[1] Whether Article 104(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 104(2) provides for the method of estimating the amount of evaded tax (affirmative in principle)

[2] The case holding that the court below's decision that the Defendant Gap corporation's corporate tax evasion tax amount should be estimated by simple expense rate method pursuant to Article 104 (2) of the former Enforcement Decree of the Corporate Tax Act, barring special circumstances, but the standard estimation method is allowed by the prosecutor is erroneous in the misapprehension of legal principles or incomplete hearing

[3] The elements for recognizing the “suspect” of the crime of tax evasion under Article 9(1) of the former Punishment of Tax Evaders Act

[4] The meaning of "Fraud or other unlawful act" in the crime of tax evasion under Article 9 (1) of the former Punishment of Tax Evaders Act

[1] Article 104(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009) does not list the method of estimating the amount of tax to be exempted if the method is an objective and reasonable way generally acceptable, and if the result has high probability and truth, the estimation of the amount of tax to be evaded shall be allowed. However, if the method of estimating the amount of tax is prescribed by the law as above, it is reasonable to view that the method should be applied to a specific case, unless there are special circumstances deemed unreasonable.

[2] The case holding that the court below erred in the misapprehension of legal principles as to the method of estimating the amount of tax evaded by the public prosecutor, or in incomplete deliberation, without examining special circumstances such as that the amount of tax evaded by the defendant Gap corporation should be estimated by simple expense rate method pursuant to Article 104 (2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302 of Feb. 4, 2009), and that the amount of tax evaded by the public prosecutor is allowed by estimation method without examining whether there are special circumstances such as that the estimation would result in unreasonable results

[3] In order to establish intent to commit the crime of tax evasion under Article 9(1) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010), there should be awareness that, in addition to the recognition that the Defendant is entitled to receive a refund of the input tax pursuant to the false tax invoice, the Defendant would be entitled to receive a deduction of the input tax amount under the false tax invoice as a result of the evasion of the liability to pay the value-added tax by either filing and paying the tax base and the tax amount of the value-added tax, excluding the output tax amount under the false tax invoice, or filing and paying the entire output tax amount under the false tax invoice, or filing and paying the refund of the output tax amount after filing

[4] In the crime of tax evasion under Article 9(1) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010), the term "Fraud and other unlawful act" means an act which makes it possible to evade taxes and which is recognized as unlawful by social norms, i.e., a deceptive scheme which makes it impossible or considerably difficult to impose and collect taxes impossible or considerably difficult, and it does not constitute a mere failure to report under tax law or making a false report without accompanying any other act.

[1] Article 104 (2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302 of Feb. 4, 2009) / [2] Article 66 (3) of the former Corporate Tax Act (amended by Act No. 10423 of Dec. 30, 2010), Article 104 (2) 3 of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302 of Feb. 4, 2009), Article 3 of the former Punishment of Tax Evaders Act (amended by Act No. 9919 of Jan. 1, 2010), Article 9 (1) 3 of the former Punishment of Tax Evaders Act (amended by Presidential Decree No. 21302 of Feb. 4, 2009) / [3] Article 9 (1) 19 (1) of the former Punishment of Tax Evaders Act (amended by Act No. 9910 of Jan. 19, 2019) of the current Punishment Act)

[1] Supreme Court Decision 2004Do7141 Decided May 12, 2005 (Gong2005Sang, 988) Decided May 28, 2004, Supreme Court Decision 2004Do7141 Decided May 12, 2005 / [3] Supreme Court Decision 90Do1955 Decided October 16, 1990 (Gong190, 2355), Supreme Court Decision 2005Do572 Decided June 14, 2010, Supreme Court Decision 2008Do868 Decided January 14, 201 / [4] Supreme Court Decision 2008Do2300 Decided June 12, 2008; Supreme Court Decision 2010Do13281 Decided March 24, 2011; Supreme Court Decision 20130Do13825 Decided March 24, 2011

Defendant 1 and one other

Defendants and Prosecutor

Law Firm Lo Commission, Attorneys credit rating et al.

Busan High Court Decision 2010No852 decided December 29, 2010

The guilty part of the judgment of the court below is reversed, and that part of the case is remanded to Busan High Court. The prosecutor's appeal is dismissed.

1. Judgment on the Defendants’ grounds of appeal

A. As to the first ground for appeal

The court below acknowledged the fact that Defendant 1, an actual operator of Defendant 2, purchased a false tax invoice from so-called data, and reflected oil equivalent to the value of supply on the tax invoice in deductible expenses by undermining the corporate tax base of Defendant 2, and attaching documents, such as balance sheets and profit and loss statements, reflecting the disguised purchase amount in the tax return, by undermining the corporate tax base of Defendant 2, and attaching them to the tax return. The court below determined that Defendant 1 had the intent to evade corporate tax of Defendant 2, on the ground that it was not merely a false tax return or false tax return under tax law, but also a fraudulent scheme that makes it impossible or significantly difficult to impose and collect corporate tax.

In light of the records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to intentional tax evasion as otherwise alleged in the ground of appeal.

B. Regarding ground of appeal No. 2

With respect to Defendant 2’s corporate tax evasion, the lower court determined that the estimation of the corporate tax evasion tax based on the estimation method is lawful on the grounds that the prosecutor’s determination of the amount of income of Defendant 2 was based on the estimation method, on the grounds that the prosecutor determined the amount of tax evasion on the grounds that “necessary account books or documentary evidence do not exist or important parts thereof are incomplete or false,” and that the Defendants were suspected of tax evasion, despite Defendant 2’s closure of business, the Defendants did not apply the simplified expense method on the grounds that the oil supplied by the Defendants was actually a tax exemption inducement for a marine vessel, and that the Defendants calculated the sales cost and estimated the corporate tax evasion tax evasion tax amount of Defendant 2, based on the price of tax exempted for fishing

However, this decision of the court below is not acceptable for the following reasons.

