A. Violation of the Act on the Aggravated Punishment, etc. of Specific Crimes (Taxes) (Recognition)

violation of the Punishment of Tax Evaders Act

(b) Violation of the Punishment of Tax Evaders Act;

1. A.

2.2.B

Consolidated paths (prosecutions) and Kim Jong-hun (Trial)

Attorney C, D, and E (for the defendant)

January 19, 2017

Defendant A shall be punished by imprisonment for 10 months, and by a fine of 50,000,000 won for Defendant B.

However, with respect to Defendant A, the execution of the above punishment shall be suspended for two years from the date this judgment becomes final and conclusive.

To order the above defendant to provide community service for 80 hours of welfare facilities and group service activities.

In the facts charged against the Defendants, acquittal of violation of the Punishment of Tax Evaders Act due to the evasion of value-added tax;

The summary of each acquittal judgment against the Defendants shall be published.

Criminal History Office

Defendant A is the representative director of Defendant B Co., Ltd. (former trade name: FF Co., Ltd.; hereinafter referred to as “Defendant Company”).

1. Defendant A

around May 9, 2011, the Defendant entered into a contract for transfer and acquisition of the taxi 10 households, etc. owned by G Co., Ltd. and the Defendant Co., Ltd. from May 31, 201 to July 18, 201, the Defendant received KRW 4,455,000,000 from G Co., Ltd. for the transfer price under the said contract from May 31, 201 to July 18, 201, and obtained a license for the passenger vehicle transport business from Busan City on July 15, 201, and the transfer registration for the said taxi was completed to G Co., Ltd. as of July 28, 2011.

Nevertheless, around May 31, 2011, the Defendant drafted a double contract to transfer H and I and 100 taxi owned by the Defendant Company to G Co., Ltd. the transfer price of KRW 1,500,000,000. On March 31, 2012, the Defendant evaded corporate tax amounting to 433,481,781 by reducing the transfer price while filing a corporate tax return for the taxable period of corporate tax in 2011.

Accordingly, the Defendant evaded taxes by fraud or other illegal acts.

2. Defendant B, a representative director of the Defendant, committed such a violation as above with respect to his business.

Summary of Evidence

1. Partial statement of the defendant;

1. The police statement of H;

1. Details of the accusation by the director of the regional tax office and the investigation of tax offense;

1. Descriptions and existing descriptions of transfer/acquisition contracts for respective taxi transportation business licenses and stocks Section;

1. Electronic tax invoices, certified transcript of corporate register, license for passenger transport business, passenger transport business, notification of transfer or takeover of passenger transport business, notification of transfer or takeover of passenger transport business, notification of submitted matters to be corrected, details of payment, each entry and withdrawal confirmation, each receipt, copies of cashier's checks, and respective certificates of confirmation;

1. Investigation report (to hear by telephone related to the preparation of the J or I double contract);

Application of Statutes

1. Article relevant to the facts constituting an offense and the selection of punishment;

(a) Defendant A: The proviso to Article 3(1)1 of the former Punishment of Tax Offenses Act (amended by Act No. 13627, Dec. 29, 2015; hereinafter the same shall apply) (proviso to Article 3(1)1 of the same Act

(b) Defendant B: The main sentence of Article 18 of the Punishment of Tax Evaders Act, proviso to Article 3(1)1 of the former Punishment of Tax Evaders Act

1. Suspension of execution;

Defendant A: Article 62(1) of the Criminal Act (General Considerations favorable to the reasons for sentencing at the time of sales)

1. Social service order;

Defendant A: Judgment on the issues of Article 62-2 of the Criminal Act

1. Whether value-added tax evaded is aggregated;

A. Key issue

The issue on this part is whether the time when the taxi or taxi transportation business of Defendant Company was actually transferred to G Co., Ltd. is the first taxable period in 201 or the second taxable period in 2011.

The effective point of time of corporate tax evasion in 2011 is March 31, 2012, and in case of the latter, the total amount of value-added tax and corporate tax evasion can be calculated in 2012 by adding the annual amount of tax evasion on January 25, 2012, which is the filing deadline of the second quarter of value-added tax in 2011. However, in case of the former, the effective point of time of the act of tax evasion is July 25, 201, which is the filing deadline of the first quarter of value-added tax in 2011, the amount of value-added tax evasion and corporate tax evasion cannot be added.

B. Determination

It is insufficient to deem that the transfer of taxi transportation business was conducted in the second taxable period in 2011 only with the evidence submitted by the prosecutor, and there is no other evidence. Rather, in light of the following circumstances, it is reasonable to deem that the transfer of taxi transportation business was conducted on June 1, 201, which actually belongs to the first taxable period in 2011. Therefore, value-added tax evasion amount cannot be added to the corporate tax evasion amount in 2011.

