Supreme Court rules tax evasion intent stands despite offsetting payments elsewhere

The Supreme Court ruled on February 26 that filing false expenses to lower one company's corporate tax bill constitutes tax evasion, even if the corresponding income was reported and taxed under a different entity. The decision overturns a lower court finding regarding the defendant's criminal intent.

The case centered on an individual accused of inflating service costs and salary expenses for a specific company to artificially reduce its taxable income. While the lower court reasoned that the defendant lacked intent because the revenue was declared by another firm, the high court rejected this logic, stating that corporate tax obligations are distinct for each legal entity.

"The result of tax evasion occurred regarding the entire corporate tax of the defendant company, and there is a strong possibility that the actor's intent is also recognized," the court said. It added that reporting the related income as profit for a separate company does not alter the fact that the first company's tax debt was illegally reduced.

Under the Act on the Punishment of Tax Crimes, intent is established when an actor knowingly engages in fraudulent acts resulting in unpaid taxes for a specific taxpayer. Unless special circumstances like consolidated tax filing apply, the evasion must be judged separately for each corporation.