Which Korean tax arrears scheme should a former proprietor review?
Closing a business registration does not automatically extinguish taxes already incurred.
A former proprietor who still owes Korean comprehensive income tax, value-added tax or late-payment penalties can check whether a temporary statutory arrears scheme is relevant before discussing ordinary payment arrangements.
This calculator reviews livelihood-based extinguishment of the payment obligation and collection relief for small individual business owners who have restarted economic activity.
Extinguishment addresses the payment obligation itself, while collection relief allows qualifying principal to be paid in installments with a statutory late-payment penalty exemption.
The schemes use different dates, balances and restart conditions, so a single combined debt threshold would give a misleading answer.
Tax-office investigation, National Tax Arrears Settlement Committee review and a decision are still required.
An input-based review candidate is not an approval or a final tax saving.
Who this review is for
It is intended for former individual proprietors with longstanding Korean arrears, people who have taken a job or restarted a business after closing, and family members helping prepare evidence.
It does not assess corporate arrears, local taxes, bankruptcy discharge or a general cancellation of all national taxes.
Prepare a ledger separated by tax type before entering figures.
All amounts are Korean won and the calculations use Korean rules for 2026.
Amounts and application deadlines for the two schemes
Key 2026 thresholds and periods for Korean extinguishment and collection relief| Test | Extinguishment | Collection relief |
|---|
| Amount condition | Qualifying amount + prior other-office relief ≤ KRW 50,000,000 | Current relevant tax ≤ KRW 80,000,000 |
| Three-year average gross revenue | Below KRW 1,500,000,000 | Below KRW 1,500,000,000 |
| Applications begin | 2026-01-01 | 2020-01-01 |
| Application deadline | 2028-12-31 | 2029-12-31 |
| Basic decision period | 6 months | 2 months |
| Maximum requested installment term | Not applicable | 5 years · illustrated as 60 monthly payments |
The KRW 50 million and KRW 80 million tests do not compare the same balance.
Extinguishment tests qualifying uncollectible debt plus amounts already extinguished under the same livelihood scheme by other tax offices.
Collection relief tests the current comprehensive income tax and VAT balance separately from surcharges and late-payment penalties.
Other assessed penalties that are not covered by the exemption need to be classified correctly in the tax ledger rather than simply removed from the threshold test.
Evidence to enter and the meaning of each date
Current arrears ledger
Separate the tax type, original delinquency date, current tax amount, late-payment penalties or surcharges, and enforcement costs.
Comprehensive income tax includes the rural special tax imposed with it.
Do not replace the original delinquency date with a newly issued notice date or the year in which business income arose.
The attribution of penalties attached to old principal also needs confirmation from the relevant tax office.
Closure and gross revenue
Enter the final historical date on which all businesses had closed.
For a business restart, distinguish that earlier closure from the new business opening date.
Average revenue is business gross revenue for the three tax years including the closure year, not net profit.
For extinguishment, check the statutory annualization required for a tax period shorter than one year.
Exactly KRW 1.5 billion does not meet a condition requiring revenue below that amount.
Enter separate average-revenue figures for extinguishment and collection relief.
Annualization of a short tax period can make the figures differ; exceeding the revenue test for one route does not automatically block the other.
Debt with a verified expired collection limitation period is excluded from the candidate amount; an unknown limitation status withholds complete benefits.
Do not just add five or ten years to the original delinquency date based on Article 27 of the Framework Act on National Taxes.
Article 28 provides interruption or suspension rules involving payment notices, demands, distribution claims, seizures and installment periods.
The underlying records must be reviewed before deciding that collection rights have expired.
The property valuation formula for uncollectible arrears
Uncollectible amount = debt − property value × 140% + eligible senior claims
Use property valued under Articles 60–66 of the Inheritance Tax and Gift Tax Act.
Senior claims concern qualifying security interests established before the statutory tax date, such as registered leasehold, pledge or mortgage claims, or eligible deposits supported by a fixed-date tenancy document.
Ordinary unsecured loans and all personal liabilities cannot simply be added as senior claims.
For the arithmetic illustration, the calculator limits the result to between zero and the relevant debt and discards fractions of one won.
That planning convention does not replace the tax office’s actual valuation or collection rounding.
For verified no-property cases, completed enforcement with an unpaid remainder, or property that cannot exceed enforcement costs, use the verified relevant balance.
Do not deduct a distribution a second time if the entered remaining balance already reflects it.
Extinguishment uses the survey-date property position; the day after application is displayed as the survey commencement reference.
Collection relief uses a historical date instead: 2019-07-25 for closures through 2019, or July 25 of the closure year for a 2020–2025 closure.
Using one current property figure for both schemes can therefore produce the wrong review amount.
Keep valuation evidence and the dates of eligible security interests with each separate ledger.
Extinguishment conditions and the KRW 50 million boundary
- The debt must have become delinquent before 2025-01-01 and concern comprehensive income tax, VAT and attributable penalties, surcharges or enforcement costs with unexpired collection rights.