1) Defendants, G Co., Ltd, H, and I (hereinafter “transferee”) are taxi transport business subject to transfer and acquisition. The subject matter of transfer and acquisition between Defendant Company and H and I includes the lease of a taxi and the succession of employment of taxi drivers in addition to 100 taxi vehicles on the subject matter of transfer and acquisition under the contract for transfer and acquisition of stocks (Evidence No. 4; hereinafter “instant contract”). The Defendants and the transferee reported the transfer and acquisition of passenger transport business under joint signature pursuant to Article 14 of the Passenger Transport Service Act on June 30, 201, and accordingly, G Co., Ltd received authorization for transfer and acquisition of passenger transport business from the Bupyeong-si market.

2) On June 1, 2011, the transferee made available the Defendant Company’s taxi transport business and actually operated the taxi transport business from that time.

A) The Defendants and the assignee agreed that the assignee will substantially manage the taxi transport business upon delivery. Article 5 of the instant contract provides that “In principle, the assignee shall receive the full amount of the vehicle transport revenue from the date of receipt of the subject matter of transfer, and shall take over the name plates, the administrative agent, the accounting books, etc. and shall actually operate the taxi transport business.”

B) In fact, the transferee actually engaged in taxi transport business, including obtaining income through the taxi transport business of the Defendant Company. H and 1 established a G Co., Ltd. for the purpose of the taxi transport business of taxi passengers on June 1, 201 (in the investigation record, 103 pages, 258 pages), from that time the transferee received cash income from the taxi driver, received the card income deposited in the name of the Defendant Company from the taxi driver, and transferred the card income and the subsidy for disabled persons, etc. to the account in the name of H and G Co., Ltd., and actually belonged to the transferee (in the investigation record, 137 to 151 pages). In addition, from June 1, 2011, G Co. started to use the land and buildings used as the garage of the Defendant Company as its garage (in the investigation record, 152 to 153 pages).

C) From June 1, 2011 to the police investigation, one of the assignee stated that H was practically operating a taxi transport business after being handed over a name plate and account book from June 1, 201 (242 pages). The J and the Defendant Company, who arranged the transfer or takeover of taxi transport business, were in charge of the accounting affairs of the company, and the witness K, taxi driver L, and M, who continued to work in the G Company and continued to work in the company from June 1, 201, stated that the transferee actually operated the taxi transport business.

3) Although the Defendants reported and paid value-added tax on the transfer and acquisition of the instant taxi transport business on July 1, 201, the Defendants reported the second-term portion of 201, and G corporation obtained authorization for the transfer and acquisition of the taxi transport business on July 15, 2011, it cannot be deemed that the transfer of the taxi transport business, which is subject to value-added tax, was conducted during the second-term period of 201, and the time when the transferee could have commenced the business due to the actual transfer of the taxi transport business to the transferee should be determined based on economic substance.

2. The corporate tax evasion amount related to the corporate tax evasion in 2011 is calculated as follows (i.e., the corporate tax evasion amount of 589,640,258 won - the tax amount of 47,284,694 won - the deductible tax amount of 28,873,783 won - the under-reported amount of 80,000 won for the under-reported amount of tax.

A. The portion of the tax amount on the income amount from June 1, 201 to July 31, 2011

As seen earlier, the income from June 1, 201 to July 31, 2011 was actually reverted to the assignee. Therefore, the tax amount of KRW 214,930,425 on the income amount of the said period ought to be excluded from the amount of tax evaded by the Defendants according to economic substance.

(b)in calculating the amount of evaded tax, 28,873,783 won of the increased amount of reduced or exempted tax due to the increase in the amount of income must be excluded from the amount of evaded tax (the taxation authorities also recognize the deduction in this part);

C. The failure to file a tax return under the tax law or filing a false tax return without accompanying a deceptive scheme or other affirmative act that makes it impossible or significantly difficult to impose and collect the tax on the underreported amount does not constitute fraud or other unlawful act (see Supreme Court Decision 2011Do527, Apr. 28, 201). As such, 80,000,000 won for the tax amount of KRW 363,636,363, which is the amount of the Defendants’ simple underreporting amount, shall be excluded from the amount of the tax evaded (see Supreme Court Decision 26 through 27, supra).

