[1] The meaning of and criteria for determining “Fraud and other unlawful acts” under Article 9 of the former Punishment of Tax Evaders Act

[2] The case affirming the judgment below which held that the act of the defendant's act of having a certified tax accountant prepare a book with a content different from the actual sales and having him report value-added tax and global income tax even though he was registered as a business operator under his name and received sales money through a borrowed account, constitutes "Fraud or other unlawful act" under the former Punishment of Tax Evaders Act

[3] The relation between the crimes of violation of the former Punishment of Tax Evaders due to the failure to withhold taxes

[4] In a case where the defendant was prosecuted for violating the former Punishment of Tax Evaders Act on the ground that he did not withhold tax on wage and salary income, the case holding that the court below erred in the misapprehension of legal principles as to the number of crimes committed on the premise that one crime is constituted by each business year

[1] In the crime of tax evasion under Article 9 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 enables the tax evasion and which is recognized as unlawful under social norms, i.e., a deceptive scheme or other active act which makes it impossible or considerably difficult to impose and collect taxes. It does not constitute a mere failure to report under tax law or making a false report without accompanying any other act. However, it does not constitute an active concealment of the circumstances, such as a failure to report or underreporting taxable items, a false entry in books, check, etc., a repeated use of multiple borrowed accounts, etc. In addition, the imposition and collection of taxes may be recognized as being impossible or considerably difficult. Moreover, it can be seen that active concealment of sales by intentionally omitting sales from value-added tax return or by establishing a disguised business under the name of another person, which appears in the name of another person, upon filing a final tax return.

[2] The case affirming the judgment below which held that the Defendant’s act of fraud or other unlawful act constitutes “Fraud” under the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919 of Jan. 1, 2010), and that the tax evasion cannot be the same as mere omission of sales or underreporting, and that the intent of tax evasion is recognized.

[3] The elements of the crime of violation of the former Punishment of Tax Evaders Act stipulating that a withholding agent did not withhold wage and salary income are not the payment of wage and salary income, and thus, a single comprehensive crime is established against all wage and salary income; however, when paying monthly wage and salary income, a crime of failing to withhold income tax and a crime of failing to withhold income tax based on the year-end adjustment is established. Each of the above crimes is a substantive concurrent crime.

[4] In a case where the defendant was prosecuted for violating the former Punishment of Tax Evaders Act on the ground that he did not withhold tax on wage and salary income, the case holding that the court below erred by misapprehending the legal principles as to the number of crimes committed on the premise that one crime is constituted by each business year

[1] Article 9 (see current Article 3) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010) / [2] Article 1(2) of the Criminal Act; Article 9(1) (see current Article 3(1) and (6) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010); Article 8(1) and (2) of the former Act on the Aggravated Punishment, etc. of Specific Crimes (wholly amended by Act No. 7767, Dec. 29, 2005); Article 8(1) and (2) of the former Act on the Aggravated Punishment, etc. of Specific Crimes (wholly amended by Act No. 9919, Jan. 1, 2010) / [3] Article 37 of the Criminal Act; Article 9(1) of the former Punishment of Tax Evaders Act (wholly amended by Act No. 19104, Jan. 19, 194 of the current Act)

[1] Supreme Court Decision 99Do5191 decided Feb. 8, 2000 (Gong2000Sang, 651), Supreme Court Decision 2001Do3797 decided Feb. 14, 2003 (Gong2003Sang, 871), Supreme Court Decision 2004Do5818 decided Nov. 12, 2004 (Gong2004Ha, 2082), Supreme Court Decision 2006Do1937 decided Jun. 15, 2006, Supreme Court Decision 2006Do50419 decided Aug. 23, 2007)

Defendant

Defendant

Attorney Park Byung-chul et al. and one other

Seoul High Court Decision 2010No1728 decided September 30, 2010

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. "Fraud or other unlawful act" in the crime of tax evasion provided for in Article 9 of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010) means an act which makes it possible to evade taxes, i.e., acts which are recognized as illegitimate under social norms, i.e., deceptive scheme which makes it impossible or considerably difficult to impose and collect taxes, and other active act. It does not constitute mere failure to file a tax return under tax law or filing a false tax return without accompanying any other act (see, e.g., Supreme Court Decisions 2001Do3797, Feb. 14, 2003; 200Do63797, Feb. 14, 200; 200Do650, Jun. 6, 2008).

Examining the facts in light of the evidence duly admitted by the court below and the court below, it is just for the court below to acknowledge the facts in its holding, and to determine that the defendant's act of having a certified tax accountant prepare a book different from the actual sales and to have him file a return on value-added tax and global income tax on the materials which omitted part of the sales amount which the defendant registered as a business operator by lending his name and did not issue a tax invoice, and omitted part of the sales amount and the payment amount paid to the certified tax accountant, constitutes "Fraud or other unlawful act" where the defendant's active concealment intention is revealed, and that this cannot be the same as a mere omission of sales or underreporting, and that the defendant'

2. Article 11 of the former Punishment of Tax Evaders Act (wholly amended by Act No. 9919, Jan. 1, 2010) provides that "where a withholding agent of tax fails to withhold the said tax or to pay the tax collected without justifiable grounds, he/she shall be punished by imprisonment for not more than one year, or by a fine equivalent to the amount of unpaid tax." According to the former Income Tax Act (amended by Act No. 9897, Dec. 31, 2009) the income tax shall be levied on the amount of income for one year from January 1 to December 31 (Article 5 (1)). When a withholding agent pays the monthly earned income of Class A, he/she shall withhold the income tax according to the simplified tax withholding table for employment income if he/she pays the income tax for the same year after deducting the amount of monthly earned income of the person who has already paid the said earned income from the date of his/her global income tax withholding for two months following the relevant year, the withholding agent shall withhold the income tax for the following year from his/her global income tax base.

In light of the above legal principles, the first instance court maintained by the lower court determined that the crime was committed on the premise that one of the crimes was established for each business year due to non-performance of withholding tax on the wage and salary income in the judgment, and that the crime was committed. In so doing, the lower court erred by misapprehending the legal principles on the number of crimes committed in violation of the former Punishment of Tax Evaders Act, thereby affecting the conclusion of the judgment (the crime of violation of the former Punishment of Tax Evaders Act is established when paying the wage and salary income for each month, and the statute of limitations should also be calculated for each crime).

3. Therefore, the part of the crime of violation of the former Punishment of Tax Evaders due to non-performance of withholding tax on wage and salary income in the judgment below shall be reversed. Since one sentence is imposed on the remaining crimes of the defendant and concurrent crimes in the former part of Article 37 of the Criminal Act, the entire judgment of the court below is reversed and the case shall be remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices

Justices Shin Young-chul (Presiding Justice)