The Bounds of Economic Crime — Tax Invoices Without Actual Transactions, the Statute of Limitations under Dual Punishment Provisions, and Confiscation and Additional Collection

Question

When punishing the act of receiving or issuing tax invoices in the absence of any actual transaction, what does an actual transaction mean, and by what criteria is it determined whether the tax invoice prepared is recognized as validly representing an actual transaction? It is at issue whether the same criteria apply as they stand even where there is a time gap between the transaction date and the date of preparation of the tax invoice.

In a case where the business owner is punished under a dual punishment provision, it is at issue whether the effect of the filing of an indictment against the actor extends to the business owner, that is, whether the business owner under the dual punishment provision is included within the scope of the suspension of the statute of limitations for prosecution as provided in Article 253, paragraph (2) of the Criminal Procedure Act. Whether a case in which the business owner is punished on direct responsibility can be equated with an accomplice relationship must also be examined together.

For confiscation or additional collection under Article 6, paragraph (1) of the Act on Special Cases Concerning the Confiscation and Recovery of Corrupt Proceeds to take place, the case must fall under those in which recovery of the damage is extremely difficult; yet it is at issue whether that requirement is satisfied where the victim's property damage has been restored to the state before the crime. Furthermore, it is necessary to clarify by whom and by what evidence the fact that recovery of the damage is difficult must be proven.

Material to check

First, one must secure contracts, purchase orders, quotations, delivery notes, inspection confirmations, construction logs, and service provision reports that directly show the existence of the transaction. These materials serve as the basic axis for determining whether a binding agreement existed between the parties and whether there was an actual supply of goods or services subject to value-added tax.

Next, one must verify payment records, the manner in which the time of issuance and the date of preparation of the tax invoice are stated, purchase and sales slips, value-added tax filing data, and cross-check materials with the transaction partner. Where there is a gap between the transaction date and the date of preparation of the tax invoice, accounting processing records explaining the reason for that gap or materials concerning transaction practice are additionally required.

In cases where a dual punishment provision is at issue, one must examine business registration materials, corporate registry records, powers of attorney, personnel appointment materials, rules on the division of duties, approval documents, and payroll ledgers that show the relationship between the business owner and the actor. These materials are used to determine whether the business owner stood in a relationship of direction and supervision over a particular actor, and to distinguish whether the actual basis for punishment is the business owner's own direct responsibility or joint and several liability for the acts of another.

Finally, one must organize restitution agreements, repayment plans, deposit records, settlement agreements, judgments in civil actions, and compulsory execution or recovery materials showing the status of recovery of the victim's loss. Records of applications for provisional attachment and materials on the investigation of the debtor's assets, which support whether the victim can exercise a claim for the return of property against the offender, also need to be verified together.

Possible readings

The interpretation advanced by the side actively seeking punishment places weight on the legislative purpose of normalizing the order of tax invoice issuance and receipt. That is, even where only part of the transaction exists or only documents are in place, once the outward form of the transaction is complete, the requirements for punishment should be regarded as satisfied, and the scope of the actors subject to punishment should likewise be read broadly, not limited to false-invoice dealers but extending to all actors who have disturbed the transaction order. As regards the dual punishment provision as well, the position is taken that reading the effect of the filing of an indictment against the business owner as extending to the actor conforms to the practical benefit of investigation and trial.

By contrast, the interpretation advanced by the defense invokes the principle of legality and the prohibition of expansive interpretation. The text of penal statutes must be read strictly, and the existence of an actual transaction means an actual supply based on a binding agreement or a legal ground, not a mere outward form; documents alone are therefore insufficient. Extending the effect of the suspension of the statute of limitations produces results disadvantageous to the defendant, so the accomplices in Article 253, paragraph (2) of the Criminal Procedure Act should be limited to those standing in an accomplice relationship under the Criminal Act.

The point of contact between the two interpretations lies in the strictness of the requirements set out in the judgments. While the Supreme Court confirmed the purpose of punishment, it confined the range of means for achieving that purpose within the text and the principles, and demanded strict determinations at all four gates: the existence of an actual transaction, the valid representational force of the tax invoice, the limitation of the scope of accomplices, and the proof of the extreme difficulty of recovering the damage. In the end, the conclusion that the requirements cannot be relaxed on the basis of the substantive need for punishment alone can be read in common.