Article 104(2) of the former Enforcement Decree of the Corporate Tax Act (amended by Presidential Decree No. 21302, Feb. 4, 2009; hereinafter “former Enforcement Decree of the Corporate Tax Act”) provides that “where a small enterprise makes a estimation or correction, it shall be made by the following methods” under Article 104(2)3 of the former Enforcement Decree of the Corporate Tax Act, “where a small enterprise under Article 7(1)2(a) of the Restriction of Special Taxation Act closes its business, it shall be determined by the Commissioner of the National Tax Service by applying mutatis mutandis the provisions of Article 143(3)1-2 of the Enforcement Decree of the Income Tax Act, and Article 143(3)1-2 of the Enforcement Decree of the Income Tax Act provides for the method of determining or correcting the amount obtained by deducting the amount obtained by multiplying its income by simple expense rate from its income amount (hereinafter “simplified method”).

The above provisions of the former Enforcement Decree of the Corporate Tax Act do not regard the method of estimating the amount of tax evaded by such method to be limited, but it does not mean that the method is generally acceptable objective, reasonable, and if the result is highly probable and correct (see, e.g., Supreme Court Decision 2004Do7141, May 12, 2005). However, in a case where the method of estimating the amount of tax evaded by such method is prescribed in the statutes as above, it is reasonable to deem that the method should be applied unless there are special circumstances to deem that the method of estimating is unreasonable in a specific case. Accordingly, the corporate tax evasion amount of Defendant 2, barring any special circumstances, should be estimated by the simple method pursuant to

Nevertheless, the court below did not examine whether there are special circumstances, such as that the tax evasion amount by Defendant 2 corporation would result in unreasonable results in the estimation of the tax evasion amount by simple expense method, and determined that the estimation method applied by the prosecutor is allowed only for the reasons stated in its reasoning. Such judgment below erred by misapprehending the legal principles on the estimation method of the tax evasion amount or failing to exhaust all necessary deliberations, which affected the conclusion of the judgment. The ground of appeal assigning this error has merit

2. Judgment on the grounds of appeal by the prosecutor

A. As to the first ground for appeal

In order for the Defendant to have intentionally committed the crime of evading taxes under Article 9(1) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010; hereinafter the same), there should be awareness that, in addition to the recognition that the Defendant would receive a refund of the input tax pursuant to the false tax invoice, the Defendant would have to be aware that, by evading the liability for the payment of value-added tax on the said false tax invoice, the Defendant would result in a decrease in the national tax revenue by evading the return and payment of the tax base and the tax amount of value-added tax, excluding the output tax on the said false tax invoice, or by evading the payment of the entire output tax on the said false tax invoice after filing a return and payment of the input tax amount on the said false tax invoice (see, e.g., Supreme Court Decisions 90Do1955, Oct. 16, 190; 2008Do868, Jan. 14, 2010).

The lower court determined to the effect that, in light of the fact that Defendant 1 paid the amount of value-added tax when purchasing a false tax invoice from the so-called data, most companies that issued false tax invoices to Defendant 1 reported the output tax amount calculated including the value of supply on the relevant tax invoice, and that some companies actually paid the output tax amount reported, Defendant 1 was aware that it would be refunded the input tax amount by a false tax invoice. However, it is difficult to view that Defendant 1 was aware that Defendant 1 would have been subject to the deduction of the input tax amount by evading the liability for value-added tax payment on the false tax invoice, thereby resulting in the reduction of the national tax revenue, and therefore, Defendant 1 could not be deemed to have committed an intentional act on the tax evasion.

In light of the above legal principles and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to intentional tax evasion as otherwise alleged in the ground of appeal.

B. Regarding ground of appeal No. 2

In the crime of tax evasion under Article 9(1) of the former Punishment of Tax Evaders Act, the term “Fraud or other unlawful act” means an act which enables the tax evasion and which is recognized as unlawful by social norms, i.e., a deceptive scheme or other affirmative act which makes it impossible or considerably difficult to impose and collect taxes. It does not constitute a mere failure to file a tax return under the tax law or making a false tax return without accompanying any other act (see, e.g., Supreme Court Decision 2010Do1345, Mar. 24, 2011).

With respect to the evasion of corporate tax of Nonindicted Co., Ltd., the lower court determined that Defendant 1’s act of submitting a list of total tax invoices by entering the false list of total tax invoices in Nonindicted Co., Ltd. or of failing to report the corporate tax base and tax amount of Nonindicted Co., Ltd.

In light of the above legal principles and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to fraud or other unlawful act in the crime of tax evasion as otherwise alleged in the

3. Conclusion

Therefore, among the judgment below, the part of the defendants' violation of the Punishment of Tax Evaders due to the defendant 2's evasion of corporate tax is reversed. Since this part of the judgment below and the remaining part of the crime which the court below found guilty are concurrent crimes under the former part of Article 37 of the Criminal Act, one of the judgment below's convictions shall be reversed, and this part of the case shall be remanded to the court below for a new trial and determination, and it is so decided as per Disposition by the assent of all participating

Justices Lee In-bok (Presiding Justice)