Critical review about Preliminary Return and Final Return on Capital Gains Tax: With Focus on the Judgement Numbered 2017Du73297 Sentenced on December 31, 2021 by the Supreme Court
Authors:   KOREAN SOCIETY OF TAX LAW, Choi Bo-Kwang 
Published: August 2023

In some cases, each individual tax law has a separate provision for ‘Final Return’ and ‘Preliminary Return’, and one of the representative tax items is Capital Gains Tax under the Income Tax Act.
Opinions on the finalizing effect of the Preliminary Return on Capital Gains Tax are largely divided into Final Conclusive Theory and Provisional Conclusive Theory, and this discussion has been ongoing for a long time. Final Conclusive Theory is the opinion that tax liability for Capital Gains Tax is determined by Preliminary Return on Capital Gains Tax, and Provisional Conclusive Theory is the opinion that tax liability for Capital Gains Tax is determined with deferring the tax settlement procedure through Final Return on Capital Gains Tax by Preliminary Return on Capital Gains Tax.
In reference to the Supreme Court's series of rulings on the validity of the Preliminary Return on Capital Gains Tax, it seems to adopt Provisional Conclusive Theory on finalizing effect of the Preliminary Return. In addition, the Target Judgement(the Judgement Numbered 2017Du73297 Sentenced on December 31, 2021 by the Supreme Court) seems to have confirmed the Supreme Court's legal principles regarding the validity of the Preliminary Return on Capital Gains Tax once again.
According to the Target Judgement, it is judged that Preliminary Return on Capital Gains Tax and Tax office’s disposition of increase and correction based on Preliminary Return on Capital Gains Tax are absorbed and extinguished by Final Return. In this point of view, above all, this may cause a problem that taxpayers abuse the Final Return System. However, it is difficult to say that the conclusion of the Target Judgment is wrong under the current tax law, as it seems that the taxpayer cannot be prohibited from filing Final Return which revises the details of the Preliminary Return on Capital Gains Tax.
In addition, under the current tax law related with the validity of the Preliminary Return of Capital Gains Tax, there seem to be various issues about Limitation Period for Imposition, Limitation Period for Imposition of National Taxes, Tax office’s disposition of increase and correction, and other provisions of the Framework Act on National Taxes etc. Therefore, through legislative supplementation which is premised on active discussions on the relevant tax laws related to the validity of the Preliminary Return on Capital Gains Tax, it is necessary to improve the systematic consistency of related tax law regulations and harmonize in some degree with the Supreme Court legal principles which seem to take an attitude of Provisional Conclusive Theory about the finalizing effect of the Preliminary Return on Capital Gains Tax.
In other words, through the legislative supplementation as above, it is expected that problems which may arise due to the interpretation of the validity of the Preliminary Return on Capital Gains Tax can be minimized, legal stability can be improved, and equity among taxpayers can be enhanced at the same time.