- All businesses, including any reopened business, must have closed before the survey, and economic hardship preventing payment must be substantiated.
- There must be no relevant tax-offense punishment, disposition or related trial during the five-year period preceding the survey, and no ongoing tax-offense investigation at that date.
- Prior extinguishment under Article 99-5 is excluded; prior amounts extinguished by other tax offices under livelihood Article 99-15 must be included in the cumulative limit test.
Exceeding the threshold does not create a partial automatic deduction
If the qualifying extinguishment amount is KRW 50,000,001, this tool does not automatically cancel the first KRW 50,000,000.
Conversely, KRW 40 million for the present review plus KRW 10 million already extinguished by another tax office reaches, but does not exceed, the KRW 50 million boundary.
The obligation is extinguished on notification of a favorable decision, not when a calculation is performed or an application is merely filed.
The basic decision and notification period is six months, excluding time allowed for explanations and time spent valuing property.
The tax office may request explanations concerning property within a specified period of up to ten days.
If other collectible property that existed at the survey date is later discovered, extinguishment can be reversed for an amount corresponding to that property’s value.
These matters remain subject to the actual statutory procedure and tax-office review.
Collection-relief restart conditions and the KRW 80 million boundary
Business restart
Apply for business registration during 2020-01-01 to 2028-12-31 and actually begin business, continuing for at least one month by application.
Registration application and actual opening are entered separately; the duration reference uses actual opening.
Employment
Start employment in the same window and work for at least three months.
All three consecutive months must each have at least 15 workdays, or all three must each have at least KRW 1 million of salary paid.
The withholding employer must generally remain the same; verify any statutory unavoidable-change exception separately.
Covered artist or service provider
A person covered by the relevant Employment Insurance Act provisions must begin services during 2026-01-01 to 2028-12-31 and continue for at least three months.
Three consecutive months of employment-insurance contributions are also required.
An ordinary freelance contract alone does not establish these conditions.
All historical businesses must have closed by 2025-12-31, with the restart following that closure.
A person who already received extinguishment under Article 99-5 or Article 99-15 does not meet the collection scheme’s prior-benefit exclusion.
A current relevant tax balance of KRW 80,000,000 meets the amount boundary, while KRW 80,000,001 exceeds it.
This is why prior extinguishment history and the two different amount tests must remain separate.
From the uncollectible amount at the historical reference date, deduct payments toward that debt between the reference date and application, and the value of subsequently acquired property discovered before application.
Cap the result by the current remaining relevant principal that originated by that historical date.
Entering the current balance in the historical balance field and then deducting later payments again would double-count those payments.
The form deliberately keeps the historical and current ledgers separate.
How to complete the review
- Enter the proposed application date, evidence-check date, historical final closure date and three-year average gross revenue, then select the verified or unverified status of each common fact.
- Split current arrears by tax type and original delinquency date, separating tax, late penalties and enforcement costs.
Keep limitation status unverified when the underlying records have not been checked.
- For extinguishment, verify current closure, hardship and tax-offense history, then enter survey-date property information and prior other-office extinguishment.
- For collection relief, verify the restart date, actual continuing activity, monthly work or pay, and any insurance evidence.
Enter the historical reference-date balance, property, later payments and discovered property separately.
- Enter only the tax-office-confirmed exemptible penalty and the requested installment count, compare both results and their reasons, then save the review and gather missing documents.
The default amounts are fictional and all factual confirmations start unverified.
The evidence-basis selector distinguishes unverified records, an assumed scenario and actual verified evidence; assumed scenarios withhold benefit amounts.
Changing an unanswered question to yes does not verify the assertion externally.
Use records appropriate to the application date and do not combine unlisted tax types or differently dated balances into another field.
The Korean and English screens use the same pure calculation functions and legal constants.
Worked examples using fictional amounts
Example 1 · extinguishment with property
Assume relevant debt of KRW 40,000,000, statutory property value of KRW 10,000,000 and eligible senior claims of KRW 5,000,000.
40,000,000 − 10,000,000 × 140% + 5,000,000 = KRW 31,000,000.
With no previous other-office extinguishment, the amount boundary is met, but closure, hardship, tax-offense, limitation and revenue facts must also be verified before this becomes an amount for review.
Example 2 · avoid deducting payments twice
Assume historical collection-reference tax of KRW 40,000,000, property of KRW 10,000,000 and senior claims of KRW 5,000,000.
Historical uncollectible debt is KRW 31,000,000.
Subtract KRW 2,000,000 paid later and KRW 1,000,000 of later-acquired discovered property to obtain KRW 28,000,000.
As the current relevant tax balance is KRW 38,000,000, the final illustrative candidate remains KRW 28,000,000.
An illustrative 60-month equal-payment plan for the second example has 40 payments of KRW 466,667 and 20 payments of KRW 466,666, totaling KRW 28,000,000.
