1. Overview and issues of the case
While running a pharmaceutical company, the client decided to outsource the sales of pharmaceutical products and established a pharmaceutical sales promotion agency to manage his customers. The client registered a business license for a company ("Company B") with the client's relative Mr. A as its representative.
Company B was legally engaged in the business of drug sales promotion, but the local tax office imposed excessive taxes on Mr. A and Company B on the ground that some business expenses were not accounted for. Company B failed to pay the taxes and went out of business, and Mr. A also failed to pay the taxes and became a credit delinquent.
A then requested the client to pay the taxes and remove the credit delinquent status from him. Mr. A filed a lawsuit against the client, alleging that the client violated the Tax Offenses Punishment Act by registering a business under another person's name for the purpose of evading taxes.
The issue in this case was whether the factual circumstances of the case constituted the offense of “registering a business using another person’s name or operating a business using a business registration in another person’s name" under Article 11(1) of the Tax Offenses Punishment Act.
2. Our argument and role
After taking on the case, based on a number of lower court rulings, including Supreme Court precedents, we emphasized that, “another person” should be considered to mean only a “natural person”, so the act of “registering a business using the name of another person” does not include “registering a business as a legal entity using another person’s name as representative thereof”, and the act of “operating a legal entity using a business registration in the name of another person” does not include “operating a business using the business registration of a legal entity with another person’s name being registered as representative thereof”.
In addition, we clearly demonstrated that “there was no intent to evade taxes” by elaborating on the circumstances under which the client had no choice but to establish a pharmaceutical sales promotion agency, the circumstances under which the client had no choice but to register a business with another person as its representative, the circumstances under which the client had been paying taxes and operating legally since the establishment of the company, and the circumstances under which the client had to pay additional taxes as a result of the tax investigation.
3. Result and significance
During the investigation, the police had strong suspicions that the client had established and operated Company B to evade taxes. However, by choosing a law firm with excellent expertise in tax criminal law, our client was able to obtain a dismissal of the case at the police stage as a result of a sophisticated legal defense and thorough fact-finding.
□ Attorneys in charge: Cho Jae-bin and Lee Seo-in