What the decisions held

Supreme Court Judgment 2025Do13674 delivered on 8 January 2026 set out the standards for interpreting Article 10(3), subparagraphs 1 and 3, of the former Punishment of Tax Evaders Act and Article 8-2(1), subparagraph 1, of the Act on the Aggravated Punishment, etc. of Specific Crimes. These provisions are the basis for punishing the issuance and receipt of tax invoices without an actual transaction. An actual transaction means that a supply of goods or services constituting a transaction subject to value-added tax exists on the basis of a binding agreement between the parties or a legal cause. For a tax invoice to be recognised as issued where an actual transaction exists, it must reach a level at which, by generally accepted social norms, it can be regarded as validly representing the actual transaction. The judgment also confirmed that the persons punishable are not limited to dealers in false tax invoices (so-called data merchants), and that the purpose of these provisions is to restore order in the issuance and receipt of tax invoices by punishing the issuance and receipt of tax invoices without an actual transaction.

Supreme Court Judgment 2024Do15290 delivered on 1 May 2025 addressed the scope of the effect of the suspension of the statute of limitations under Article 253(2) of the Criminal Procedure Act. A provision extending the effect of the institution of a prosecution must in principle be interpreted strictly and must not be excessively extended or applied by analogy to the defendant's disadvantage, a position supported by the spirit of Article 12(1) of the Constitution of the Republic of Korea and Article 1(1) of the Criminal Act. Where a business owner is punished under a dual punishment provision, the business owner is punished on the basis of its own direct liability, not joint liability for another person's act, so that its relationship with the actor cannot be equated with a relationship of accomplices. Accordingly, the accomplices referred to in Article 253(2) of the Criminal Procedure Act do not include persons standing in the relationship of business owner and actor under a dual punishment provision.

Supreme Court Judgment 2023Do17596 delivered on 13 June 2024 characterised confiscation and additional collection under Article 6(1) of the Act on Special Cases concerning the Confiscation and Return of Property Acquired through Corrupt Practices as, in essence, a procedure preliminary to return. Because the system is designed for the prosecutor to confiscate or collect property damaged by a crime and then return it to the victim, thereby restoring the pecuniary damage the victim suffered from a specific criminal act, the victim's pecuniary damage can, absent special circumstances, be regarded as restored to its pre-crime state, and it is difficult to treat this as a case in which recovery of the damage is extremely difficult. Penal provisions must be interpreted strictly, and an interpretation that goes beyond the possible meaning of the text to the defendant's disadvantage violates the prohibition of extensive interpretation under the principle of legality. Unless the prosecutor has proved it by evidence, whether the requirements for confiscation and additional collection are met cannot be determined on the premise of a concern, or an abstract possibility, that the defendant may withdraw the funds at will or the like.

Practical checklist

First, one must check whether the contracts proving the existence of the transaction and the performance materials correspond to one another. If one verifies whether the purchase orders, delivery notes, inspection materials, and payment records are connected as a single flow, and whether there is a reasonable explanation for the gap between the date of preparation of the tax invoice and the transaction date, one can gauge the possibility of recognizing an actual transaction.

Second, one must precisely identify the scope of the actors subject to punishment. Since the applicable provisions and the defense logic differ depending on whether a person is a false-invoice dealer, a party to the transaction, or the person responsible for the accounting treatment, it is desirable to record in chronological order at what stage each actor committed an act that disturbed the order of tax invoice issuance and receipt.

Third, the timing and effect of the filing of an indictment against the business owner and against the actor must each be organized separately. The dates on which the statute of limitations for prosecution begins to run and the grounds for its suspension under Article 253, paragraphs (1) and (2) of the Criminal Procedure Act should be arranged on a timeline, and the grounds for determining whether the business owner stands in a separate relationship that could be regarded as an accomplice should be reviewed separately.

Fourth, in matters relating to corrupt proceeds, one must verify the current state of the victim's property damage and the degree of recovery through figures and evidence. It is necessary to record separately the amount returned, the remaining amount of loss, the feasibility of exercising the claim for return against the offender, and whether the prosecutor possesses evidence with which to prove the extreme difficulty of recovering the damage.

Glossary

An actual transaction is a transaction in which a supply of goods or services subject to value-added tax actually exists on the basis of a binding agreement between the parties or a legal cause. A transaction that has only the outward form on paper, or one contrived after the fact, does not qualify, and only a tax invoice that validly represents the transaction is recognised as tied to an actual transaction.

A dual punishment provision is a provision under which, where an actor commits a violation of law, the violation is, subject to certain requirements, treated as having been committed directly by a legal person or individual other than the actor, who is then punished together with the actor; the business owner is punished for its own direct liability, not for joint liability for another person's act. Suspension of the statute of limitations is a mechanism whereby the running of the limitation period stops by reason of the institution of a prosecution or similar events, and the extension of the effect of the institution of a prosecution to accomplices under Article 253(2) of the Criminal Procedure Act must be interpreted strictly.

