Minimizing Risks Related to Criminal Penalties, Fines, and Confiscation in Tax Evasion Cases
Transition Process Toward Criminal Exposure
Most tax evasion cases begin at the stage of a tax audit.
However, where a certain scale of underreporting and intentional misconduct is identified, the process commonly progresses from a tax audit to a criminal tax investigation conducted by specialized investigation units, and ultimately to a criminal referral to the prosecution.
This is why matters initially expected to conclude with administrative penalties may later evolve into full criminal proceedings.
In practice, many taxpayers fail to clearly distinguish between cases that may be resolved through administrative tax measures and those that carry genuine criminal exposure, resulting in missed opportunities for timely and appropriate strategic response.
In particular, where deliberate concealment structures—such as false reporting, suppression of sales, or the use of nominee accounts or nominee corporations—are identified during the audit stage, criminal exposure should already be considered substantially realized.
At this point, whether and how an early strategic response is made can significantly affect the likelihood of criminal prosecution, the possibility of non-prosecution, the scope of confiscation, and sentencing outcomes.
Actual Criminal Penalties Applicable Upon a Finding of Tax Evasion
Tax evasion constitutes a criminal offense under the Punishment of Tax Evaders Act.
Where intentional tax evasion is established, liability extends beyond administrative sanctions and results in criminal responsibility.
Under the Act, general tax evasion is punishable by imprisonment of up to two years or a fine of up to twice the amount of the evaded tax.
Where the evaded tax amount exceeds KRW 300 million and represents at least 30% of the tax due, or exceeds KRW 500 million, enhanced penalties apply, including imprisonment of up to three years or a fine of up to three times the evaded tax.
The applicable statutory framework and penalty levels vary depending on the amount of tax evaded.
If the annual evaded tax amount ranges between KRW 500 million and KRW 1 billion, Article 8 of the Act on the Aggravated Punishment of Specific Crimes may apply, resulting in imprisonment of not less than three years and a fine of two to five times the evaded tax, imposed concurrently.
If the annual evaded tax amount exceeds KRW 1 billion, the statute provides for life imprisonment or imprisonment for not less than five years, together with a fine of two to five times the evaded tax.
In practice, decisions regarding detention and sentencing are influenced not only by the amount of tax evaded, but also by the degree of intent, repetition or habitual conduct, and whether the evasion involved systematic or organized concealment.
Treating tax evasion solely as a financial issue involving penalties or additional taxes—while overlooking criminal exposure—can result in an unexpected and substantial risk of actual imprisonment.
Confiscation and Tax Surcharges: Often More Burdensome Than Criminal Sentencing
In tax evasion cases, confiscation and additional tax surcharges arise independently of imprisonment and criminal fines imposed by the criminal court.
Confiscation in criminal proceedings serves as a property-based sanction designed to recover economic benefits obtained through unlawful conduct, while administrative tax procedures may impose additional taxes and surcharges under the Framework Act on National Taxes and related tax statutes.
Key issues in calculating confiscation include identifying the true beneficiary of the income, determining the scope of concealed income, and assessing discrepancies between nominal ownership and substantive control, particularly in cases involving nominee structures.
When compounded with tax surcharges, the overall financial burden may become irrecoverable, even where the custodial sentence itself is relatively limited.
In practice, confiscation and additional tax liabilities often result in more severe consequences than criminal fines alone.
How Decent Law Firm Handles Tax Evasion Cases as Criminal Matters
Tax evasion cases must not be addressed by separating tax procedures from criminal defense.
Because statements and materials submitted during audits and investigations directly affect criminal liability, Decent Law Firm formulates defense strategies from a criminal law perspective at the earliest stage.
We focus on challenging the existence of criminal intent and limiting the scope of liability, with the objective of minimizing both sentencing exposure and confiscation risk.
If notice of a criminal tax investigation has already been issued, or if allegations of concealment or false reporting have arisen during a tax audit, immediate action is critical.
Once the appropriate response window has passed, the risks associated with criminal penalties and confiscation in tax evasion cases may become irreversible.
