Supreme Court rules duplicate tax investigations invalidate fines

The Supreme Court ruled that tax penalties imposed after duplicate investigations are illegal, establishing that such fines constitute unjust enrichment eligible for return.

In a judgment announced April 30, the high court determined that conducting a second audit on the same tax item and period violates the principle prohibiting duplicate tax investigations under the former Basic Act on National Taxes. The court stated that any assessment based on such a prohibited reinvestigation carries a major procedural flaw that renders it void, regardless of whether the authorities excluded the illegally obtained data from their final calculation.

The justices reasoned that because tax offense investigations serve as a precursor to criminal proceedings and carry severe disadvantages for taxpayers, the prohibition on duplicate audits must apply strictly. Consequently, a notice of disposition issued following a flawed, redundant investigation lacks the necessary procedural legitimacy, making any resulting fine unlawful.

Taxpayers who have already paid fines under these circumstances may file civil lawsuits against the state to recover the amounts. The court clarified that civil courts have the authority to determine the validity of the original tax disposition as a preliminary issue in such refund cases.

The judgment also held that even if a company is reported for evading corporate tax, this does not exempt the authorities from granting a pre-assessment review opportunity regarding subsequent income adjustments attributed to individuals. Issuing such adjustment notices before the review process concludes infringes on procedural rights and is therefore invalid.