D. The portion of the tax amount on retirement pay to the head of the association

The defendants' defense counsel asserts that the amount of 20,000,000 won paid to N as retirement allowance should be excluded from the amount of income omitted as necessary expenses, and thus, the amount of 4,400,000 won should be excluded from the amount of evaded tax. However, it is difficult to recognize that the above retirement allowance payment falls under the necessary expenses solely on the statement of the written confirmation of 0 written statement of confirmation (162 pages).

Reasons for sentencing

1. Defendant A

(a) Scope of punishment: Imprisonment with prison labor for not less than one month but not more than three years;

(b) Scope of recommendations based on the sentencing criteria;

[Scope of Recommendation Form] General Evasion of Taxes (at least KRW 300 million, less than KRW 500 million)

【Special Convicted Person】

(c) Determination of sentence: Ten months of imprisonment and two years of suspended sentence;

In the process of transferring a taxi business, the Defendant evaded taxes by means of a method such as preparing a double contract form. Tax offenses are likely to seriously disrupt tax order by making it difficult for the State to impose and collect taxes, and disrupt the burden to the general public, and damage the tax justice by exceeding the burden to the general public. This is the circumstances unfavorable to the Defendant.

However, the Defendant paid all evaded taxes to the Defendant by making a serious effort to pay the evaded taxes late in response to his mistake. There is no same criminal history for the Defendant. This is the circumstances favorable to the Defendant.

In light of the above circumstances and the Defendant’s age, family relation, environment, character and conduct, motive, means and consequence of the crime, and all sentencing factors indicated in the instant pleadings, such as the circumstances after the crime, the sentence against the Defendant shall be determined as ordered, and the execution thereof shall be suspended on the condition that the community service order is faithfully observed.

2. Defendant B. The scope of the punishment: Fines of not less than 50,000 won but not more than 1,300,445,343 won;

(b)the sentencing criteria shall not apply.

(c) Determination of sentence: Fines of 50,000,000;

The act of the defendant's representative to evade taxes with respect to his duties shall not be less than the nature of such crime. In addition, the punishment shall be determined as ordered by taking into comprehensive account all factors of sentencing as shown in the arguments in this case.

The acquittal portion

1. Summary of the facts charged

A. The Defendant A evaded the total amount of KRW 895,00,000 as value-added tax and corporate tax by fraud or other improper act as stated in the facts constituting a crime in the judgment.

B. Defendant B, the representative director of the Defendant, committed such a violation as above in relation to his business.

2. Determination

As seen earlier, Defendant A’s act of evading value-added tax should exclude KRW 305,00,00 from the annual amount of evaded tax as of July 25, 2011. As such, Defendant A’s act of evading value-added tax should also be reduced to KRW 28,873,783, and the amount of corporate tax shall also be reduced to KRW 80,00,000, and the amount of tax on the amount of income in June to July 201, and KRW 47,284,694, respectively, shall not be reduced to KRW 500,00.

Therefore, the above facts charged constitute a case where there is no proof of a crime, and thus, should be sentenced not guilty under the latter part of Article 325 of the Criminal Procedure Act. Of them, as to the violation of the Act on the Aggravated Punishment, etc. of Specific Crimes (tax) against Defendant A, the guilty of the violation of the Punishment of Tax Evaders Act due to the evasion of value-added tax, and as long as the acquitted of the violation of the Act on the Aggravated Punishment, etc. of Tax Evaders due to the evasion of value-added tax, this part of the charges shall not be sentenced separately. In addition, as long as it is found that Defendant B was guilty of the violation of the Act on the Aggravated Punishment, etc. of Tax Evaders due to the evasion of corporate tax 43,481

Acquittal Parts

1. Summary of the facts charged

A. Defendant A evaded value-added tax of KRW 305,00,000 by fraud or other unlawful act as stated in the facts constituting a crime in its holding.

B. Defendant B, the representative director of the Defendant, committed such a violation as above in relation to his business.

2. Determination

As seen earlier, the act of evading value-added tax came to become extinct upon the lapse of July 25, 201, which was the first term of value-added tax reporting in 2011. Meanwhile, the statute of limitations under Article 2 of the Addenda of the Punishment of Tax Evaders Act and the main text of Article 22 of the former Punishment of Tax Evaders Act is five years. However, it is evident that the instant public prosecution was instituted on September 28, 201, which was five years after the expiration of the term of validity.

Thus, each of the above facts charged constitutes the completion of the statute of limitations, and thus, each of the above facts charged is sentenced to acquittal pursuant to Article 326 subparagraph 3 of the Criminal Procedure Act, and a summary of the judgment is publicly announced pursuant to Article 58 (3)

It is so decided as per Disposition for the above reasons.

The presiding judge, the highest judge;

Judges Yang Sung-sung

Judges Nam-tae et al