap.

One page to tie it together

Four axes of penalty tax

\begin{aligned}\text{Did not file} &\rightarrow 20\%\ (\text{wrongful } 40\%, \text{ offshore } 60\%) \\ \text{Reported too little} &\rightarrow 10\%\ (\text{wrongful part } 40\% / 60\% \text{ separately}) \\ \text{Paid late} &\rightarrow \text{interest} + 3\% \\ \text{Withheld but not remitted} &\rightarrow \text{cap } 50\%\ (10\% \text{ before notice})\end{aligned}

Breaches of cooperative duties are capped at ₩50 million or ₩100 million per type, except for intentional breaches (Article 49).

The ranking of rates is consistent: offshore wrongful acts (60%) > domestic wrongful acts (40%) > non-filing (20%) > under-reporting (10%). The degree of concealment and difficulty of detection are reflected in the rates.

What remains

All interest rates are set by presidential decree. The article says only “taking into account the rates financial institutions apply to overdue loans”. To memorise the numbers you must consult the Enforcement Decree, which changes often.
“Wrongful acts” follow the seven types in Article 3(6) of the Punishment of Tax Evaders Act, covered in chapter 1 of the Punishment of Tax Evaders Act course (in Korean).
Penalty taxes for each tax (Income Tax Act Article 81 onward, Corporate Tax Act Article 75-2 onward, etc.) belong to the respective tax laws.

References

Korea Law Information Center, Framework Act on National Taxes, Articles 47, 47-2, 47-3, 47-4, 47-5, 48 and 49 (in force 11 August 2026, Act No. 21860; checked 2026-09-20)