횡령한 재산을 피해자 법인에 반환하였을 때 생기는 소득과세의 문제 ―대법원 2024.6.17. 선고 2021두35346 판결―

Under Korean tax law, bribes are taxed as income while they are required to be confiscated by criminal courts. The Plenary Chamber of the Supreme Court of Korea (“SC”) in 2015 held that the person who was convicted of bribery and sentenced to confiscation thereof should be ex post relieved from his or her income tax liability. Most commentators welcomed the new case law, apparently relying on the SC’s finding that, after the confiscation, there is no longer income left to be taxed. The debate later extended to the whether a person who committed a crime of embezzlement should be likewise exempt from his or her income tax liability once he or she returns the profit unlawfully acquired from the criminal act. Because the SC characterized in its 2015 holding the confiscation as one of the events where “the possibility of forfeiture embedded” in the illegal act has been realized, the key question boils down to whether returning embezzled profit should also qualify as such a realization. In its recent 2024 decision, which this article examines, the SC held in essence that, if the person indicted of embezzlement gives back the embezzled profit with the intent to mitigate potential criminal liability, this act does not qualify as the realization of the “forfeiture possibility embedded” under the 2015 case law. This article explores whether this new ruling aligns with the 2015 precedent, and reconciled with the broader principles governing the taxation of illegal income. It argues that, whereas, at the moment of initially taxing the profit as income, the obligation to return embezzled profit may have been disregarded, this obligation must now be taken into account once he or she has actually fulfilled it, which should result in nullifying ex post the income tax liability. This article adds that the fact that the embezzler has benefited from his or her returning of embezzled fund at criminal court is irrelevant for taxation purposes.