Confiscation and additional collection are means by which the State deprives a person of crime-related property, and confiscation and additional collection under Article 6(1) of the Act on Special Cases concerning the Confiscation and Return of Property Acquired through Corrupt Practices are understood as a procedure preliminary to the prosecutor's recovering the property and then returning it to the victim. A case in which recovery of the damage is extremely difficult means a case in which recovery of the damage is recognised as extremely difficult, such as where the crime victim cannot exercise a claim for return of the property or a claim for damages against the offender in respect of that property. If the victim's pecuniary damage has been restored to its pre-crime state, the requirement is not met absent special circumstances.

Sources and limitations

This white paper was prepared on the sole basis of the three decisions, Supreme Court Decision 2025Do13674, Supreme Court Decision 2024Do15290, and Supreme Court Decision 2023Do17596, and the provisions cited in those judgments. The text of the judgments and the provisions were cross-checked against the Korea Law Information Center as of 2026-10-15, and no case numbers other than those three decisions, no lower court precedents, no scholarly theories, and no administrative interpretations were cited.

This material is a summary of judicial issues for general research purposes, is not legal advice, and does not constitute a legal opinion on any particular matter. In an actual case, conclusions may vary depending on the specific content of the facts and evidence, the timing, and whether the relevant statutes have been amended, so individual advice from an attorney or other expert must be obtained.

Points left open

Whether a tax invoice can still be regarded as validly representing an actual transaction remains open even where the time gap between the transaction date and the date of preparation of the tax invoice is large. The representational force is not denied merely by the fact that a gap exists, but what degree of gap must be combined with what supplementary circumstances cannot but vary from case to case. In addition, it has not been clearly settled whether the effect of suspending the statute of limitations under Article 253, paragraph (2) of the Criminal Procedure Act extends to cases where the business owner and the actor under a dual punishment provision have also entered into a separate accomplice relationship.

In connection with Article 6, paragraph (1) of the Act on Special Cases Concerning the Confiscation and Recovery of Corrupt Proceeds, it also remains unresolved how far the category extends in which the victim cannot exercise a claim for the return of property against the offender. At what standard a state in which civil recovery is practically impossible, the debtor's lack of means, and the extinctive prescription of the claim for return fall under the extreme difficulty of recovering the damage requires further determination in conjunction with the scope of the prosecutor's proof.

When to reconsider

This white paper must be revisited when new Supreme Court decisions are rendered or lower court precedents accumulate concerning the representational force of actual transactions and tax invoices, the relationship between the business owner and an accomplice under a dual punishment provision, and the criteria for the extreme difficulty of recovering the damage. In particular, if subsequent decisions explicitly addressing the permissible range of the time gap or the allocation of the burden of proof are issued, it is necessary to update the degree of specification of the criteria for determination.

When the relevant provisions of the Punishment of Tax Offenses Act, the Act on the Aggravated Punishment of Specific Crimes, the Act on Special Cases Concerning the Confiscation and Recovery of Corrupt Proceeds, and the Criminal Procedure Act are amended, or when there is a change in the value-added tax taxation system, the verification of provisions and the summary of requirements in this white paper must also be redone. In addition, where methods of proving transactions change owing to the mandatory issuance of electronic tax invoices or the spread of non-face-to-face transactions, a restructuring of the items to be checked in the materials is required.

Statutes referred to

• 특정범죄 가중처벌 등에 관한 법률 제8조의2 제1항 제1호
• 조세범 처벌법 제10조 제3항, 제10조 제3항 제1호, 제10조 제3항 제3호 (2018. 12. 31. 법률 제16108호로 개정되기 전의 구 조세범 처벌법 제10조 제3항 제1호, 제3호 포함)
• 헌법 제12조 제1항
• 형법 제1조 제1항, 제30조, 제31조, 제32조
• 형사소송법 제248조 제1항, 제253조 제1항, 제253조 제2항
• 부패재산의 몰수 및 회복에 관한 특례법 제6조 제1항

Decisions referred to

• 대법원 2026. 1. 8. 선고 2025도13674 판결 · Decision ledger
• 대법원 2025. 5. 1. 선고 2024도15290 판결 · Decision ledger
• 대법원 2024. 6. 13. 선고 2023도17596 판결 · Decision ledger

Verification status

The texts of the relevant provisions and the judgments of Supreme Court Decision 2025Do13674, Supreme Court Decision 2024Do15290, and Supreme Court Decision 2023Do17596 were cross-checked against the Korea Law Information Center as of 2026-10-15. This white paper cites only the three judgments addressed herein.