A separately confirmed exempt penalty of KRW 3,000,000 is not deducted again from that principal.
The actual authorization determines payment dates and amounts; the example is not an automatic approval.
Penalty exemptions are not estimated by proportionally allocating an entire penalty balance to a partially qualifying principal.
Interpret results and choose the next step
Input criteria met for review
The entered facts and verification statuses pass this calculator’s checks.
The extinguishment amount is not a finalized cancellation, and the collection-relief amount is principal to be repaid in installments.
Even when both appear possible, do not add the benefits together.
Ask the tax office about the appropriate application order and how extinguishment would affect the collection-relief exclusion.
Verification required or criteria not met
When material facts remain unverified, benefits are withheld and displayed differently from a genuine zero.
Verified threshold failures, an expired application window or unmet restart conditions are listed separately.
Ordinary payment and installment consultation may still be relevant even if neither special scheme fits.
Contact the competent tax office or the Korean National Tax Consultation Center on 126 for the applicable procedure.
Someone still operating a restarted business may fail the extinguishment requirement to have closed all businesses before the survey while following a different path under collection relief.
Someone who has not completed three months of employment should check both the displayed earliest-duration reference and the actual monthly evidence.
For an application in 2027 or later, the dates and arithmetic can be displayed, but an affirmative review result and benefit amounts are withheld until that year’s law is rechecked.
The current implementation verifies the 2026 rule set only.
Documents, saved reviews and cancellation risks
- Prepare closure certificates and business gross-revenue filings for the three relevant tax years.
- Check current arrears ledgers, the historical collection-reference ledger and notices, demands or seizure records relevant to limitation.
- Separate property valuation evidence, security creation dates, claim amounts, fixed-date tenancy deposits, later payments and later-acquired discovered property.
- Gather employment, workday, salary, actual business opening, consecutive insurance contribution and hardship evidence required by the chosen path.
On Hometax, look for tax-related applications in the certificates, registration and application area, then the arrears-related application menu.
Postal or in-person filing with the competent tax office is also available.
For extinguishment, a person with mobility difficulties or hospitalization / long-term care can ask about filing by a responsible official with the person’s consent.
The saved TXT review and printout help prepare the case but do not submit an application.
Manage the authorized installment schedule
Collection relief can be cancelled after five missed installments in total or three consecutive missed installments, allowing enforcement to proceed.
Discovery of other collectible property existing at the historical reference date is also a cancellation ground.
The statutory restriction on enforcement concerns the relevant relief debt and procedure; it does not automatically promise release of existing seizures or permit nonpayment of other taxes.
Calendar downloads contain only the shared public application deadline, without personal debt or property figures.
Frequently asked questions
Does closing the business cancel its national tax arrears?
No automatic extinguishment follows business closure.
The statutory conditions, investigation, committee review, decision and notification remain necessary.
If qualifying debt exceeds KRW 50 million, is the first KRW 50 million cancelled?
This is not an automatic deduction.
The qualifying extinguishment amount plus previous other-office extinguishment must be no more than KRW 50 million.
What if penalties take the balance above KRW 80 million?
The collection-relief amount test separates surcharges and late-payment penalties.
Confirm the ledger classification of other assessed penalties and relevant tax amounts with the tax office.
Can debt that became delinquent during 2025 qualify for extinguishment?
The extinguishment cutoff is before 2025-01-01.
Debt originating on or after that date is excluded from that candidate; collection relief has its own separate historical date and conditions.
Is simply reaching three months after employment enough?
Monthly workdays or salary, the withholding-employer condition and actual continued employment must also be verified.
Covered services add statutory coverage and consecutive employment-insurance contribution requirements.
Does every tax debt expire after five years?
Notices, demands, distribution claims and seizures can interrupt limitation, while installment periods and other statutory events can suspend it.
The original delinquency date alone is insufficient.
Why is arithmetic visible while facts are unverified?
It is an input-based subtotal and valuation illustration.
It must not be read as a verified benefit or final extinguishment amount when relevant facts remain unknown.
Does saving a review apply to the tax office?
Downloads and printing only help prepare evidence.
Apply separately through Hometax or the tax office and confirm the actual authorization or decision notice.
Check the official basis and prepare the application evidence
Official sources were checked on 2026-10-22.
The current Restriction of Special Taxation Act, MST284389, and its Enforcement Decree, MST288915, are versions effective 2026-09-18; the Framework Act on National Taxes, MST289999, is effective 2026-10-02.
Article 99-15 was introduced on 2025-12-23 and Enforcement Decree Article 99-14 on 2026-02-27.
Amounts, application periods, restart conditions, the applicable penalty items and transitional provisions need review when the law changes.
Start with the arrears ledger and closure / restart evidence, then complete the calculator’s unverified items.
Final valuation, seniority, economic hardship, tax-offense history, exempt penalty and the actual installment schedule are matters for the competent tax office.
Follow current payment notices while checking the application path that fits your verified circumstances.
Prepare the tax arrears review